` JCIT (OSD), New Delhi V. M/s. Indocount Industries Limited, New Delhi

ITA 2388/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3454 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 29-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Keywords: Capital receipt; Revised return
• Section: 143(3); 10

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 2388/DEL/2016 (ASSESSMENT YEAR: 2012 - 13 ) JCIT(OSD), CIRCLE - 12(1), ROOM NO. 405, CR BUILDING, NEW DELHI VS. INDOCOUNT INDUSTRIES LTD, 1206, PRAGATI TOWER, 26, RAJENDRA PLACE, NEW DELHI PAN:AAACI0866P (APPELLANT) (RESPONDENT) REVENUE BY : MS. APARNA KARAN, CIT DR ASSESSEE BY: NONE DATE OF HEARING 16/11 /2017 DATE OF PRONOUNCEMENT 0 9 / 0 2 / 2018 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD IT(A) - 4, NEW DELHI DATED 22.02.2016 FOR THE ASSESSMENT YEAR 2012 - 13. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE ON ACCOUNT OF SALE OF TAX SUBSIDY OF RS. 267153041/ - AND REFUND OF INTEREST ON TERM LOAN OF RS. 71748549/ - . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DIRECTING THE AO TO ALLOW APPELLANTS CLAIM OF SUBSIDY TOTALING TO RS. 338904590/ - (RS. 267153041/ - + RS. 71748549/ - ) RECEIVED AS CAPITAL RECEIPT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF COTTON YARN. IT FILED ITS RETURN OF INCOME ON 14.09.2012 DECLARING NIL INCOME. SUBSEQUENTLY THE RETURN WAS REVISED ON 24.01.2014 DECLARING LOSS OF RS. 30634028 1/ - . IN THE REVISED RETURN ASSESSEE HAS CLAIMED RS. 267153041/ - AND RS. 71748549/ - EXEMPT ON ACCOUNT OF VAT REFUNDS AND INTEREST SUBSIDY UNDER TUFF. THE LD ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE AND HELD THAT JCIT(OSD) VS. INDOCOUNT INDUSTRIES LTD, ITA NO. 2388/DEL/2016 (ASSESSMENT YEAR: 2012 - 13) PAGE | 2 THIS SUBSIDY IS REVENUE IN NATURE. THE LD ASSESSING OFFICER RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN CASE OF SAHANEY STEEL AND PRE SSWORK LTD VS. CIT 228 ITR 253. THE LD AO WAS ALSO OF THE VIEW THAT SINCE ASSESSMENT YEAR 2008 - 09 THE ASSESSEE ITSELF WAS TREATING IT AS REVENUE RECEIPT AND OFFERING THE SAME FOR TAXATION AND THIS IS THE FIRST YEAR WHERE IT IS CLAIMING TO BE CAPITAL RECEIPT. SUBSEQUENTLY, THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT WAS PASSED ON 30.01.2015 AT NIL INCOME CONSIDERING THE SALE TAX SU BSIDY AND REFUND OF INTEREST ON TERM LOAN. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHEREIN, THE ASSESSEE SUBMITTED THAT ACCORDING TO THE SCHEME THE SUBSIDY IS IN THE NATURE OF CAPITAL RECEIPT. IT FURTHER RELIED UPON SEVERAL DECISIONS TO STATE THAT SUBSIDY IS CAPITAL IN NATURE. THE LD CIT(A) ON THE BASIS OF THE ARGUMENT OF THE LD AR HELD THAT SALES TAX SUBSIDY OF RS. 267153041/ - AND REFUND OF INTEREST OF TERM LOAN OF RS. 71748549/ - IS AN INCENTIVE FROM TUFF AND ARE TO BE TREATED AS CAPITAL RECE IPT. REVENUE AGGRIEVED WITH THE ORDER OF THE LD CIT(A), PREFERRED APPEAL BEFORE US. 5. THE LD DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTESTED THE ORDER OF THE LD CIT(A) AND SUPPORTED THE ORDER OF THE LD AO. HE SUBMITTED THAT VAT REFUND IS A REVENUE RECEIPT AND THE INTEREST ON TERM LOAN SUBSIDY IS REVENUE IN NATURE. HE FURTHER REFERRED TO THE AMENDMENT TO THE DEFINITION OF INCOME U/S 2(24) OF THE INCOME TAX ACT WHEREIN, SUCH RECEIPTS ARE INCOME. IT WAS FURTHER SUBMITTED THAT ASSESSEE ALSO HAS NOT ADJUSTED T HE ABOVE SUM AS PER EXPLANATION 10 TO SECTION 43(1) OF THE ACT. HE FURTHER PRESSED THE DECISION OF HON'BLE DELHI HIGH COURT IN CASE OF BHUSHAN STEEL LTD IN 398 ITR 216 THE SUBSIDY IS HELD TO BE REVENUE IN NATURE. 6. DESPITE NOTICE, NONE APPEARED ON BEHALF OF THE ASSESSEE. THEREFORE, THE ISSUE IS DECIDED BASED ON THE INFORMATION ON RECORD. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE HON'BLE SUPREME COURT IN CASE OF CIT VS. POONI SUGARS & CHEMICALS LT D 306 ITR 392 HAS HELD THAT JCIT(OSD) VS. INDOCOUNT INDUSTRIES LTD, ITA NO. 2388/DEL/2016 (ASSESSMENT YEAR: 2012 - 13) PAGE | 3 CHARACTER OF THE RECEIPT IN THE HANDS OF THE ASSESSEE HAS TO BE ASCERTAINED LOOKING AT THE PURPOSE FOR WHICH THE SUBSIDY IS PROVIDED. THEREFORE, HON'BLE SUPREME COURT HELD THAT FOR ASCERTAINING THE TRUE CHARACTER OF THE SUBSIDY THE PURPOSE OF THE SUBSIDY I.E. PURPOSE TEST NEEDS TO BE LOOKED INTO. HON'BLE SUPREME COURT FURTHER STATED THAT SOURCE OF THE SUBSIDY, TIME OF THE SUBSIDY IS NOT RELEVANT. ACCORDING TO THE HON'BLE SUPREME COURT IF THE OBJECT OF THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY THEN THE RECEIPT WAS ON REVENUE ACCOUNT. IT WAS FURTHER HELD THAT IF THE OBJECT OF THE SUBSIDY WAS TO SET A NEW UNIT OR TO EXPAND EXISTING UNIT THEN SUCH RECEIPT IS ON CAPITAL ACCOUNT. HENCE, IT WAS H ELD THAT THE OBJECT FOR WHICH THE SUBSIDY IS GIVEN NECESSARILY DETERMINES THE NATURE OF THE SUBSIDY. THE FORM OR THE MECHANISM THROUGH WHICH THE SUBSIDY IS GIVEN IS IRRELEVANT. THE LD CIT(A) HAS DECIDED THE ISSUE BASED ON THE ABOVE DECISION OF THE HON'BLE SUPREME COURT. THE LD CIT(A) HAS DISCUSSED THE WHOLE ISSUE IN PARA NO. 4 OF HIS ORDER WHEREIN, HE HAS DECIDED THE ISSUE AS PER THE GUIDELINES THE DECISION OF THE HON'BLE SUPREME COURT. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CIT(A). FURTHERMORE , THE DECISION OF THE HON'BLE DELHI HIGH COURT RELIED UPON BY THE LD DR IN CASE OF BHUSAN STEEL HAS BEEN NOW STAYED BY HON'BLE SUPREME COURT VIDE ORDER DATED 20.11.2017. IN VIEW OF THIS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CIT(A) IN HOLDING THAT SUBSIDY RECEIVED BY THE ASSESSEE IS CAPITAL IN NATURE. IN THE RESULT BOTH THE GROUNDS OF THE APPEAL OF THE REVENUE ARE DISMISSED. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 9 / 0 2 / 2018 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 9 / 02 / 2018 A K KEOT COPY FORWARDED TO JCIT(OSD) VS. INDOCOUNT INDUSTRIES LTD, ITA NO. 2388/DEL/2016 (ASSESSMENT YEAR: 2012 - 13) PAGE | 4 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI