DCIT, CIR-10(1), KOLKATA, Kolkata V. M/s Indian Oil Petronas Pvt. Ltd., Kolkata

ITA 1468/KOL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1604 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 11-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Keywords: Capital asset; Additional evidence; Capital receipt; Revised return
• Section: 143(3); 6

Judgement Text

1 ITA NO. 1468/KOL/2015 ASSESSMENT YEAR: 2009-2010 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1468/KOL./2015 ASSESSMENT YEAR: 2009-2010 DEPUTY COMMISSIONER OF INCOME TAX,................. .........APPELLANT CIRCLE-10(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. INDIAN OIL PETRONAS PVT. LIMITED,........... .....RESPONDENT ACROPOLISH, 12 TH FLOOR, UNIT-I & II, 1858/1, RAJDANGA ROAD, KOLKATA-700 107 APPEARANCES BY: SHRI G. MALLIKARJUNA, CIT, D.R., FOR THE DEPARTMENT SHRI AKKAL DUDHWEWALA, A.R., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JANUARY 17, 2018 DATE OF PRONOUNCING THE ORDER : JANUARY 31, 2018 O R D E R PER SHRI P.M. JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATA DAT ED 21.09.2015, WHEREBY HE GRANTED RELIEF TO THE ASSESSEE ON ACCOUN T OF SALES TAX SUBSIDY BY TREATING IT AS CAPITAL RECEIPT NOT LIABLE TO TAX BY ENTERTAINING THE CLAIM MADE BY THE ASSESSEE FOR THE SAME WITHOUT FILING A REVISED RETURN. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING, TRADING AND TERMINAL LING OF LIQUEFIED PETROLEUM GAS. THE RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION WAS 2 ITA NO. 1468/KOL/2015 ASSESSMENT YEAR: 2009-2010 FILED BY IT ON 29.09.2009 DECLARING TOTAL INCOME OF RS.14,09,87,750/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A FRES H CLAIM WAS MADE BY THE ASSESSEE FOR EXCLUSION OF SALES TAX SUBSIDY REC EIVED FROM THE GOVERNMENT AMOUNTING TO RS.14,91,51,889/- ON THE GR OUND THAT THE SAME WAS CAPITAL RECEIPT NOT CHARGEABLE TO TAX. THE RELE VANT DETAILS AND DOCUMENTS IN SUPPORT OF THE SAID CLAIM WERE ALSO FU RNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. SINCE THE SA ID CLAIM WAS NOT MADE BY THE ASSESSEE IN THE RETURN OF INCOME FILED BY IT AND THERE WAS NO REVISED RETURN FILED BY THE ASSESSEE MAKING THE SAI D CLAIM, THE LD. CIT(APPEALS) DID NOT ENTERTAIN THE SAME BY RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZ INDIA LI MITED [284 ITR 323] AND PROCEEDED TO COMPLETE THE ASSESSMENT UNDER SECT ION 143(3) VIDE AN ORDER DATED 25.03.2013 WITHOUT CONSIDERING THE CLAI M OF THE ASSESSEE FOR EXCLUSION OF SALES TAX SUBSIDY. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE CAS E LAWS CITED IN SUPPORT, THE LD. CIT(APPEALS) ADMITTED THE CLAIM OF THE ASSESSEE FOR EXCLUSION OF THE SALES TAX SUBSIDY FOR THE FOLLOWIN G REASONS GIVEN IN PARAGRAPH NO. 5.2 OF HIS IMPUGNED ORDER:- 5.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE AR AND PERUSED VARIOUS JUDICIAL DECISIONS CITED BEFORE ME IN SUPPORT OF TH E APPELLANT'S CLAIM. IT IS OBSERVED THAT THE CLAIM MADE BY THE APPELLANT IN THE PRESENT APPEAL THAT THE AMOUNT OF INCENTIVE OF RS.14,91,51, 889/- RECEIVED IN THE FORM OF SALES TAX REMISSION FROM THE WEST BENGA L GOVERNMENT UNDER THE 'WEST BENGAL INCENTIVE SCHEME, 1999 IS A CAPITAL RECEIPT NOT LIABLE TO TAX WAS ADMITTEDLY NOT MADE IN THE RE TURN OF INCOME FILED U/S 139(1) AS WELL AS U/S 139(5). IN THE COUR SE OF PROCEEDINGS U/S 143(3) BEFORE THE APPELLANT HOWEVER MADE THIS C LAIM BY FILING A LETTER AND THEREAFTER SUBMITTED SUPPORTING DOCUMENT S FROM THE ASSESSMENT ORDER I FIND THAT THE AO REJECTED THE CL AIM OF THE APPELLANT PRIMARILY ON THE GROUND THAT SUCH 'CLAIM WAS NOT MA DE BY THE APPELLANT IN THE RETURN OF INCOME AND THEREFORE THE RE WAS NO QUESTION OF ALLOWING DEDUCTION IN RESPECT OF SUBSIDY RECEIVE D BY THE APPELLANT FROM THE STATE GOVERNMENT BY WAY OF SALES TAX REMIS SION. IN VIEW OF THE JUDICIAL DECISIONS AND THE RATIO LAID DOWN BY T HE SUPREME COURT IN THE CASE OF JUTE CORPORATION OF INDIA LTD VS CIT (1 87 ITR 688) & NATIONAL THERMAL POWER CO. LTD VS CIT (229 ITR 383) AND CALCUTTA, BOMBAY & DELHI HIGH COURTS IN MAYANK PODDAR (HUF) V S. WTO (262 3 ITA NO. 1468/KOL/2015 ASSESSMENT YEAR: 2009-2010 CTR 633), CIT VS. PRUTHVI BROKERS AND SHAREHOLDERS PVT. LTD, (252 CTR 151), CIT VS. JAI PARABOLIC SPRINGS LTD (306 ITR 42 ) AND ALSO ITAT, KOLKATA IN THE CASE OF DCIT VS. RAMESH CHANDRA KEDI A (ITA NO. 2072/KOL/2007) DATED 27.06.2008, I AM INCLINED TO H OLD THAT AN ASSESSEE IS LEGALLY ENTITLED TO MAKE A FRESH CLAIM IN THE APPELLATE PROCEEDINGS EVEN IF SUCH CLAIM WAS NOT MADE IN THE RETURN OF INCOME. IN VIEW OF THESE JUDICIAL DECISIONS THE CLAIM MADE BY THE APPELLANT IS ADMITTED FOR ADJUDICATION. 4. THE LD. CIT(APPEALS) ALSO CONSIDERED THE CLAIM O F THE ASSESSEE FOR EXCLUSION OF SALES TAX SUBSIDY ON MERIT AND ALLOWED THE SAME VIDE PARAGRAPH NO. 5.3 TO 5.14 OF HIS IMPUGNED ORDER, WH ICH READ AS UNDER:- 5.3 DURING THE YEAR UNDER CONSIDERATION THE APPEL LANT COMPANY RECEIVED INCENTIVE OF RS.14,91,51,889/- IN THE FORM OF SALES TAX REMISSION UNDER THE 'WEST BENGAL INCENTIVE SCHEME, 1999' AND WHICH WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT U NDER THE SAID SCHEME, WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORAT ION LIMITED ISSUED AN ELIGIBILITY CERTIFICATE TO THE APPELLANT BEING NO. INC(99)/EC-87(B) DATED 4 TH JUNE 2002. THE ELIGIBILITY CERTIFICATE WAS ISSUED FOR APPELLANTS PROJECT AT BLOCK SUTAHAT A BLOCK-1, POST OFFICE HALDIA 721602 POLICE STATION BHABHANIPUR DIS TRICT MIDNAPUR (E) FOR THE MANUFACTURE OF BLENDED LPG HAV ING CAPACITY OF 6,00,000 TONNES. AS PER THE SCHEME THE WEST BENG AL INDUSTRIAL DEVELOPMENT CORPORATION LTD. SANCTIONED THE INCENTI VE IN THE FORM OF REMISSION OF SALES TAX ON SALE OF FINISHED GOODS DUE FOR PAYMENT BY IT FOR A PERIOD OF 9 YEARS SUBJECT TO CE ILING OF 100% OF THE GROSS VALUE OF FIXED CAPITAL ASSETS OF THE APPR OVED PROJECT OR R.75 CRORE WHICHEVER IS LESS, AS PER PARA 10.1.1(II ), 10 1.7 OF THE SCHEME IT THEREFORE APPEARED THAT THE INCENTIVE IN THE FORM OF SALES TAX REMISSION WAS FOR SETTING UP OF A NEW IND USTRIAL UNIT. 5.4. ON PERUSAL OF WEST BENGAL INCENTIVE SCHEME. 1 999, NOTIFIED ON 22.06.1999, IT IS OBSERVED THAT IT STARTS WITH THE WORDINGS 'WHEREAS, THE GOVERNOR IS OF THE OPINION THAT IT N ECESSARY AND EXPEDIENT TO EXTEND INCENTIVE FOR PROMOTION OF INDU STRIES IN THIS STATE; NOW, THEREFORE, THE GOVERNOR IS PLEASED HEREBY. IN SUPERSESSION OF THE WEST BENGAL INCENTIVE SCHEME, 1993 SANCTIONED U NDER COMMERCE & INDUSTRIES DEPARTMENT'S NOTIFICATION NO 188-CIIC DATED 3003 1993 AND AMENDED FROM TIME TO TIME, TO A PPROVE AND SANCTION THE INCENTIVE SCHEME FOR LARGE, MEDIUM AND SMALL SCALE INDUSTRIAL UNITS AS UNDER: SECTION 4 OF THE WBIS PROVIDE THE APPLICABILITY OF THE 1995- SCHEME AND IT SAYS THAT IT SHALL GENERALLY BE APPLI CABLE TO ALL LARGE, MEDIUM COTTAGE AND SMALL SCALE PROJECTS AND TOURISM UNITS IN LARGE/MEDIUM SECTOR TO BE SET UP AND ALSO TO EXP ANSION PROJECTS 4 ITA NO. 1468/KOL/2015 ASSESSMENT YEAR: 2009-2010 OF EXISTING UNITS ON OR AFTER THE 1ST APRIL, 1999. THE UNITS MAY BE IN THE PRIVATE SECTOR, CO-OPERATIVE SECTOR, JOINT S ECTOR AS ALSO COMPANIES/UNDERTAKINGS OWNED OR MANAGED BY THE STAT E GOVERNMENT. SECTION 6 OF THE SCHEME PROVIDE THE 'EL IGIBILITY CRITERIA FOR INCENTIVES UNDER THE 1999-SCHEME' AND SECTION 7 PROVIDES 'CLASSIFICATION OF DEVELOPED AREAS AND BAC KWARD AREAS' IN THREE GROUPS VIZ. GROUP A, GROUP B AND GROUP C T HE APPELLANT'S PROJECT FALLS UNDER GROUP B. SECTION 8, 9, 10 AND 1 1 PROVIDE FOR VARIOUS TYPES OF INCENTIVES AND SUBSIDIES WHICH ARE 'STATE CAPITAL INVESTMENT SUBSIDY', 'SALES TAX'. 'WAIVER OF ELECTR ICITY DUTY' AND 'SUBSIDY FOR CONVERSION OF PIPED COAL GAS' ETC. FRO M THE ABOVE, IT WAS OBSERVED THAT THE SCHEME-1999 WAS ANNOUNCED FOR PROMOTION OF INDUSTRIES IN THE STATE OF WEST BENGAL WITH VARI OUS INCENTIVES AND SUBSIDIES AS MENTIONED ABOVE AS PER SCHEME, THE INCENTIVES WERE TO BE GIVEN FOR SETTING UP OF NEW UNITS OR EXP ANSION OF THE EXISTING UNITS AND THE SAME WAS NOT TO FACILITATE T HE TRADE OR BUSINESS OF THE INDUSTRIES. 5.5. THUS, THE MAIN OBJECT AND PURPOSE OF THE SCHE ME FOR WHICH IT WAS SANCTIONED WAS 'PROMOTION OF INDUSTRIES IN THE STATE OF WEST BENGAL'. SIMILAR SCHEMES WERE SANCTIONED BY THE STA TE GOVERNMENT EARLIER ALSO TO PROMOTE SETTING UP OF IN DUSTRIES IN THE STATE AND UNDER THOSE SCHEMES VARIOUS INCENTIVES WE RE GIVEN TO THE REGISTERED AND ELIGIBLE INDUSTRIES. THE PRIME O BJECT OF ALL THE SCHEMES WAS TO PROVIDE INCENTIVES TO PROMOTE INDUST RIES IN THE STATE OF WEST BENGAL. WITH THIS OBJECT WEST BENGAL INCENTIVE SCHEME. 1999 WAS ANNOUNCED BY THE STATE GOVERNMENT W.E.F. 1 ST APRIL. 1999 WHICH WAS IN SUPERSESSION OF WEST BENGA L INCENTIVE SCHEME 1993. IT IS OBSERVED THAT IN THE CASE OF APP ELLANT COMPANY. WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION LTD, VIDE LETTER NO. INC(99)/EC-87(B) DATED 4TH JUNE 2002 ISSUED ELI GIBILITY CERTIFICATE TO THE APPELLANT FOR SETTING UP A NEW U NIT FOR THE MANUFACTURE OF BLENDED LPG AT BLOCK - SUTAHATA BLOC K-I. POST OFFICE HALDIA-721602 POLICE STATION BHABHANIPUR DIS TRICT MIDNAPUR (E). AS PER THE APPROVAL LETTER, THE APPEL LANT COMPANY WAS GRANTED INCENTIVES IN THE FORM OF REMISSION OF SALES TAX, EXEMPTION OF SALES TAX AND WAIVER OF ELECTRICITY DU TY AS PER THE SCHEME. THE INCENTIVE WAS PROVIDED FOR SETTING UP O F NEW UNIT, BUT THE MODE OF CALCULATION OF INCENTIVE WAS SALES TAX PAID/COLLECTED BY THE APPELLANT IN VIEW OF THE FOREGOING FACTS & C IRCUMSTANCES. I AM OF THE OPINION THAT IT WOULD NOT BE CORRECT TO S AY THAT THE SUBSIDY/INCENTIVE WAS GIVEN TO THE APPELLANT FOR TH E PURPOSE OF ASSISTING IN CARRYING ON BUSINESS OR TRADE BY WAY O F REFUND OF SALES TAX OR THAT THERE WAS CESSATION OF LIABILITY ON ACCOUNT OF PAYMENT OF SALES TAX ATTRACTING THE PROVISIONS OF S ECTION 41(1) OF THE ACT THOUGH. THE METHOD OF CALCULATION OF INCENT IVE/SUBSIDY IS COLLECTION OF SALES TAX BUT THE PURPOSE OF GIVING T HE INCENTIVE WAS SETTING UP/EXPANSION OF INDUSTRIES IN THE BACKWARD AREAS OF THE STATE OF WEST BENGAL. ON PERUSAL OF APPROVAL LETTER /ELIGIBILITY CERTIFICATE, IT IS APPARENT THAT THE INCENTIVE WAS ALLOWED TO THE APPELLANT COMPANY FOR SETTING UP A NEW UNIT FOR MAN UFACTURE OF 6.00,000 TONNES PER YEAR OF BLENDED LPG. THE SOLE O BJECTIVE OF THE SCHEME FORMULATED BY THE STATE GOVERNMENT WAS TO AL LOW INCENTIVE TO THE ENTREPRENEURS TO ESTABLISH THE NEW INDUSTRIES OR 5 ITA NO. 1468/KOL/2015 ASSESSMENT YEAR: 2009-2010 EXPAND THE EXISTING INDUSTRIES IN BACKWARD AREA FOR OVERALL ECONOMIC DEVELOPMENT OF THE STATE OF WEST BENGAL. O N GOING THROUGH THE WEST BENGAL INCENTIVE SCHEME, IT IS OBS ERVED THAT THE SUBSIDY WAS NOT ALLOWED TO ASSIST THE APPELLANT COM PANY IN CARRYING ON ITS TRADE OR BUSINESS OR CARRYING OUT T HE BUSINESS OPERATION. THE UNIT WHICH WAS SET UP BY THE APPELLA NT COMPANY, IS LOCATED IN THE BACKWARD AREA OF VILLAGE-HALDIA. DIS TRICT-MIDNAPUR IN THE STATE OF WEST BENGAL. AS PER THE INCENTIVE S CHEME. 1999, THE APPELLANT'S UNIT FALLS UNDER GROUP-B OF CLASSIF ICATION OF AREAS. ACCORDINGLY. THE APPELLANT COMPANY HAD RECEIVED INC ENTIVE IN THE FORM OF SALES TAX REMISSION AND OTHER INCENTIVES SP ECIFIED FOR GROUP-B LOCATION. SINCE, THE INCENTIVE HAS NOT BEEN ALLOWED TO THE APPELLANT-COMPANY FOR FACILITATING ITS BUSINESS OR TRADE, THE AMOUNT RECEIVED BY THE APPELLANT ON ACCOUNT OF SALE S TAX REMISSION, WOULD BE CAPITAL IN NATURE. 5.6. THE SUPREME COURT IN THE CASE OF CIT VS PONNI SUGARS & CHEMICALS LTD. (306 ITR 392) APPLYING THE PRINCIPLE S LAID DOWN IN THE EARLIER DECISION IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD (SUPRA) HELD THAT THE CHARACTER OF A SUBSIDY RECEIP T IN THE HANDS OF THE ASSESSEE UNDER THE SCHEME HAS TO BE DETERMIN ED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GRA NTED IN THE OPINION OF THE APEX COURT, ONE HAS TO APPLY THE PUR POSE TEST. THE POINT OF TIME AT WHICH THE SUBSIDY IS PAID IS NOT R ELEVANT. THE SOURCE IS IMMATERIAL IF THE OBJECT OF THE SUBSIDY I S TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY THEN T HE RECEIPT IS ON REVENUE ACCOUNT ON THE OTHER HAND, IF THE OBJECT OF THE ASSISTANCE UNDER THE SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND AN EXISTING UNIT THEN THE RECEIPT OF THE SUBSIDY WOULD BE ON CAPITAL ACCOUNT. IN THE CASE OF APPELLA NT COMPANY, THE INCENTIVE WAS RECEIVED FROM THE WEST BENGAL GOVERNM ENT UNDER THE WEST BENGAL INCENTIVE SCHEME, 1999 IN THE FORM SALES TAX REMISSION HOWEVER, THE SOLE OBJECT OF THE INCENTIVE SCHEME WAS TO ENABLE THE APPELLANT TO SET UP A NEW MANUFACTURING UNIT AT VILLAGE-HALDIA. DISTRICT-MIDNAPUR. IN THE CASE OF A PPELLANT IT HAD INVESTED A SUBSTANTIAL AMOUNT IN FIXED CAPITAL ASSE TS FOR THE PURPOSE OF SETTING UP A NEW UNIT. HENCE, AS PER THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF PO NNI SUGARS & CHEMICALS LTD (SUPRA), THE RECEIPT ON ACCOUNT OF IN CENTIVE IN THE FORM OF SALES TAX REMISSION RECEIVED BY THE APPELLA NT WAS ON CAPITAL ACCOUNT. 5.7. THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS , RASOI LTD (335 ITR 438) OBSERVED THAT THE ASSESSEE RECEIVED A SUBS IDY AMOUNT OF RS.5,34,86,887/- AS INDUSTRIAL PROMOTION ASSISTANCE FROM THE GOVERNMENT OF WEST BENGAL. IN THE BOOKS OF ACCOUNT, THE SAID AMOUNT WAS SHOWN AS INCOME UNDER THE HEAD 'OTHER IN COME'. IN THE NOTES TO ACCOUNTS, THE ASSESSEE MENTIONED THAT ALTHOUGH THE AMOUNT HAD BEEN ACCOUNTED FOR IN THE ABOVE MANNER, THE COMPANY HAS BEEN LEGALLY ADVISED THAT IT WAS OF THE NATURE OF CAPITAL RECEIPT FOR THE PURPOSE OF COMPUTATION OF TAXABLE I NCOME AND IN THE RETURN OF INCOME FILED BY THE ASSESSEE, IT CLAI MED THE AMOUNT TO BE IN THE NATURE OF CAPITAL RECEIPT THE AO DISMI SSED THE CLAIM OF THE APPELLANT AND HELD THAT THE SUBSIDY WAS UTIL IZED FOR MEETING 6 ITA NO. 1468/KOL/2015 ASSESSMENT YEAR: 2009-2010 REVENUE DISBURSEMENTS AND THEREFORE, WAS SUPPLEMENT ARY TRADE RECEIPTS AND TO BE CONSIDERED AS REVENUE RECEIPTS T HE CIT (A) CONFIRMED THE ORDER OF THE AO. HOWEVER. THE ITAT AL LOWED THE APPEAL OF THE ASSESSEE AND HELD IT AS CAPITAL IN NA TURE. ON APPEAL BEFORE THE HON'BLE HIGH COURT THE REVENUE CONTENDED THAT FOR DETERMINING THE NATURE OF SUBSIDY, THE THREE FACTOR S ARE REQUIRED TO BE SEEN-(I) WHETHER THE BENEFIT OF INCENTIVE/SUB SIDY WAS AVAILABLE ONLY TO NEW UNITS OR EXPANDED UNITS WITHO UT ANY INTENTION TO SUPPLEMENT THE TRADE RECEIPTS OR IT WA S IN THE NATURE OF A HELP WITH AN INTENTION TO SUPPLEMENT THE TRADE RECEIPTS OF AN EXISTING UNDERTAKING, (II) WHETHER THE BENEFIT IS G IVEN BEFORE THE START OF PRODUCTION OR AFTER THE START OF PRODUCTIO N, (III) WHETHER THE SCHEME, BY WHICH BENEFIT IS GIVEN, PERMITS THE BENEFICIARY TO UTILIZE THE MONEY ACCORDING TO ITS WISH OR WHETHER IT RESTRICTS OR PUT ANY LIMIT ON THE UTILIZATION OF THE AMOUNT IN T HIS CASE, THE ASSESSEE HAS, BY VIRTUE OF THE SCHEME, GOT BACK THE SALES-TAX PAYABLE BY IT TO THE STATE GOVERNMENT AND THUS. THE SAME SHOULD BE TREATED AS REVENUE RECEIPT AS HELD BY THE SUPREM E COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD (SUPRA) THE ASSESSEE CONTENDED THAT THE OBJECT OF THE SCHEME WAS HELPING THE INDUSTRIES WITH CAPITALS IN THE CASE OF SAHNEY STEEL & PRESS W ORKS LTD (SUPRA), THE QUESTION WAS WHETHER THE GRANT OF SUBS IDY HAD FALLEN WITHIN THE PURVIEW OF SEC. 41 (1) OF THE ACT AND SU CH QUESTION WAS ANSWERED AGAINST THE ASSESSEE HOWEVER, M THE CASE O F ASSESSEE, ALTHOUGH THE SUBSIDY WAS EQUIVALENT TO THE AMOUNT P AID BY THE ASSESSEE TO THE STATE GOVERNMENT BY WAY OF SALES-TA X, YET. THE SAME COULD NOT BE TERMED AS SUBSIDY 'IN TERMS OF RE FUND OF SALES- TAX PAID' AFTER HEARING BOTH THE PARTIES, THE HON'B LE CALCUTTA HIGH COURT HELD AS FOLLOWS: 'THE OBJECT OF THE SUBSIDY IS FOR EXPANSION OF THEI R CAPACITIES, MODERNIZATION, AND IMPROVING THEIR MARKETING CAPABI LITIES AND THUS, THOSE ARE FOR THE ASSISTANCE ON CAPITAL ACCOU NT. SIMILARLY, MERELY BECAUSE THE AMOUNT OF SUBSIDY WAS EQUIVALENT TO 90% OF THE SALES-TAX PAID. AS POINTED OUT BY THE BENEFICIA RY DOES NOT IMPLY THAT THE SAME WAS IN THE FORM OF REFUND OF SA LES-TAX PAID. AS PAINTED OUT BY THE SUPREME COURT IN THE CASE OF SEN AIRAM DOONGARMALL VS CIT, ASSAM, REPORTED IN AIR 1961 (SC ) 1579, IT IS THE QUALITY OF THE PAYMENT THAT IS DECISIVE OF THE CHARACTER OF THE PAYMENT AND NOT THE METHOD OF THE PAYMENT OR ITS ME ASURE AND MAKES IT FALL WITHIN CAPITAL OR REVENUE THUS, IN TH E CASE BEFORE US, THE AMOUNT PAID AS SUBSIDY WAS REALLY CAPITAL IN NA TURE'. 5.8. IN THE CASE OF APPELLANT, THE INCENTIVE IN TH E FORM OF SALES TAX REMISSION, THOUGH, CALCULATED ON THE BASIS OF PAYME NT/COLLECTION OF SALES-TAX, WAS RECEIVED BY IT UNDER THE WEST BEN GAL INCENTIVE SCHEME, 1999 FOR SETTING UP OF NEW MANUFACTURING UN IT. I FIND THAT THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN T HE CASE OF RASOI LTD (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE AND THEREFORE THE INCENTIVE RECEIVED BY WAY OF SALES TAX REMISSION IS CAPITAL IN NATURE. 5.9. SIMILAR ISSUE WAS DECIDED BY THE HON'BLE JURI SDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. STRASSENBURG PHAR MACEUTICALS LTD 7 ITA NO. 1468/KOL/2015 ASSESSMENT YEAR: 2009-2010 (G.A. 20142 OF 2011) DATED 21.07.2011 HOLDING THAT VARIOUS AMOUNTS RECEIVED BY THE ASSESSEE AS SUBSIDY UNDER T HE WEST BENGAL INDUSTRIAL PROMOTION ASSISTANCE IS CAPITAL I N NATURE FOLLOWING THE DECISION IN THE CASE OF M/S RASOI LIM ITED (SUPRA). 5.10. SIMILAR ISSUE WAS AGAIN DECIDED BY THE ITAT, KOLKATA IN THE CASE OF DCIT VS.- ANKIT INDIA LTD. (ITA NO 1330/KO I/2010). IN THE DECIDED CASE THE ASSESSEE WAS ENGAGED IN THE PRODUC TION OF WHEAT PRODUCTS VIZ ATTA. MAIDA. SUJI AND BRAN THE ASSESSE E FILED ITS RETURN OF INCOME ON 1/11/2004 DISCLOSING TOTAL INCO ME OF RS.57,48,960/- THE ASSESSMENT WAS COMPLETED U/S 143 (3) OF THE ACT ON 29/12/2006 AT AN ASSESSED INCOME OF RS.1,82, 06,720/- WHICH. INTER ALIA. INCLUDED ADDITION OF RS.41,49,36 5/- AS SALES TAX REMISSION TREATING IT IS A REGULAR INCOME INSTEAD O F CAPITAL RECEIPT AS CLAIMED BY THE ASSESSEE BEFORE THE AO, THE ASSES SEE EXPLAINED THAT THE SAID REMISSION OF SALES-TAX HAS BEEN GRANT ED BY THE GOVERNMENT OF WEST BENGAL UNDER WEST BENGAL INCENTI VE SCHEME FOR PROMOTION OF INDUSTRIALIZATION OF THE BACKWARD AREAS IF THE STATE THE INCENTIVE WAS GIVEN FOR SETTING UP OR EXP ANSION OF THE EXISTING UNITS AND. THEREFORE IT WAS IN CAPITAL FIE LD AND HENCE NOT INCLUDIBLE AS REVENUE RECEIPT HOWEVER, THE CONTENTI ON OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO AND RELYING ON THE DECISION OF SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS W ORKS LTD (SUPRA). THE AO HELD THAT THE AMOUNT RECEIVED BY TH E ASSESSEE ON ACCOUNT OF SALES TAX REMISSION WAS REVENUE IN NATUR E AND ADDED THE SAME IN THE INCOME OF THE ASSESSEE. ON APPEAL, THE CIT(A) DELETED THE SAID ADDITION. ON APPEAL BY THE DEPARTM ENT, THE ITAT, KOLKATA FOLLOWING THE DECISION OF ITS COORDINATE BE NCH IN THE CASE OF MAITHAN ALLOYS LTD VS. DCIT (ITA NOS. 996 TO 100 1 OF 2006) AND ITAT, MUMBAI IN THE CASE OF DCIT VS. RELIANCE INDUS TRIES LIMITED (82 TTJ 765) UPHELD THE ORDER OF THE CIT(A) HOLDING THE RECEIPT AS CAPITAL IN NATURE. AGGRIEVED, THE REVENUE FILED FUR THER APPEAL BEFORE THE CALCUTTA HIGH COURT THE CALCUTTA HIGH CO URT IN THEIR ORDER IN ITAT NO. 249 OF 2011 DATED 08.09.2011 DISM ISSED THE APPEAL FILED BY THE DEPARTMENT AND UPHELD THE ORDER OF THE TRIBUNAL. 5.11. APPELLANT'S RELIANCE ON THE DECISION IN THE C ASE OF DCIT VS TEESTA AGRO INDUSTRIES LTD (ITA NO. 1237. 1053 & 17 53/KOL/2010) DATED 07.01.2011 IS ALSO FOUND TO BE OF RELEVANCE S INCE THE FACTS WERE PARI MATERIA WITH THE APPELLANT'S CASE IN THAT CASE THE AO FOUND THAT THE ASSESSEE HAD CLAIMED THAT THE INCENT IVE RECEIVED BY IT IN THE FORM OF SALES-TAX REMISSION UNDER THE WES T BENGAL INCENTIVE SCHEME. 1999 WAS A CAPITAL RECEIPT, NOT C HARGEABLE TO INCOME TAX. THE AO HELD THAT UNPAID SALES TAX WHICH WAS REMITTED BY THE GOVT OF WEST BENGAL UNDER WBIS WAS IN THE NA TURE OF TRADE RECEIPT AND HENCE TAXABLE AS ASSESSEE'S INCOME. THE AO TREATED THE INCENTIVE AS REVENUE RECEIPT RELYING ON THE DECISIO N IN THE CASES OF SUPREME COURT IN SAHNEY STEEL & PRESS WORKS LTD VS CIT (228 ITR 253), MADRAS HIGH COURT IN CIT VS. PONNI SUGARS & C HEMICALS LTD. (260 ITR 605). CALCUTTA HIGH COURT IN B MARINO PLY & CHEMICALS LTD VS. CIT (209 ITR 508) AND ANDHRA PRADESH HIGH C OURT IN CIT VS. TIRUMALA BRICKS & TILES FACTORY (217 ITR 547) O N FIRST APPEAL, THE CIT(A) HELD THAT THE ASSISTANCE GIVEN BY THE ST ATE GOVERNMENT BY WAY OF SALES-TAX REMISSION IS IN THE NATURE OF C APITAL RECEIPT 8 ITA NO. 1468/KOL/2015 ASSESSMENT YEAR: 2009-2010 AND ACCORDINGLY HE DIRECTED THE AO TO DELETE THE AD DITION. AGGRIEVED BY THE SAID ORDER, THE REVENUE FILED AN A PPEAL BEFORE THE ITAT, KOLKATA. AFTER HEARING BOTH THE SIDES, TH E IT AT HELD AS UNDER. 5.12. SIMILAR VIEW WAS REITERATED BY THE ITAT, KOLK ATA IN ITO VS DUROPLAS INDIA PVT. LTD (ITA NOS 1983. 1984 AND 1985/KOL/2008) AS WELL WHEREIN THE INCENTIVE/SUBSID Y RECEIVED BY THE ASSESSEE FROM THE GOVERNMENT OF WEST BENGAL UNDER THE WBIS, 1999 WAS HELD TO BE CAPITAL IN NATURE AS THE INCENTIVE WAS PROVIDED BY THE STATE GOVERNMENT FOR INDUSTRIAL PRO MOTION IN THE STATE OF WEST BENGAL. 5.13. THE CLAIM MADE BY THE APPELLANT THAT THE AMO UNT RECEIVED FROM THE GOVT. OF WEST BENGAL IN THE FORM OF SALES TAX REMISSION FOR SETTING UP A NEW UNIT IS CAPITAL IN NATURE: ALS O FINDS SUPPORT FROM THE DECISION OF THE FOLLOWING HIGH COURTS: - DCIT VS. INOX LEISURE LTD. (351 ITR 314) (GUJ) - CIT VS. RELIANCE INDUSTRIES LTD. (339 ITR 632) ( BOM) - SHREE BALAJI ALLOYS VS. CIT (333 ITR 335) (J&K) - CIT VS. CHAPHALKAR BROS. (215 TAXMAN 145) (BOM) 5.14. RESPECTFULLY FOLLOWING THE PRINCIPLES LAID D OWN IN THE JUDICIAL PRONOUNCEMENTS OF THE SUPREME COURT, JURIS DICTIONAL CALCUTTA HIGH COURT, OTHER HIGH COURTS AND THE JURI SDICTIONAL ITAT, KOLKATA AS DISCUSSED ABOVE. I HAVE NO HESITAT ION IN HOLDING THAT THE INCENTIVE OF RS.14,91,51,889/- RECEIVED BY THE APPELLANT COMPANY IN THE FORM OF SALES TAX REMISSION UNDER WE ST BENGAL INCENTIVE SCHEME 1999 IS CAPITAL IN NATURE. I THERE FORE HOLD THAT THE SAID RECEIPT WAS NOT ASSESSABLE AS INCOME OF TH E APPELLANT. THE AO IS ACCORDINGLY DIRECTED TO EXCLUDE THE SALES TAX INCENTIVE OF RS.14,91,51,889/- WHILE ASSESSING THE TOTAL INCO ME OF THE APPELLANT. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE SOLITARY ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE RELATI NG TO THE ASSESSEES CLAIM FOR EXCLUSION OF SALES TAX SUBSIDY ON THE GRO UND THAT IT IS CAPITAL RECEIPT NOT CHARGEABLE TO TAX IS SQUARELY COVERED I N FAVOUR OF THE ASSESSEE, INTER ALIA, BY THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS.- RASOI LIMITED [335 ITR 438], ON WHICH RELIANCE HAS BEEN PLACED BY THE LD. CIT(APPEALS) IN HIS IMPUGNED ORDER WHILE GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE. EVEN THE LD. D.R. HAS NOT BEEN ABLE TO 9 ITA NO. 1468/KOL/2015 ASSESSMENT YEAR: 2009-2010 DISPUTE THIS POSITION. HE, HOWEVER, HAS SUPPORTED T HE ADDITIONAL GROUND FILED BY THE REVENUE RAISING THE ISSUE OF VIOLATION OF RULE 46A OF INCOME TAX RULES BY THE LD. CIT(APPEALS) AND CONTENDED THA T WHEN THE FRESH CLAIM MADE BY THE ASSESSEE FOR EXCLUSION OF SALES T AX SUBSIDY, OTHERWISE THAN BY FILING A REVISED RETURN, WAS NOT ENTERTAINE D BY THE ASSESSING OFFICER BY RELYING ON THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF GOETZ INDIA LIMITED (SUPRA), THE LD. CIT(AP PEALS) OUGHT TO HAVE GIVEN OPPORTUNITY THE ASSESSING OFFICER TO EXAMINE THE SAID CLAIM OF THE ASSESSEE AS REQUIRED BY RULE 46A OF THE INCOME TAX RULES. WE, HOWEVER, FIND MERIT IN THE CONTENTION RAISED BY THE LD. COUN SEL FOR THE ASSESSEE IN THIS REGARD THAT THERE BEING NO ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) IN SUPPORT OF ITS CLAIM FOR EXCLUSION OF SALES TAX SUBSIDY, RULE 46A HAS NO APPLICATION AND THE LD . CIT(APPEALS) WAS NOT REQUIRED TO GIVE ANY OPPORTUNITY TO THE ASSESSING O FFICER TO VERIFY THE CLAIM OF THE ASSESSEE. THE LD. CIT (D.R.) HAS URGED THAT SUCH OPPORTUNITY EVEN OTHERWISE DESERVES TO BE GIVEN TO THE ASSESSIN G OFFICER IN THE INTEREST OF SUBSTANTIAL JUSTICE. IT IS, HOWEVER, OB SERVED THAT THE LD. CIT(APPEALS), WHO IS HAVING CO-TERMINUS POWERS TO T HAT OF THE ASSESSING OFFICER, HAS ALREADY EXAMINED THIS ISSUE IN DETAIL IN THE LIGHT OF THE MATERIAL AVAILABLE ON RECORD INCLUDING THE SCHEME O F THE WEST BENGAL GOVERNMENT UNDER WHICH THE AMOUNT OF SALES TAX SUBS IDY IN QUESTION WAS RECEIVED BY THE ASSESSEE AND AFTER HAVING SATISFIED HIMSELF ON MERIT, HE HAS ALLOWED THE CLAIM OF THE ASSESEE FOR EXCLUSION OF SALES TAX SUBSIDY BY TREATING THE SAME AS CAPITAL RECEIPT NOT CHARGEABLE TO TAX. MOREOVER, AS ALREADY NOTED BY US, THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE CALCUTTA HI GH COURT IN THE CASE OF RASOI LIMITED (SUPRA) AND SINCE THE LD. CIT(APPEALS ) HAS GIVEN RELIEF TO THE ASSESSEE ON THIS ISSUE BY RELYING ON THE SAID D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE ARE OF THE VIEW THAT NO CAUSE OF JUSTICE IS GOING TO BE SERVED BY SENDING THE MATTER BACK TO TH E ASSESSING OFFICER FOR EXAMINATION. WE, THEREFORE, UPHOLD THE IMPUGNED ORD ER OF THE LD. CIT(APPEALS) ALLOWING THE CLAIM OF THE ASSESSEE FOR EXCLUSION OF SALES TAX 10 ITA NO. 1468/KOL/2015 ASSESSMENT YEAR: 2009-2010 SUBSIDY BY TREATING THE SAME AS CAPITAL RECEIPT NOT LIABLE TO TAX AND DISMISS THIS APPEAL OF THE REVENUE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF JANUARY, 2018. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 31 ST DAY OF JANUARY, 2018 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-10(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 2) M/S. INDIAN OIL PETRONAS PVT. LIMITED, ACROPOLISH, 12 TH FLOOR, UNIT-I & II, 1858/1, RAJDANGA ROAD, KOLKATA-700 107 (3) CIT(APPEALS)-4, KOLKATA, (4) CIT- , KOLKATA, (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO, INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.