M/s Crystal Crop Protection Pvt. Ltd., Delhi V. DCIT, New Delhi

ITA 1539/DEL/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0840 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: S S NAGAR
• Keywords: Capital asset; Opportunity of being heard; Earning of tax free income; Question of law; Capital receipt; Rule 8D; Set aside
• Section: 143(3); 14A; 115JB; 208; 192; 13; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. BHAVNESH SAINI, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 1539/DEL./2016 : ASSTT. YEAR : 2011-12 M/S CRYSTAL CROP PROTECTION (P) LTD. GI-17, G.T. KARNAL ROAD, AZADPUR, DELHI-110033 VS DCIT, CIRCLE-6(2) NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAB CJ3574E ASSESSEE BY : SH. S. S. NAGAR, CA REVENUE BY : MS. ASHIMA NEB, SR. DR DATE OF HEARING: 02 . 12 .2019 DATE OF PRONOUNCEMENT: 19 .12 .2019 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. CIT (A)-2, NEW DELHI DATED 29.12.2015. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: 1. BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN LAW AS WELL AS FACTS WHILE CO NFIRMING THE FOLLOWING ADDITIONS: DETAILS ADDITIONS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(APPEALS) AMOUNT IN RS. (I) DISALLOWANCE U/S 14A READ WITH RULE 8D 2,50,000.00 TOTAL 2,50,000.00 2. THAT THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN OVERLOOKING AND IN SUMMARILY REJECTING THE DETAILED STATEMENT O F FACTS SUBMITTED ALONGWITH VARIOUS DOCUMENTS AND EVIDENCE PLACED IN AND PAPER BOOK FILED AND PRODUCED, WHILE ACCEPTI NG THE LOP- SIDED, FACTUALLY INCORRECT AND PRESUMPTIVE VERSION OF THE LEARNED ASSESSING OFFICER WITH RESPECT TO THE DISAL LOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (ACT ). 2 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. 3. THAT THE SUBSIDY RECEIVED BY THE APPELLANT UNDER THE NEW INDUSTRIAL POLICY AND OTHER CONCESSIONS SCHEME FRO M THE STATE OF JAMMU & KASHMIR IS TO TREATED AS CAPITAL RECEIPT IN VIEW OF THE DECISION OF THE HONBLE JAMMU & KASHMIR HIGH COURT IN SHREE BALAJI ALLOYS V CIT (239 CTR 70), TH OUGH WRONGLY TREATED AS REVENUE RECEIPT IN THE RETURN OF INCOME. 3. GROUND NOS. 1 & 2 ARE INTER-RELATED. THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS IF MANUFACTURING OF PESTICI DES, INSECTICIDES, HERBICIDES AND FERTILIZERS. THE ASSESSING OFFICER O BSERVED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD MADE AN INVESTMENT OF RS.10,00,00,000/- IN SBI MUTUAL FUNDS, THE INCOM E FROM WHICH IS EXEMPT IN THE FORM OF DIVIDEND BUT THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S 14A OF THE INCOME TAX ACT, 1961. T HE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE INV ESTMENTS IN SBI MUTUAL FUND WERE MADE OUT OF OWN SURPLUS FUNDS AND NO FUND S WERE BORROWED FOR THIS PURPOSE. THUS, NO EXPENSES WERE LIABLE TO BE D ISALLOWED U/S 14A OF THE ACT READ WITH RULES 8D OF THE I.T. RULES, 1962. HOWEVER, THE ASSESSING OFFICER AFTER RECORDING REASONS AND FOLLO WING CBDT CIRCULAR NO. 5/2014 DATED 11.02.2014 DISALLOWED RS.2,50,000/-U/S 14A OF THE ACT READ WITH RULES 8D(2)(III). 4. DURING THE ARGUMENTS BEFORE US, THE LD. AR SUBMI TTED THAT THE COMPANY HAS NOT EARNED ANY EXEMPT INCOME AND HENCE THE DISALLOWANCE MADE BY THE ASSESSEE FOLLOWING THE CBDT CIRCULAR NO . 5/2014 DATED 11.02.2014 IS LEGALLY NOT VALID. THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. THE REVENUE HAS NOT DISPUTED THE FACTUAL POSITION. HENCE, KEEPING IN VIEW THE JUDGMENT OF HONBLE DELH I HIGH COURT IN THE CASE CHEMINVEST LTD. VS CIT IN ITA NO. 749/2014 DAT ED 02.09.2015, JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CH ITTI LOGISTICS WHEREIN THE SLP FILED BY THE REVENUE IN THE SIMILAR MATTER, WE HOLD THAT NO DISALLOWANCE IS CALLED FOR. FURTHER, IN THE CASE OF IL&FS ENERGY DEVELOPMENT COMPANY LTD., THE HONBLE HIGH COURT OF DELHI DATED 16.08.2017 HELD THAT THE CIRCULAR OF THE CBDT CANNO T OVERRIDE THE 3 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. PROVISIONS OF THE SECTION 14A. HENCE, WE HEREBY HOL D THAT THE ORDER OF THE LD. CIT (A) IS NOT LEGALLY VALID IN CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 5. THE ASSESSEE HAS TAKEN ADDITIONAL GROUND PERTAIN ING TO CLAIM OF EXCISE DUTY SUBSIDY AND INTEREST SUBSIDY AS CAPITAL RECEIPT WHICH WAS WRONGLY TREATED AS REVENUE RECEIPT. ADMISSION OF TH E ADDITIONAL GROUND HAS BEEN OPPOSED IN PRINCIPLE BY THE LD. DR. KEEPIN G IN VIEW, THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF N ATIONAL THERMAL POWER CO. LTD. VS COMMISSIONER OF INCOME TAX ON 4 DECEMBE R, 1996, (229 ITR 383), THE ADDITIONAL GROUND FILED BY THE ASSESSEE I S ACCEPTED. THE RELEVANT PORTION OF THE JUDGMENT IS AS UNDER: UNDER SECTION 254 OF THE INCOME-TAX ACT, THE APPELLATE TRIBUNAL MAY, AFTER GIVING BOTH THE PARTIES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD, PASS SUCH ORDERS THEREO N AS IT THINKS FIT. THE POWER OF THE TRIBUNAL IN DEALING WI TH APPEALS IS THUS EXPRESSED IN THE WIDEST POSSIBLE TERMS. THE PU RPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHOR ITIES IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASSESSEE I N ACCORDANCE WITH LAW. IF, FOR EXAMPLE, AS A RESULT OF A JUDICIA L DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUN AL, IT IS FOUND THAT A NON-TAXABLE ITEM IS TAXED OR A PERMISS IBLE DEDUCTION IS DENIED, WE DO NOT SEE ANY REASON WHY T HE ASSESSEE SHOULD BE PREVENTED FROM RAISING THAT QUES TION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVANT FACTS ARE ON RECORD IN RESPECT OF THAT ITEM. WE DO NOT SEE ANY REASON TO RESTRICT THE POWER OF THE TRIBUNAL UNDER SECTION 254 ONLY TO DECIDE THE GROUNDS WHICH ARISE FROM THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN A PPEAL/CROSS- OBJECTIONS BEFORE THE TRIBUNAL. WE FAIL TO SEE WHY THE TRIBUNAL SHOULD BE PREVENTED FROM CONSIDERING QUESTIONS OF L AW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLI ER. 6. IN THE CASE OF JUTE CORPORATION OF INDIA LTD. V. C.I.T . . THIS COURT, WHILE DEALING WITH THE POWERS OF THE APPELLA TE ASSISTANT COMMISSIONER OBSERVED THAT AN APPELLATE AUTHORITY H AS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DEC IDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR L IMITATIONS, IF ANY, PRESCRIBED BY THE STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION, THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHICH THE SUBORDINATE AUTHOR ITY MAY HAVE IN THE MATTER. THERE IS NO GOOD REASON TO JUST IFY 4 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. CURTAILMENT OF THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IN ENTERTAINING AN ADDITIONAL GROUND R AISED BY THE ASSESSEE IN SEEKING MODIFICATION OF THE ORDER O F ASSESSMENT PASSED BY THE INCOME-TAX OFFICER. THIS C OURT FURTHER OBSERVED THAT THERE MAY BE SEVERAL FACTORS JUSTIFYING THE RAISING OF A NEW PLEA IN AN APPEAL AND EACH CAS E HAS TO BE CONSIDERED ON ITS OWN FACTS. THE APPELLATE ASSISTAN T COMMISSIONER MUST BE SATISFIED THAT THE GROUND RAIS ED WAS BONA FIDE AND THAT THE SAME COULD NOT HAVE BEEN RAI SED EARLIER FOR GOOD REASONS. THE APPELLATE ASSISTANT COMMISSIO NER SHOULD EXERCISE HIS DISCRETION IN PERMITTING OR NOT PERMITTING THE ASSESSEE TO RAISE AN ADDITIONAL GROUND IN ACCOR DANCE WITH LAW AND REASON. THE SAME OBSERVATIONS WOULD APPLY T O APPEALS BEFORE THE TRIBUNAL ALSO. 7. THE VIEW THAT THE TRIBUNAL IS CONFINED ONLY TO I SSUES ARISING OUT OF THE APPEAL BEFORE THE COMMISSIONER OF INCOME -TAX (APPEALS) TAKES TOO NARROW A VIEW OF THE POWERS OF THE APPELLATE TRIBUNAL [VIDE, E.G., C.I.T, V. ANAND PRASAD (DELHI), C.I.T . V. KARAMCHANDPREMCHAND P. LTD. AND C.I.T. V. CELLULOSE PRODUCTS OF INDIA LTD . . UNDOUBTEDLY, THE TRIBUNAL WILL HAVE THE DISCRETION TO ALLOW OR NOT ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER A Q UESTION OF LAW ARISING FROM THE FACTS WHICH ARE ON RECORD IN T HE ASSESSMENT PROCEEDINGS WE FAIL TO SEE WHY SUCH A QU ESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECES SARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. 8. THE REFRAMED QUESTION, THEREFORE, IS ANSWERED IN THE AFFIRMATIVE, I.E., THE TRIBUNAL HAS JURISDICTION TO EXAMINE A QUESTION OF LAW WHICH ARISES FROM THE FACTS AS FOUN D BY THE AUTHORITIES BELOW AND HAVING A BEARING ON THE TAX L IABILITY OF THE ASSESSEE. WE REMAND THE PROCEEDINGS TO THE TRIB UNAL FOR CONSIDERATION OF THE NEW GROUNDS RAISED BY THE ASSE SSEE ON THE MERITS. 6. BRIEF FACTS OF THE GROUND IS THAT THE ASSESSEE H AS SET UP ONE UNIT IN JAMMU & KASHMIR AND BY VIRTUE OF NEW INDUSTRIAL POL ICY RECEIVED INTEREST SUBSIDY AND EXCISE DUTY SUBSIDY AMOUNTING TO RS.5,2 8,316/- AND RS.10,17,09,529/-. IN COMPUTING THE TOTAL TAX LIABI LITY, THE SAME WAS CLAIMED AS REVENUE RECEIPT UNDER NORMAL PROVISIONS OF THE ACT. IT WAS ARGUED BY THE LD. AR THAT THE INTEREST AND EXCISE D UTY SUBSIDY HAS BEEN GRANTED WITH THE OBJECTIVE OF DEVELOPMENT OF INDUST RIES AND GENERATION O EMPLOYMENT AND CONSIDERING THE PURPOSE TEST AND SPI RIT, HONBLE HIGH 5 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. COURT OF JAMMU & KASHMIR IN THE CASE OF SHREE BALAJ I ALLOYS VS CIT (2011) 333 ITR 335 (J&K) HELD THAT EXCISE DUTY SUBS IDY, INTEREST SUBSIDY AND INSURANCE SUBSIDY RECEIVED WITH THE OBJECT OF C REATING AVENUES FOR PERPETUAL EMPLOYMENT, TO ERADICATE THE SOCIAL PROBL EM OF UNEMPLOYMENT IN THE STATE BY ACCELERATED INDUSTRIAL DEVELOPMENT IS CAPITAL RECEIPT. IT WAS ALSO SUBMITTED THAT THE CIVIL APPEAL NO. 10061 OF 2 011 DATED 19.04.2016 FILED BY DEPARTMENT HAS BEEN DISMISSED BY THE HONB LE APEX COURT. IT WAS REITERATED THAT THE FACTS OF SHREE BALAJI ALLOYS IS AKIN TO THE FACTS OF THE INSTANT CASE. 7. THE LD. AR ALSO ARGUED PLACING RELIANCE IS ALSO PLACED ON THE DECISION OF CO-ORDINATE BENCH OF ITAT IN THE CASE OF MONTAGE ENTERPRISES PVT. LTD. IN ITA NO. 5124/DEL/2011 DATED 29.06.2018 WHEREIN I T WAS HELD THAT EXCISE DUTY SUBSIDY TO BE TREATED AS CAPITAL IN NAT URE STANDS UPHELD FROM THE STAGE OF THE HONBLE SUPREME COURT. ONCE RECEIP T ITSELF HAS BEEN TREATED AS CAPITAL IN NATURE IT CANNOT BE BOUGHT TO TAX, THEN SAME CANNOT BE HELD TO BE INCLUDABLE IN THE BOOK PROFIT. THE LD . DR RELIED ON THE JUDGMENT OF CO-ORDINATE BENCH OF DELHI IN THE CASE OF MODERN HOMECARE PRODUCTS LTD. IN ITA NO. 2595/DEL/2002 HOLDING THAT IT IS NOT THE APPROPRIATE FORUM TO RAISE THE ISSUE AT THIS JUNCTU RE. 8. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 9. IN THE CASE OF JUTE CORPORATION OF INDIA LTD. VS CIT VIDE ORDER DATED 04.09.1990, 1991 AIR 241 HELD THAT THE HONBLE APEX COURT WHILE ADJUDICATING ON THE ISSUE OF ADDITIONAL GROUND HELD THAT THE DECLARATION OF LAW IS CLEAR THAT THE POWER OF THE APPELLATE ASSIST ANT COMMISSIONER IS CO- TERMINUS WITH THAT OF THE INCOME TAX OFFICER. IF TH AT BE SO, THERE APPEARS TO BE NO REASON AS TO WHY THE APPELLATE AUTHORITY C ANNOT MODIFY THE ASSESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NO T RAISED BEFORE THE INCOME TAX OFFICER. NO EXCEPTION COULD BE TAKEN TO THIS VIEW AS THE ACT DOES NOT PLACE ANY RESTRICTION OR LIMITATION ON THE EXERCISE OF APPELLATE 6 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. POWER. EVEN OTHERWISE AN APPELLATE AUTHORITY WHILE HEARING APPEAL AGAINST THE ORDER OF A SUBORDINATE AUTHORITY HAS AL L THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DECIDING THE QUESTIO N BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATION IF ANY PRESCRIBED BY THE STATUTORY PROVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISIONS TO THE C ONTRARY THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHI CH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. 10. THE HONBLE APEX COURT HAS ALSO HELD THAT IF TH E APPELLATE ASSISTANT COMMISSIONER IS SATISFIED HE WOULD BE ACTING WITHIN HIS JURISDICTION IN CONSIDERING THE QUESTION SO RAISED IN ALL ITS ASPEC TS. OF COURSE, WHILE PERMITTING THE ASSESSEE TO RAISE AN ADDITIONAL GROU ND, THE APPELLATE ASSISTANT COMMISSIONER SHOULD EXERCISE HIS DISCRETI ON IN ACCORDANCE WITH LAW AND REASON. HE MUST BE SATISFIED THAT THE GROUN D RAISED WAS BONA FIDE AND THAT THE SAME COULD NOT HAVE BEEN RAISED EARLIE R FOR GOOD REASONS. THE SATISFACTION OF THE APPELLATE ASSISTANT COMMISS IONER DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE AND NO RIG ID PRINCIPLES OR ANY HARD AND FAST RULES CAN BE LAID DOWN FOR THIS PURPO SE. 11. THE SIMILAR PROPOSITION HAS REITERATED BY THE H ONBLE APEX COURT WHILE DEALING WITH THE SIMILAR ISSUE IN THE CASE NA TIONAL THERMAL POWER CO. LTD. VS CIT 229 ITR 383. THE APEX COURT REITERA TED THAT 6. IN THE CASE OF JUTE CORPORATION OF INDIA LTD. V. C. I.T . THIS COURT, WHILE DEALING WITH THE POWERS OF THE APPELLATE ASSI STANT COMMISSIONER OBSERVED THAT AN APPELLATE AUTHORITY H AS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DEC IDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR L IMITATIONS, IF ANY, PRESCRIBED BY THE STATUTORY PROVISIONS. IN THE ABSE NCE OF ANY STATUTORY PROVISION, THE APPELLATE AUTHORITY IS VES TED WITH ALL THE PLENARY POWERS WHICH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. THERE IS NO GOOD REASON TO JUSTIFY CURTAILM ENT OF THE POWER OF THE APPELLATE ASSISTANT COMMISSIONER IN ENTERTAI NING AN ADDITIONAL GROUND RAISED BY THE ASSESSEE IN SEEKING MODIFICATION OF THE ORDER OF ASSESSMENT PASSED BY THE INCOME-TAX OF FICER. THIS COURT FURTHER OBSERVED THAT THERE MAY BE SEVERAL FA CTORS JUSTIFYING THE RAISING OF A NEW PLEA IN AN APPEAL AND EACH CAS E HAS TO BE CONSIDERED ON ITS OWN FACTS. THE APPELLATE ASSISTAN T COMMISSIONER MUST BE SATISFIED THAT THE GROUND RAISED WAS BONA F IDE AND THAT THE SAME COULD NOT HAVE BEEN RAISED EARLIER FOR GOOD RE ASONS. THE 7 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. APPELLATE ASSISTANT COMMISSIONER SHOULD EXERCISE HI S DISCRETION IN PERMITTING OR NOT PERMITTING THE ASSESSEE TO RAISE AN ADDITIONAL GROUND IN ACCORDANCE WITH LAW AND REASON. THE SAME OBSERVATIONS WOULD APPLY TO APPEALS BEFORE THE TRIBUNAL ALSO. 12. WHILE DEALING WITH THE CASE OF NTPC, THE HONBL E APEX COURT ENUNCIATED THAT IT WOULD NOT BE PROPER IF THE TRIBU NAL IS CONFINED ONLY TO ISSUES ARISING OUT OF THE APPEAL BEFORE THE COMMISS IONER OF INCOME-TAX (APPEALS) AND IT AMOUNTS TO TAKING TOO NARROW A VIE W OF THE POWERS OF THE APPELLATE TRIBUNAL. UNDOUBTEDLY, THE TRIBUNAL WILL HAVE THE DISCRETION TO ALLOW OR NOT ALLOW A NEW GROUND TO BE RAISED. BUT W HERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER A QUESTION OF LAW ARISING FROM THE FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS WE FAIL TO SEE WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. THUS, WE FIND THAT THE COURTS HAVE ALWAYS UPHELD THE POWERS OF THE TRIBUNAL OR RATHER DIRECTED THE TRIBUNALS TO AS SESS THE CORRECT TAX LIABILITY OF THE ASSESSEES. IN CASE THE ASSESSEE HA S WRONGLY OR OWING TO LACK OF KNOWLEDGE PAYS TAX ON AN ITEM OF AMOUNT WHI CH IS NOT TAXABLE IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX AC T, THE ASSESSEE WOULD HAVE EVERY RIGHT TO PRAY FOR RIGHT TAXATION OF HIS TAXABLE INCOME. 13. THUS, IT CAN BE SAID THAT THE CLAIM OF THE ASSE SSEE HAS TO BE CONSIDERED BASED ON THE FACT THAT WHETHER THE AMOUN TS IN QUESTION OR TAXABLE OR NOT, NOTWITHSTANDING THE FACT THAT THE A SSESSEE HAS SUO-MOTO OFFERED THE AMOUNTS TO TAXATION ALREADY. FOR DETERM INATION OF THE ISSUE WHETHER THE ASSESSING OFFICER OR THE TRIBUNAL EMPOW ERED TO CONSIDER THE PLEA OF THE ASSESSEE, THE PROVISIONS OF THE ACT ARE EXAMINED. 14. YEAR-1989 -- THE PROVISION SUB-SECTION (3) WAS SUBSTITUTED BY THE FOLLOWING PROVISION BY THE DIRECT TAX LAWS (AMENDME NT) ACT, 1987 WITH EFFECT FROM 1ST APRIL 1989, WHICH READ AS FOLLOWS ' (3) ON THE DAY SPECIFIED IN THE NOTICE ISSUED UNDER SUB-SECTION (2), OR AS S OON AFTERWARDS AS MAY BE, AFTER HEARING SUCH EVIDENCE AS THE ASSESSEE MAY PRODUCE AND SUCH OTHER EVIDENCE AS THE ASSESSING OFFICER MAY REQUIRE ON SPECIFIED POINTS, 8 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. AND AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIAL WHICH HE HAS GATHERED, THE ASSESSING OFFICER SHALL, BY AN ORDER IN WRITING , MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF THE ASSESSEE, AND DETER MINE THE SUM PAYABLE BY HIM ON THE BASIS OF SUCH ASSESSMENT.' 15. ON PERUSAL OF THE ABOVE PROVISION, IT IS NOTED THE LEGISLATURE SPECIFICALLY EXCLUDED THE A.O.'S POWER TO DETERMINE SUM 'REFUNDABLE' TO THE ASSESSEE ON COMPLETION OF ASSESSMENT UNDER SUB- SECTION (3) OF SECTION 143 OF THE ACT. THE INTENTION OF THE LEGISLATURE IN IN TRODUCING AMENDED SECTION 143(3) WAS EXPLAINED BY THE CBDT IN CIRCULAR NO. 549 DATED 31.10.1989 WHEREIN THE BOARD STATED THAT UNDE R THE AMENDED PROVISIONS, THE ITA NO.679/KOL/2016 SMT. SHARMILA K UMAR, AY- 2011-12 ASSESSING OFFICER IN AN ASSESSMENT ORDER PASSED UND ER SECTION 143(3) CANNOT ASSESS INCOME AT A FIGURE LOWER THAN THE RE TURNED INCOME, NOR CAN LOSS BE ASSESSED AT A FIGURE HIGHER THAN TH E RETURNED, AND THEREFORE NO TAX PAID WITH REFERENCE TO THE RETURNE D INCOME CAN NOW BE REFUNDED TO THE ASSESSEE ON COMPLETION OF REGULAR A SSESSMENT. 16. YEAR 1998 -- THE ABOVE PROVISION WAS LATER ON S UBSTITUTED BY THE FINANCE (NO.2) ACT OF 1998 AND THE POWER TO DET ERMINE 'SUM REFUNDABLE' TO THE ASSESSEE BY THE ASSESSING OFFICE RS IN THE PROCEEDINGS U/S 143(3) WAS RE-INSTATED BY THE LEGISLATURE. THE RELEVANT PROVISION, AS IT STANDS NOW READS AS UNDER: '(3) ON THE DAY SPECIFIED IN THE NOTICE ISSUED UNDE R SUB-SECTION (2), OR AS SOON AFTERWARDS AS MAY BE, AFTER HEARING SUCH EVIDENCE AS THE ASSESSEE MAY PRODUCE AND SUCH OTHER EVIDENCE AS THE ASSESSING OFFICER MAY REQUIRE ON SP ECIFIED POINTS, AND AFTER TAKING INTO ACCOUNT ALL RELEVANT MATERIAL WHICH HE HAS GATHERED, THE ASSESSING OFFICER SHALL, BY AN ORDER IN WRITING, MAKE AN ASSESSMENT OF THE TOTAL INCOME OR LOSS OF THE ASSESSEE, AND DETERMINE THE SUM PAYABLE BY HIM OR R EFUND OF ANY AMOUNT DUE TO HIM ON THE BASIS OF SUCH ASSESSME NT.' 17. THE CBDT CIRCULAR NO. 772 DTD. 23.12.1998-- EXP LAINING THE ABOVE SUBSTITUTED PROVISION OF SECTION 143(3) EXPLICITLY STATED THAT UNDER THE ERSTWHILE PROVISIONS, THERE WAS NO PROVISION TO ISS UE REFUND AND THE 9 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. ASSESSING OFFICER WAS ONLY EMPOWERED TO DETERMINE T HE SUM PAYABLE BY THE ASSESSEE, BUT UNDER THE AMENDED PROVISIONS THE A.O. IS EMPOWERED TO PROVIDE FOR DETERMINATION OF SUM PAYABLE BY THE ASS ESSEE AS WELL AS THE REFUND OF ANY AMOUNT DUE TO HIM. 18. ON HARMONIOUS READING OF THESE PROVISIONS & AFT ER GIVING DUE CONSIDERATION OF THE LEGISLATIVE HISTORY OF SECTION 143(3) AND THE JUDGMENT OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF C IT VS BRITANNIA INDUSTRIES LTD IN ITA NO. 03/2013 VIDE ORDER DATED 13.07.2017 HELD THAT EVEN IF IT (ACCEPTING THE FRESH CLAIM OF THE ASSESS EE) RESULTS IN AN ASSESSMENT BELOW THE RETURNED INCOME AND CONSEQUENT LY REFUND ARISES, IT IS VALID AS PER LAW. 19. THE HONBLE HIGH COURT HAS ALSO HELD THAT THERE IS NO CONFLICT BETWEEN THE GURJARGRAVURES PRIVATE LTD. AND GOETZE (INDIA) LTD. IN THE FORMER A CLAIM FOR EXEMPTION WAS FOR THE FIRST TIME PUT UP BEFORE THE APPELLATE ASSISTANT COMMISSIONER WHO REJECTED THE C LAIM AS NOT MADE BEFORE THE I.T.O. THIS REJECTION WAS SET ASIDE BY T HE TRIBUNAL WITH DIRECTION UPON THE APPELLATE ASSISTANT COMMISSIONER TO ENTERTAIN THE QUESTION OF RELIEF UNDER SECTION 84, CLAIMED BY THE ASSESSEE IN THAT CASE. THE SUPREME COURT HELD THAT IT WAS NOT COMPETENT FO R THE TRIBUNAL TO HAVE DONE SO. THE DISTINCTION BETWEEN THE TWO AUTHO RITIES ELIMINATING ANY CONFLICT IS THAT IN GURJARGRAVURES PRIVATE LTD. THE COMPETENCE OF THE TRIBUNAL TO DIRECT THE APPELLATE ASSISTANT COMMISSI ONER TO ENTERTAIN A CLAIM NOT MADE BEFORE THE I.T.O WAS FOUND TO BE LAC KING. IN GOETZE (INDIA) LTD. THE SUPREME COURT HELD THAT THE ASSESS ING AUTHORITY'S POWER WAS LIMITED BUT NOT THAT OF THE TRIBUNAL IN THE CON TEXT OF DEALING WITH A CLAIM OF THE ASSESSEE THEREIN NOT PUT FORWARD BEFOR E THE ASSESSING OFFICER. IN GURJARGRAVURES PRIVATE LTD. (SUPRA) THE TRIBUNAL ITSELF DID NOT CONSIDER TO ALLOW THE CLAIM FOR RELIEF. 20. FURTHER, THE CBDT CIRCULAR NO. 14(XL-35 DATED 1 1.04.1955) WHEREIN IT IS HELD AS UNDER: 10 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. ' 3. OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTA GE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ON E OF THEIR DUTIES TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY , PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INITIAT IVE IN GUIDING A TAX PAYER WHERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THE ITA NO.679/KOL/2016 SMT. SHARMILA KUMAR, AY- 2011-12 DEPARTMENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM T HAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPARTMEN T. ALTHOUGH, THEREFORE, THE RESPONSIBILITY FOR CLAIMIN G REFUNDS AND RELIEFS RESTS WITH ASSESSEES ON WHOM IT IS IMPOSED BY LAW, OFFICERS SHOULD' 21. FURTHER, WE ALSO NOTE THAT THE RELIEF SOUGHT CA NNOT BE REFUSED MERELY BECAUSE THE ASSESSEE HAS OMITTED TO CLAIM TH E RELIEF AS HELD BY THE HON'BLE SUPREME COURT IN ANCHOR PRESSINGS P. LTD. V S. CIT 161 ITR 159. HENCE, KEEPING IN VIEW THE ENTIRE FACTS ON RECORD, THE JUDICIAL PRONOUNCEMENTS OF THE HONBLE APEX COURT ON THE ISS UE OF ALLOWABILITY OF THE CLAIM, WE HEREBY HOLD THAT THE ASSESSEE IS ELIG IBLE TO RAISE THE ISSUE AT APPELLATE LEVELS. 22. HAVING SAID SO, THE ISSUE WHETHER THE EXCISE DU TY SUBSIDY AND INTEREST SUBSIDY CAN BE TREATED AS CAPITAL RECEIPT IS EXAMINED. THE SIMILAR SUBSIDY HAS BEEN ALLOWED AS CAPITAL RECEIPT AND ALS O THE ISSUE OF COMPUTATION OF PROFITS U/S 115JB HAS BEEN EXAMINED BY THE CO-ORDINATE BENCH OF TRIBUNAL IN ITA NO. 3837/DEL/2016 IN THE C ASE OF M/S DHANUKA AGRITECH LTD. WHEREIN THE APPEAL OF THE ASSESSEE IS ALLOWED. THE SAME IS SQUARELY APPLICABLE TO THE FACTS OF THE INSTANT CAS E. FURTHER, THE MATTER STANDS SQUARELY COVERED BY THE ORDER OF THE HONBLE JAMMU & KASHMIR HIGH COURT IN THE CASE OF SHRI BALAJI ALLOYS VS CIT 333 ITR 335. THE SNIPPETS OF THE ORDER OF THE HONBLE HIGH COURT AND THE DECISION OF THE HONBLE APEX COURT ON THE ISSUE IS AS UNDER: THE ASSESSEE, PURSUANT TO THE NEW INDUSTRIAL POLICY ANNOUNCED FOR THE STATE OF J&K, RECEIVED EXCISE REF UND AND INTEREST SUBSIDY, ETC WHICH IT CLAIMED TO BE A CAPI TAL RECEIPT. IN THE ALTERNATIVE, IT WAS CLAIMED THAT THE SAME WAS E LIGIBLE FOR DEDUCTION U/S 80-IB. THE AO, CIT (A) AND TRIBUNAL R EJECTED 11 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. THE CLAIM AND HELD THE RECEIPTS TO BE REVENUE ON TH E GROUND THAT THE SUBSIDY (I) WAS FOR ESTABLISHED INDUSTRY A ND NOT TO SET UP A NEW ONE, (II) IT WAS AVAILABLE AFTER COMMERCIA L PRODUCTION, (III) IT WAS RECURRING IN NATURE, (IV) IT WAS NOT FOR PURCHASING CAPITAL ASSETS AND (V) IT WAS FOR RUNNIN G THE BUSINESS PROFITABLY. ON APPEAL BY THE ASSESSEE, THE HIGH COURT (333 ITR 335) REVERSED THE LOWER AUTHORITIES AND HELD AS FOLLOWS: (I) THE RATIO OF SAHNEY STEEL 228 ITR 253 (SC), PON NI SUGARS 306 ITR 392 (SC) AND MEPCO INDUSTRIES 319 ITR 208 (SC) IS THAT TO DETERMINE WHETHER INCENTIVES & SUBS IDIES ARE REVENUE OR CAPITAL RECEIPTS, THE PURPOSE UNDERLYING THE INCENTIVES IS THE DETERMINATIVE TEST. IF THE OBJECT OF THE SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY THEN THE RECEIPT IS ON REVENUE ACCO UNT. ON THE OTHER HAND, IF THE OBJECT OF THE SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT THEN THE RECEIPT OF THE SUBSIDY WAS ON CAPITAL ACCOUNT. IT IS THE OBJECT FOR WHICH THE SUBSIDY/ASSISTANCE IS G IVEN WHICH DETERMINES THE NATURE OF THE INCENTIVE SUBSIDY. THE FORM OR THE MECHANISM THROUGH WHICH THE SUBSIDY IS GIVEN IS IRRELEVANT; II) ON FACTS, THE OBJECT OF THE SUBSIDY SCHEME WAS (A) TO ACCELERATE INDUSTRIAL DEVELOPMENT IN J&K AND (B) GE NERATE EMPLOYMENT IN J&K. SUCH INCENTIVES, DESIGNED TO ACH IEVE A PUBLIC PURPOSE, CANNOT, BY ANY STRETCH OF REASONING , BE CONSTRUED AS PRODUCTION OR OPERATIONAL INCENTIVES F OR THE BENEFIT OF ASSESSES ALONE. IT CANNOT BE CONSTRUED A S MERE PRODUCTION AND TRADE INCENTIVES; (III) THE FACT THAT THE INCENTIVES WERE AVAILABLE O NLY AFTER COMMENCEMENT OF COMMERCIAL PRODUCTION CANNOT BE VIE WED IN ISOLATION. THE OTHER FACTORS WHICH WEIGHED WITH THE TRIBUNAL ARE ALSO NOT DECISIVE TO DETERMINE THE CHARACTER OF THE INCENTIVE SUBSIDIES IN VIEW OF THE STATED OBJECTS O F THE SUBSIDY SCHEME; (IV) QUESTION WHETHER THE SUBSIDY RECEIPTS ARE ELIG IBLE U/S 80- IB NOT DECIDED. 23. ON APPEAL BY THE DEPARTMENT TO THE SUPREME COUR T HELD DISMISSING THE APPEAL: THE ISSUE RAISED IN THESE APPEALS IS COVERED AGAIN ST THE REVENUE BY THE DECISION OF THIS COURT IN COMMISSIO NER OF INCOME TAX, MADRAS VS. PONNI SUGARS AND CHEMICALS L TD ., 12 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. REPORTED IN (2008) 9 SCC 337, OR IN THE ALTERNATE, IN COMMISSIONER OF INCOME TAX VS. M/S MEGHALAYA STEEL S LTD. , REPORTED IN (2016) 3 SCALE 192 (383 ITR 217 (SC)). THEREFORE, FOR THE AFORESAID REASONS GIVEN ABOVE, T HE REVENUE'S GROUND OF APPEAL IS DISMISSED. 24. THE APPEAL OF THE ASSESSEE ON THE GROUND OF EXC ISE DUTY SUBSIDY AND INTEREST SUBSIDY AS CAPITAL RECEIPT IS HEREBY A LLOWED. 25. REGARDING THE CLAIM OF EDUCATION CESS AS AN ALL OWABLE EXPENDITURE, WE FIND THAT THE CBDT VIDE CIRCULAR NO. 91/58/66 ITJ(19) CLARIFIED AS UNDER: INTERPRETATION OF PROVISIONS OF SECTION 40(A)(II) OF THE I.T ACT CLARIFICATION REGARDING. SECTION 40(A)(II) RECENTLY A CASE HAS COME TO THE NOTICE OF THE BOARD WHERE THE ITO HAS DISALLOWED THE CESS P AID BY THE ASSESSEE ON THE GROUND THAT THERE HAS BEEN NO MATER IAL CHANGE IN THE PROVISIONS OF SECTION 10(4) OF THE OL D ACT AND SECTION 40(A)(II) OF THE NEW ACT. 2. THE VIEW OF THE ITO IS NOT CORRECT. CLAUSE 40(A) (II) OF THE IT BILL, 1961 AS INTRODUCED IN THE PARLIAMENT STOOD AS UNDER: (A) ANY SUM PAID ON ACCOUNT OF ANY CESS, RATE OR T AX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSI ON OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BA SIS OF, ANY SUCH PROFITS OR GAINS. WHEN THE MATTER CAME UP BEFORE THE SELECT COMMITTEE , IT WAS DECIDED TO OMIT THE WORD CESS FROM THE CLAUSE . THE EFFECT OF THE OMISSION OF THE WORD CESS IS THAT O NLY TAXES PAID ARE TO BE DISALLOWED IN THE ASSESSMENTS FOR TH E YEARS 1962-63 AND ONWARDS. 3. THE BOARD DESIRE THAT THE CHANGED POSITION MAY P LEASE BE BROUGHT TO THE NOTICE OF ALL THE ITOS SO THAT FURTH ER LITIGATION ON THIS ACCOUNT MAY BE AVOIDED. 26. THE SIMILAR ISSUE OF ALLOWABILITY OF CESS U/S 3 7 HAS BEEN EXAMINED BY THE CO-ORDINATE BENCH OF ITAT IN ITA NO. 685/CAL ./2014 WHEREIN THE AMOUNT OF THE CESS PAID HAS BEEN HELD TO BE AN ALLO WABLE DEDUCTION. 27. FURTHER, WE FIND THAT THE HONBLE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR IN ITA NO. 52/2018 IN THE CASE OF CHAMBAL FERTILIZERS 13 ITA NO.1539/DEL/2016 CRYSTAL CROP PROTECTION (P) LTD. AND CHEMICALS LTD. HELD THAT IN VIEW OF THE CIRCULA R OF CBDT WHERE THE WORD CESS IS DELETED, THE CLAIM OF THE ASSESSEE F OR DEDUCTION IS ACCEPTABLE. IN THAT CASE, THE HONBLE HIGH COURT HE LD THAT THERE IS DIFFERENCE BETWEEN THE CESS AND TAX AND CESS CANNOT BE EQUATED WITH THE CESS. HENCE, KEEPING IN VIEW THE PROVISIONS OF THE ACT, CIRCULAR OF THE CBDT AND JUDICIAL PRONOUNCEMENTS, WE HEREBY HOLD TH AT THE ASSESSEE IS ELIGIBLE TO CLAIM THE DEDUCTION OF THE CESS AS PE R THE PROVISIONS OF SECTION 37 OF THE INCOME TAX ACT. 28. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/12/2019. SD/- SD/- (BHAVNESH SAINI) (DR . B. R. R. KUMAR) JUDICIAL MEMBER AC COUNTANT MEMBER DATED: 19/12/2019 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR