Bhagwati Sponge Private Limited, Burdwan V. A.C.I.T Cir - 1,Asansol, Asansol

ITA 2066/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4835 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 04-07-2013
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN ANSARI
• Assessee Lawyers: V N PUROHIT; H V BHARDWAJ ACA
• Keywords: Capital receipt; Revised return
• Section: 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.2066/KOL/2013 ASSESSMENT YEAR: 2006-07 BHAGWATI SPONGE PVT. LTD. VS. ASSISTANT COMMISS IONER OF INCOME-TAX, (PAN: AACCB3462A) CIR-1, ASANSOL ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 11.05.2016 DATE OF PRONOUNCEMENT: 18.05.2016 FOR THE APPELLANT: S/SHRI V. N. PUROHIT, AR & H.V. BHARDWAJ, ACA FOR THE RESPONDENT: MD. GHAYAS UDDIN ANSARI, JCI T, SR. DR ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A), ASANSOL VIDE APPEAL NO. 132/CIT(A)/ASL/WD-1(4)/ASL/2008-09 DATED 08.05 .2013. ASSESSMENT WAS FRAMED BY ITO, WD-1(4), ASANSOL, U/S. 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2006-07 VIDE HIS O RDER DATED 19.12.2008. 2. THE ASSESSEE HAS RAISED THE FOLLOWING REVISED GR OUNDS: GROUND NO. 1 THAT THE COMMISSIONER OF INCOME TAX (APPEAL) HAS ER RED IN LAW AND ON FACTS OF THE CASE IN NOT ACCEPTING ASSESSEE'S CLAIM THAT AMOUNT OF RS. 42,04,928/- RECEIVED FROM GOVERNMENT AS INTEREST SUBSIDY UNDER WEST BENGAL IN CENTIVE SCHEME, 2000 CANNOT FORM PART OF ASSESSES TOTAL INCOME, THE SAME BEING OF CA PITAL IN NATURE. GROUND NO. 2- THAT WITHOUT ANY PREJUDICE TO GROUND NO. 1 ABOVE, T HE CIT(A) HAS, LIKEWISE, FURTHER ERRED IN DISMISSING THE ASSESSEE'S ALTERNATIVE CLAI M THAT A SUM OF RS. 625,266/- INCLUDED IN THE TOTAL SUM OF RS. 42,04,928/- OF INTEREST SUB SIDY HAVING NEITHER BEEN RECEIVED NOR ACCRUED, SHOULD NOT PART OF TOTAL TAXABLE INCOME. GROUND NO. 3- THAT THE CIT(A) HAS, LIKEWISE FURTHER ERRED IN LAW AND ON FACTS OF THE CASE IN NOT ACCEPTING ASSESSEE'S CLAIM THAT AMOUNT OF RS. 9,59, 9761- AS ELECTRICITY SUBSIDY UNDER WEST BENGAL INCENTIVE SCHEME, 2000 CANNOT FORM PART OF ASSESSES TOTAL INCOME, THE SAME BEING OF CAPITAL IN NATURE. 3. THE ONLY ISSUE TO BE DECIDED IS AS TO WHETHER TH E SUBSIDY RECEIVED BY THE ASSESSEE FROM GOVERNMENT UNDER WEST BENGAL INCENTIVE SCHEME, 2000 COULD BE CONSIDERED AS CAPITAL RECEIPT IN THE FACTS AND CIRCUMSTANCES OF T HE CASE. 2 ITA NO.2066/K/2013 BHAGWAGTI SPONGE PVT. LTD.. AY 2006-07 4. THE ASSESSEE IS A COMPANY AND IS ENGAGED IN THE MANUFACTURE OF SPONGE IRON AT ITS PLANT AT JAMURIA IN THE DISTRICT OF BURDWAN IN WEST BENGAL. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY FILED ITS ORIGI NAL RETURN OF INCOME ON 29-11-2006 DECLARING A TOTAL INCOME OF RS (-) 2,82,39,180/-. T HE SAID INCOME WAS ARRIVED AT BY THE ABOVE ASSESSEE ON THE BASIS OF BOOK LOSS OF RS. 37, 19,841/- AS PER THE COMPANYS PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31-03-2006 . THE SAID BOOK LOSS OF RS.37,19,841/- AS PER COMPANY'S PROFIT & LOSS ACCOU NT FOR THE YEAR ENDED 31-03-2006, WHICH IS BASED ON THE BOOKS OF THE ASSESSEE MAINTAI NED IN REGULAR COURSE OF THE ASSESSEE, WAS ARRIVED AT AFTER DEDUCTING THE AMOUNT OF SUBSID IES OF RS. 51,64,604/- RECEIVABLE BY THE ASSESSEE COMPANY FROM GOVERNMENT OF WEST BENGAL IN TERMS OF WEST BENGAL INCENTIVE SCHEME, 2000. THIS SCHEME HAS BEEN FORMU LATED BY THE GOVERNMENT OF WEST BENGAL WITH A VIEW TO PROMOTING INDUSTRIES IN THE S TATE. THE ASSESSEE COMPANY WAS INCORPORATED FOR THE PURPOSE OF SETTING UP OF A SPO NGE IRON PLANT AND IMMEDIATELY AFTER THE INCORPORATION, THE ASSESSEE COMPANY APPLIED FOR AN ELIGIBILITY CERTIFICATE IN TERMS OF THE ABOVESAID INCENTIVE SCHEME. BY LETTER NO. INC-2 000(386)/II/GENCS/3285 DT 16.12.2004, THE WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION LIMITED (A GOVERNMENT OF WEST BENGAL UNDERTAKING), BEING THE ' AUTHORISED AGENT OF THE GOVERNMENT OF WEST BENGAL IN TERMS OF THE SAID INCE NTIVE SCHEME, INFORMED THE COMPANY THAT THE UNIT OF THE ASSESSEE FOR THE PROJE CT OF SPONGE IRON AT LOCATION LKRAH, P.O. JAMURIA HAT, P.S. JAMURIA HAS BEEN DECLARED EL IGIBLE FOR DIFFERENT INCENTIVES, SUBJECT TO CERTAIN CONDITIONS, AND AN ELIGIBILITY C ERTIFICATE NO. INC-2000/EC-291(B) DATED 16.12.2004 WAS ISSUED TO THE COMPANY. ONE OF THE CONDITIONS FOR GRANT OF INCENTIVES WAS THAT THE INCENTIVES GRANTED TO THE U NIT SHALL BE RECOVERABLE IN CASE THE ASSESSEE COMPANY FAILS TO ABIDE BY THE CONDITIONS A S MENTIONED IN CONDITION (III). AS PER THE SAID ELIGIBILITY CERTIFICATE, THE COMPANY W AS ELIGIBLE FOR THE SUBSIDIES WHICH WAS TO BE COMPUTED ON DIFFERENT CRITERIA. FOR EASY COMP UTATION THE SUBSIDIES ARE NAMED :- A) STATE CAPITAL INVESTMENT SUBSIDY (B) INTEREST SUBSIDY (C) WAIVER OF ELECTRICITY DUTY (D) EMPLOYMENT GENERATION SUBSIDY 3 ITA NO.2066/K/2013 BHAGWAGTI SPONGE PVT. LTD.. AY 2006-07 (E) REMISSION OF STAMP DUTY & REGISTRATION FEES. IN TERMS OF PROMISES OF THE GOVERNMENT OF WEST BENG AL AS CONTAINED IN THE ELIGIBILITY CERTIFICATE, THE ASSESSEE AT THE TIME OF FINALIZATI ON OF THE ACCOUNTS, COMPUTED ON ITS OWN, AMOUNTS OF THE SUBSIDIES BASED ON THE CRITERIA LAID DOWN IN THE SCHEME. THE COMPANY ARRIVED AT THE FOLLOWING FIGURES OF THE SUBSIDIES. SL. NO. ACCOUNT HEAD AMOUNT (RS.) 1. SUBSIDY ON INTEREST ON TERM LOAN-1 35,79,662 2. SUBSIDY ON INTEREST ON TERM LOAN-2 6,25,266 3. SUBSIDY ON ELECTRICITY DUTY 9,59,976 --------------- 51,64,904 --------------- THE ASSESSEE THEREAFTER, INADVERTENTLY CREDITED THE ABOVE AMOUNT OF THE SUBSIDIES TO THE ACCOUNT HEADS OF INTEREST AND ELECTRICITY CHARGES I N ITS BOOKS OF ACCOUNT AS PER FOLLOWING DETAILS AND DEBITED THE PROFIT & LOSS ACC OUNT FOR THE YEAR ENDED 31.03.2006 WITH THE NET FIGURES OF THE EXPENSES AS PER FOLLOWI NG DETAILS: SL. NO. A/C HEAD INTEREST ON TERM LOAN-1 A/C HEAD- INTEREST ON TERM LOAN- 2 A/C. HEAD ELECTRICITY CHARGES 1. TOTAL AMOUNT OF EXPENDITURE 71,59,323 25,01,063 71,86,879 2. LESS: 3. AMOUNT OF SUBSIDY COMPUTED 35,79,662 6,25.266 9,59,976 4. NET AMOUNT DEBITED TO PROFIT & LOSS ACCOUNT 35,7 9,661 18,75,797 62,26,903 TOTAL NET EXPENDITURE UNDER THE HEAD INTEREST R S.54,55,459 BASED ON THE ABOVE SAID NET FIGURES, THE ACCOUNTS O F THE COMPANY WERE FINALIZED. THE RETURNED INCOME UNDER THE INCOME-TAX ACT, 1961 WAS FINALIZED ON THAT BASIS. THIS FACT IS EVIDENT FROM THE BOOKS OF ACCOUNTS AND PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2006. AS A RESULT OF SUCH ADJUSTM ENTS, THE EXPENDITURE UNDER THE ABOVE HEADS WAS REDUCED. AS A RESULT THEREOF, THE TOTAL LOSS SUFFERED BY THE COMPANY GOT REDUCED AND THE RETURN OF INCOME WAS FI LED ACCORDINGLY SHOWING LOWER AMOUNT OF LOSS, WHICH OTHERWISE SHOULD HAVE B EEN FILED AT A HIGHER FIGURE OF LOSS. 4 ITA NO.2066/K/2013 BHAGWAGTI SPONGE PVT. LTD.. AY 2006-07 THE ASSESSEE LATER CLAIMED THAT SUCH CREDIT OF SUBS IDIES TO DIFFERENT ACCOUNT HEADS WERE MADE OUT OF IGNORANCE AS ACCORDING TO ASSESSEE , SUCH SUBSIDIES ARE CAPITAL RECEIPTS AND NOT REVENUE RECEIPTS, AND THEREFORE AR E NOT TAXABLE. AS THE SUBSIDIES RECEIVABLE WERE CREDITED UNDER THE RESPECTIVE HEAD OF EXPENSES AND WERE NOT EXCLUDED WHILE MAKING COMPUTATION OF INCOME FOR THE PURPOSES OF THE INCOME TAX ACT, 1961 THE RETURN OF INCOME WAS FILED AT A LOWER AMOUNT OF LOSS. THE ASSESSEE ARGUED THAT THE WEST BENGAL INCENTIVE SCHEME, 2000 AS FORMULATED BY THE GOVERNMENT OF WEST BENGAL FOR THE GROWTH OF INDUSTRIES IN THE STATE OF WEST BENGAL. THIS FACT IS CLEAR IN THE FOREWORD ATTACHE D TO THE SCHEME ITSELF. IN THE FOREWORD, THE GOVERNMENT OF WEST BENGAL STATES THAT AS THERE IS STRONG NEED FOR FISCAL SUPPORT FOR THE PROMOTION OF INDUSTRY IN THE STATE GOVERNMENT DECIDED TO INTRODUCE THE WEST BENGAL INCENTIVE SCHEME, 2000. ' THEREAFTER, IT WENT ON TO DIVIDE THE ENTIRE STATE INTO 3 (THREE) CATEGORIES F OR THE PURPOSE OF THE INCENTIVES. DISTRICTS HAVE BEEN GROUPED AS 'A' (CALCUTTA MUNICI PAL CORPORATION). B (HOWRAH. HOOGHLY, NORTH 24- PARGANAS, SOUTH 24- PARGANAS, BU RDWAN, NADIA & MIDNAPORE DISTRICTS) AND 'C' (MURSHIDABAD, BIRBHUM. PURULIA, BANKURA, MALDA, COACH BEHAR, NORTH DINAJPUR, SOUTH DINAJPUR, JALPAIGURI AND DARJ EELING DISTRICTS) AND QUANTIFIED THE AMOUNT OF 'FISCAL SUPPORT' PAYABLE IN EACH OF T HE CATEGORIES. IT MEANS THAT THE STATE GOVERNMENT WANTS TO EXTEND THE HELP TO THE IN DUSTRIES IN THE CAPITAL FIELD NOT IN OPERATIONAL FIELD. THE AMOUNT PAYABLE BY THE STA TE GOVERNMENT IS NOT TO SUBSIDIZE THE OPERATION OF THE UNIT, BUT TO HELP IN RECOVERING THE COST OF THE PROJECT. HAD IT NOT BEEN SO, THE WORDING WOULD HAVE BEEN DIF FERENT. THIS IS MORE CLEAR FROM THE FACT THAT THE INCENTIVE ARE PAYABLE FOR A LIMIT ED PERIOD BUT NOT OVER THE ENTIRE PERIOD OF THE LIFE OF THE INDUSTRY. MOREOVER, THESE SUBSIDIES ARE RECOVERABLE BY THE GOVERNMENT OF WEST BENGAL IN THE CASE OF THE FAILUR E OF THE ASSESSEE COMPANY TO COMPLY WITH THE TERMS AND CONDITIONS ATTACHED WITH THE GRAM OR SUCH SUBSIDIES. UNDER THESE CIRCUMSTANCES, IT WAS ARGUED THAT WHEN THE SUBSIDY IS IN THE FIELD OF CAPITAL SUPPORT, TAXING THE SAME WOULD BE WRONG AND NOT IN ACCORDANCE WITH THE LAW AND THEREFORE, NEEDS TO BE EXCLUDED WHILE COMPUTING THE INCOME UNDER THE INCOME TAX ACT. 5 ITA NO.2066/K/2013 BHAGWAGTI SPONGE PVT. LTD.. AY 2006-07 5. LD. AO TREATED THE SUBSIDY AS REVENUE IN NATURE AND BROUGHT THE SAME TO TAX IGNORING THE REVISED RETURN FILED BY THE ASSESSEE. ON FIRST APPEAL, THE LD. CIT(A) UPHELD THE ADDITION MADE BY THE AO AND HELD THAT IN VIEW O F THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA LTD. VS. CIT REPO RTED IN (2006) 284 ITR 323 (SC), REVISED RETURN FILED BEYOND THE TIME LIMIT PRESCRIB ED U/S. 139(5) OF THE ACT COULD NOT BE ACTED UPON. AGGRIEVED, ASSESSEE IS IN APPEAL BEFOR E US. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS STATED HEREINABOVE REMAIN UNDISPUTED AND HENCE, THE SAME ARE NOT REITERATED HEREIN FOR THE SAKE OF BREVITY. THE LD. AR ARGUED THAT THE ISSUE INVOLVED IS SQUARELY COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF G. A NO. 2042 OF 2011 IN ITAT NO. 201 OF 2011, CIT VS. M/S. STRASSENBURG PHARMACEUTICALS LTD. DATED 21.07.2011 . APART FROM THAT HE ALSO PLACED RELIANCE ON THE DE CISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF HYDRO CARBONS & CHEMICALS VS. ACIT IN ITA NOS. 1982 TO 1986/KOL/2009 FOR AYS 2001-02 TO 2005-06 DA TED 29.04.2011 . HE ALSO PLACED RELIANCE ON THE DECISION OF COORDINATE BENCH OF MUMBAI TRIBUNAL IN THE CASE OF ASSOCIATED CEMENT COS. LTD. VS. ADDL. CIT IN ITA NO . 7594/MUM/2004 DATED 29.08.2012 IN SUPPORT OF HIS CONTENTION. WE FIND THAT THE LD . CIT(A) HAD NOT CONSIDERED THE CLAIM OF THE ASSESSEE ON MERITS IN V IEW OF THE FACT THAT THE REVISED RETURN WAS FILED BY THE ASSESSEE BEYOND THE PRESCRIBED PE RIOD U/S. 139(5) OF THE ACT. THE LD. CIT(A) HAD APPLIED THE DECISION OF GOETZE INDIA LTD ., SUPRA AND ACCORDINGLY, REJECTED THE CLAIM OF THE ASSESSEE. BUT WE FIND FROM THE LA ST PARAGRAPH OF THE DECISION OF GOETZE INDIA LTD., SUPRA, WHEREIN THE HONBLE APEX COURT O BSERVED THAT REVISED RETURN THOUGH FILED BELATEDLY COULD BE CONSIDERED BY THE APPELLAT E AUTHORITY AND HENCE, WE FIND THAT THE ASSESSEE IS ENTITLED TO MAKE ITS CLAIM BY WAY OF RE VISED RETURN. HOWEVER, WE FIND THAT THE LD. CIT(A) HAD NOT ADJUDICATED THE CLAIM OF THE ASSESSEE ON MERITS. HENCE, WE DEEM IT FIT AND APPROPRIATE IN THE INTEREST OF JUST ICE AND FAIR PLAY TO SET ASIDE THE ISSUE TO THE FILE OF THE LD. CIT(A) TO CONSIDER THE CLAIMS M ADE BY THE ASSESSEE IN THE REVISED RETURN AND ADJUDICATE THE SAME ON MERITS. THE ASSE SSEE IS ALSO AT LIBERTY TO FILE ALL THE SUBMISSIONS AND THE CASE LAWS IN SUPPORT OF ITS CON TENTION. ACCORDINGLY, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6 ITA NO.2066/K/2013 BHAGWAGTI SPONGE PVT. LTD.. AY 2006-07 8. ORDER IS PRONOUNCED IN THE OPEN COURT ON 18.05.2 016 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 18TH MAY, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT BHAGWATI SPONGE PVT. LTD., P.O. JAMURIA HAT, DIST. BURDWAN (WB), PIN-713336 2 RESPONDENT ACIT, CIR-1, ASANSOL. 3 . THE CIT(A), ASANSOL 4. 5. CIT , ASANSOL DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .