Greenlam Industries Limited, Tinsukia V. Assistant Commissioner of Income Tax, Circle-Tinsukia, Tinsukia

ITA 402/GTY/2019

AI Insights

The case involves Greenlam Industries Limited, which appealed against the order of the Commissioner of Income-tax (Appeals), Dibrugarh, concerning the assessment year 2015-16. The primary issues in the appeal were the disallowance of amortization of leasehold land and land development expenses amounting to Rs. 22,56,588, and the treatment of excise duty exemptions received during the year amounting to Rs. 19,25,59,001. The Tribunal examined whether these excise duty exemptions should be considered as capital receipts and excluded from the computation of book profit under section 115JB of the Income Tax Act. The Tribunal found that the excise duty exemptions were indeed capital receipts and should not be included in the book profit for the purpose of calculating the minimum alternate tax (MAT).

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 128840 (ITAT-GUWAHATI)
• Duration Of Justice: 3 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-09-2022
• Assessment Year: misc
• Appeal Filed On: 21-08-2019
• Other Referred Cases: Jute Corporation of India Ltd. vs. CIT, Kanpur Coal Syndicate vs. CIT, National Thermal Power Co. Ltd. vs. CIT, Goetze (India) Ltd. vs. CIT, CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd., CIT vs. Jai Parabolic Springs Limited, CIT vs. K.S.Dattatreya (Deed.) through LR's, JCIT vs. Hero Honda Finlease Ltd., Greenply Industries Limited vs. ACIT, Sahney Steel & Press Works Ltd. vs. CIT, CIT vs. Shree Balaji Alloys, CIT vs. Chaphalkar Brothers Pune, CIT vs. Ankit Metals & Power Ltd., CIT vs. Rasoi Ltd., DCIT vs. Reliance Industries Ltd., CIT vs. Harinagar Sugar Mills Ltd., CIT vs. Tripti Menthol Industries, CIT vs. Harinagar Sugar Mills Ltd., CIT vs. Binani Industries Ltd., CIT vs. Sutlej Cotton Mills Ltd., ACIT vs. Shree Cement Ltd., ACIT vs. The Nilgiri Tea Estate Ltd., ACIT vs. Shree Balaji Alloys, ACIT vs. M/S Century Plyboards (I) Ltd., ACIT vs. Uflex Limited, ACIT vs. JSW Steels Ltd., ACIT vs. Montage Enterprises Pvt. Ltd., ACIT vs. Malana Power Co. Ltd., ACIT vs. Shivalik Venture Pvt. Ltd., ACIT vs. Harinagar Sugar Mills Ltd., ACIT vs. Ankit Metal & Power Ltd., ACIT vs. DCIT vs. Shree Cement Ltd., ACIT vs. DCIT vs. Shree Balaji Alloys, ACIT vs. DCIT vs. Binani Industries Ltd., ACIT vs. DCIT vs. The Nilgiri Tea Estate Ltd., ACIT vs. DCIT vs. Sutlej Cotton Mills Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Question of law; Capital receipt; Revenue expenditure; Capital expenditure
• Section: 37; 143(3); 244A; 142(1); 115JB; 37(1); 195; 250; 144C; 143(2); 13; 22; 20

Judgement Text

आयकर अपीलीय अधिकरण ग ु वाहाटी 'डीबी' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI ‘DB’ BENCH AT KOLKATA [वर् ु ु अल कोट ु ] [Virtual Court] श्री राजपाल यादव, उपाध्यक्ष (कोलकाता क्ष े त्र) एवं डॉ. मनीष बोरड, ल े खा सदस्य क े समक्ष Before SRI RAJPAL YADAV, VICE PRESIDENT (KZ) & DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited...................................Appellant [PAN: AAFCG 2966 D] Vs. ACIT, Circle-Tinsukia, Assam................................Respondent Appearances by: Sh. Ashok Tulsyan, Adv., appeared on behalf of the Assessee. Sh. N.T. Sherpa, JCIT, appeared on behalf of the Revenue. Date of concluding the hearing : September 29 th , 2022 Date of pronouncing the order : December 19 th , 2022 आद े श ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2015-16 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 2 of 27 “Act”) by ld. Commissioner of Income-tax (Appeals), Dibrugarh [in short ld. “CIT(A)”] dated 21.06.2019 arising out of the assessment order framed u/s 143(3) r.w.s. 144C of the Act dated 20.02.2019. 2. The assessee is in appeal before this Tribunal raising the following grounds: “1. That on the facts and circumstances of the case, necessary direction be given to the ld. Assessing Officer to allow amortization of leasehold land and land development expenses of Rs.22,56,588/-. 2. That on the facts and circumstances of the case, necessary direction be given to the ld. Assessing Officer for exclusion of excise duty as capital receipt amounting to Rs.19,25,59,001/- availed during the year under consideration in computing total income as per the regular provisions of the Income Tax Act, 1961 (‘the Act’). 3. That on the facts and circumstances of the case, necessary direction be given to the Ld. Assessing Officer for exclusion of excise duty exemption as capital receipt amounting to Rs.19,25,59,001/- availed during the year under consideration in computing book profit as per section 115JB of the Act. 4. That on the facts and circumstances of the case, interest under section 244A be recomputed considering that the additional grounds taken by the appellant as lodged in the return of income. 5. That the appellant craves leave to ad, amend, modify, rescind, supplement, or alter any of the grounds stated hereinabove, either before or at the time of hearing of this appeal.” 3. Brief facts of the case are that the assessee is a Limited Company engaged in the business as manufacturers, traders, exporters, importers of all kinds of laminates, furniture and fittings. The assessee company filed its return of income disclosing loss of Rs.20,77,62,753/-on 28.11.2015. The case was selected for scrutiny through CASS under complete scrutiny category followed by serving of notices u/s 143(2) & 142(1) of the Act. Book profit of the assessee was shown at Rs. 9,27,68,667/-. Assessment I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 3 of 27 was completed u/s 143(3) r.w.s. 144C(3) of the Act on 20.02.2019 making disallowance of amortization expenses on the lands taken on lease at Rs. Rs.22,56,588/- and Corporate Guarantee adjustment at Rs. 83,83,979/-. 4. Aggrieved, the assessee preferred appeal before ld. CIT(A) and partly succeeded. 5. Aggrieved, the assessee is now in appeal before this Tribunal. From perusal of the above grounds, we find that ground nos. 2 & 3 were not raised before ld. CIT(A) and they have been raised for the first time before this Tribunal. This being an additional ground, the question arises that whether any legal claim can be raised for the first time before this Tribunal. Ld. Counsel for the assessee referred to the following judicial pronouncements in support of its contention that this additional ground can be raised before this Tribunal: “2.3 In the case of Jute Corporation of India Ltd. vs. CIT (1991) 187 ITR 688 (SC), [Refer Page 58-63 of Additional Paper Book] three judge bench of the Apex Court relied upon the earlier three judge bench decision in the case of CIT -vs.- Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) (in the context of Section 31(3)(a) of the 1922 Act which corresponds to Sec. 251(1)(a) of the 1961 Act), where it has been held that the appellate commissioner has plenary power in disposing off an appeal. In this regard it is to be noted that Apex Court relied on the following findings in the decision of Kanpur Coal Syndicate (supra): “The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is co- terminus with that of the Income Tax Officer. He can do what the Income Tax Officer can do and also direct him to do what he has failed to do.” The Apex Court in Jute Corporation (Supra), based on the above, further held, in the context of section 251(1)(a) of the 1961 Act, that there is no reason as to why the appellate commissioner cannot I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 4 of 27 modify the assessment order or admit an additional ground even if not raised before the Income Tax Officer. According to the Apex Court, no exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. 2.4 The above decision of the Apex Court in Jute Corporation (Supra) has been followed in the subsequent decision of National Thermal Power Co. Ltd. - vs.- CIT (1998) 229 ITR 383 (SC), [Refer Page 64-66 of Additional Paper Book] to hold that, where a Tribunal is only required to consider a question of law arising from the facts, which are on records, there is no reason why such 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 the assessee. 2.5 Incidentally, the Apex Court in the case of Goetze (India) Ltd. -vs.- CIT (2006) 284ITR 323 (SC), has dealt with the power of the Assessing Officer to entertain a claim made before him, otherwise than through revised return filed on time and held that such claim cannot be entertained by the Assessing Officer. However, while concluding, the Apex Court made it abundantly clear that the said decision doesn't affect the power of the appellate authorities to admit additional ground. 2.6 The Hon'ble Bombay High Court in the case of CIT -vs.- Pruthvi Brokers & Shareholders Pvt. Ltd. (2012) 349 ITR 336 (Bom), after considering the decision in the case of Goetze (India) Ltd. (Supra) has held that the appellate authorities can adjudicate new claims raised before them though the Assessing Officer is not entitled to allow deduction which had not been claimed in the return. Similar view has also been taken in CIT -vs.- Jai Parabolic Springs Limited (2008) 306 ITR 42 (Del). 2.7 Reliance is also placed on in the case of CIT -vs.- K.S.Dattatreya (Deed.) through LR's (2011) 51 DTR 266 (Kar) wherein it has been held that - "Therefore, the scope of the power of the CIT(A) is too wide. The appellate authority has plenary powers in disposing of an appeal. An appeal is a continuation of the process of assessment and an assessment is but another name for adjudication of the tax liability to accord with the taxable event in the particular taxpayer's case. It can enhance the assessment, taking advantage of the opportunity afforded by the taxpayer's appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. The I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 5 of 27 scope of his powers is coterminous with that of the ITO. He can do what the ITO can do and also direct him to do what he has failed to do................... The CIT(A) can modify the assessment order on an additional ground even if not raised before the ITO. The Act does not place ant restriction or limitation on exercise of appellate power. It has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any prescribed by the statutory provisions." Similar view has also been expressed in the case of JCIT -vs.- Hero Honda Finlease Ltd. (2008) 115 TTJ 752 (Del).” 6. We observe that there is no dispute about the facts of the issue raised and the same is only that whether the excise duty exemption availed during the year is a revenue receipt or capital receipt and whether it is to be included in computing book profits u/s 115JB of the Act. From perusal of the judicial pronouncements referred above, we are of the view that this additional ground raised by the assessee can be entertained before this Tribunal for the first time and we, therefore admit it and proceed to adjudicate the same. 7. As far as ground no. 1 regarding disallowance of amortization of leasehold land and land development expenses is concerned, ld. Counsel for the assessee at the outset submitted that the issue is squarely covered in favour of the assessee by the decision of this parent Tribunal in the case of its parent company Greenply Industries Limited vs. ACIT in ITA Nos. 232 & 359/GAU/2019 dated 21.06.2022. 8. On the other hand, ld. D/R though supported the order of the lower authorities but failed to controvert the contention of ld. Counsel for the assessee. I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 6 of 27 9. We have heard rival contentions and perused the records placed before us. We notice that the assessee claimed the deduction of Rs. 22,56,588/- on account of amortization of leasehold land and land development while computing its total income. On the lands taken on lease are ranging for periods from 21 years to 99 years. Ld. AO was of the view that the purpose of the expenditure made by the assessee does not satisfy the conditions laid down under the provisions of the act. 10. We, further, notice that similar case came for adjudication before this Tribunal in Greenply Industries Limited (supra) which is the parent company of the assessee and such claim of amortization of leasehold land and land development was allowed by this Tribunal observing as follows: “26. We have heard the rival contentions and perused the relevant material available on record. The issue raised in the additional ground by the assessee is that the ld. CIT(Appeals) erred in not allowing the claim of expenses of RS.18,73,242/- for amortisation of leasehold land. We notice that the appellant has taken various lands on lease for a long period ranging upto 99 years, which are used to carry out on business. Upfront lease premium is paid in the first year and, therefore, normal lease rentals are paid every year. The assessee follows Accounting Standard 19 issued by the Institute of Chartered Accountants of India which provides for mechanism of amortising such lease premium. A detailed calculation of amortisation of lease premium paid during the year along with the yearly rental is placed before us in paper book at pages 30 and 31. 27. The ld. Assessing Officer has denied the claim stating that the assessee’s such claim cannot be made under section 35D of the Act and the said expense is also not allowable under section 37 of the Act. Section 35D of the Act deals with the amortisation of certain preliminary expenses. Before us, the issue is amortisation of lease amount and the lease premium paid by the assessee. It cannot be equated to preliminary expenses. Therefore, the said expense is not allowable under section 35D of the Act. The question is whether such I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 7 of 27 expenses in the nature of amortisation of lease rental is allowable as revenue expenditure under section 37(1) of the Act? Section 37(1) of the Act provides that any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head “profits and gains of business or profession”. 28. What needs to be examined whether the alleged expense has been expended wholly and exclusively for the purposes of business. In the instant case, it is not in dispute that the leasehold lands taken by the assessee on lease are used for carrying out business operation and the lumpsum lease money was paid as per the agreement and was required to be paid at the beginning of the lease term but the said sum is spread over the entire lease term. Now what is the mechanism to quantify the amount and how to spread the amount across the lease period. For this purpose, the assessee has taken guidance from the Accounting Standard 19 issued by the Institute of Chartered Accountants of India and in accordance with the procedure laid down therein and principal of accounting has debited the annual amount of lease in the profit & loss account and balance prepaid lease money is shown on the assets side in each year. The amount of amortisation debited to profit & loss account is reduced from the advance lease money paid. We find no error in this way of accounting treatment of the amortisation of the leasehold expenses and thus the same being spent exclusively for the business purposes has been rightly claimed as expenditure by the assessee under Section 37 of the Act. Our view is supported by the decision of the Coordinate Bench of Delhi in the case of NIIT Technologies Ltd.(supra), wherein it was held that the assessee would be entitled to claim 1/90th of amount of total lease rent every year till period of lease of 90 years as revenue expenditure and entire lease rent amount would not be allowed during the relevant year. 29. Similarly Coordinate Bench Ahmedabad in the case of Adani Gas Limited (supra) confirmed the decision of ld. CIT(Appeals) relying on the judgment of the Hon’ble Gujarat High Court in the case of DCIT – vs- Sun Pharmaceuticals Industries Limited (2009) 227 CTR 206 (Guj.) holding that – “Amortization is an accounting term that refers to the process of allocating the cost of an asset over a period of time and hence it is nothing else than depreciation. The allowability of costs towards amortization of leasehold land is in question. Having heard I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 8 of 27 the rival submissions on the issue, we find that the CIT(A) has rightly appreciated the facts lin perspective and concluding the issue in favour of assessee in the light of decision of Hon’ble Gujarat High Court in the case of DCIT –vs.- Sun Pharmaceuticals Industries Ltd. (2009) 227 CTR 206 (Guj.). We do not see any infirmity in the reasoning given by the CIT(A) while deleting the aforesaid disallowance of amortization leasehold lands. We thus decline to interfere”. 30. We, therefore under the given facts and circumstances of the case and respectfully following the decisions referred hereinabove, are of the view that the amortization of leasehold land and land development charges of Rs.18,73,242/- deserves to be allowed as an expenditure under section 37 of the Act. Thus the finding of the ld. CIT(Appeals) is reversed and the additional ground raised by the assessee is allowed.” 11. From perusal of the above finding of this Tribunal in case of Greenply Industries Limited (supra), we find that the same is squarely applicable on the issue raised before us in the instant appeal and therefore, taking a consistent view, the expenditure claimed by the assessee on account of amortization of leasehold land and land development charges of Rs. 22,56,588/- deserves to be allowed. Therefore, ground no. 1 raised by the assessee is allowed. 12. Now, we take ground nos. 2 & 3 relating to the issue whether excise duty exemptions are capital receipt and whether they are to be excluded for the purpose of computing book profit u/s 115JB of the Act. 13. Brief facts relating to the issue are that manufacturing units of the assessee are situated at Village: Paterh Bhonku, Tehsil: Nalagarh, Dist: Solan, Himachal Pradesh and in terms of Office Memorandum No. 1(10)/2001-NER issued by DIP, Ministry of I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 9 of 27 Commerce and Industry, Govt. of India dated 07.01.2003 read with Notification No. 50/2003-CE dated 10.06.2003, these units are eligible for 100% excise duty exemption in respect of goods manufactured and cleared from the said unit for a period of 10 years from the date of commencement of commercial production. During the year under consideration, the assessee has availed excise duty exemption of Rs. 19,25,59,001/- which is duly credited in the statement of profit and loss account. The claim of the assessee is that the said receipts are capital in nature and therefore, need to be excluded while computing total income under normal provisions as well as computing book profit u/s 115JB of the Act. 14. In support of the grounds, ld. Counsel for the assessee submitted that for the purpose of generation of employment and utilization of local resources, Govt. of India vide Office Memorandum dated 07.01.2003 provided excise duty exemption to the units located in the backward areas. The assessee company is running a manufacturing unit in the notified backward areas of the state of Himachal Pradesh. The object of the assistance was not to enable the businessmen to run the business more profitably, but to encourage the businessmen to set up a new unit or to expand the existing unit for overall economic development. Similar kind of issue regarding the nature of such type of subsidies of sales tax exemption, excise duty exemption and other exemptions of similar nature has come up for adjudication on many occasions before Hon'ble Apex Court and have consistently held such receipts as capital in nature. In support of this contention ld. Counsel for the assessee relied on the judgment of Hon'ble Apex I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 10 of 27 Court in the case of CIT vs. Ponni Sugars & Chemicals Ltd. (2008) 306 ITR 392 (SC), Sahney Steel & Press Works Ltd. vs. CIT (1997) 228 ITR 253 (SC), CIT vs. Shree Balaji Alloys (2016) 138 DTR 36 (SC), CIT vs. Chaphalkar Brothers Pune [2018] 252 Taxman 360 (SC). Reliance also placed on the judgment of Hon'ble Jurisdictional High Court in the case of PCIT vs. Ankit Metals & Power Ltd. (2019) ITA 155 of 2018 (Cal.) and in the case of CIT vs. Rasoi Ltd. (2011) 335 ITR 438 (Cal). Reliance was also placed on the judgment of Hon'ble Special Bench of ITAT in the case of DCIT vs. Reliance Industries Ltd. (2004) 88 ITD 273 (Mum)(SB). 15. Ld. Counsel for the assessee also stated that similar issue of whether excise duty exemptions are to be excluded for the purpose of computing book profit u/s 115JB of the Act, has recently been decided this Tribunal in the other group case of the assessee i.e. Greenply Industries Limited (supra) dated 21.06.2022 and Hon'ble Tribunal considering various judicial pronouncements held that excise duty exemption is a capital receipt not chargeable to tax and is to be excluded for computing the book profit u/s 115JB of the Act. 16. On the other hand, ld. D/R stated that due to the allowability of excise duty exemption, the assessee company is able to achieve more turnover and also able to increase the profits and therefore, the same should be treated as revenue receipt chargeable to tax. However, ld. D/R failed to place any other binding precedence in its favour to controvert the ratio laid down by various Hon'ble Courts in the decisions and judgments referred by ld. Counsel for the assessee. I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 11 of 27 17. We have heard rival contentions and perused the records placed before us and carefully gone through the paper book filed by the assessee. Ground nos. 2 & 3 raised by the assessee are that whether excise duty exemption of Rs. 19,45,59,001/- availed by the assessee during the year is a capital receipt and whether such excise duty exemption if held to be capital receipt is to be excluded for computing book profit u/s 115JB of the Act for calculating minimum alternative tax. 18. We observe that the assessee company is running a manufacturing unit at Village Paterh Bhonku, Tehsil: Nalagarh, Dist: Solan, Himachal Pradesh and as per the Office Memorandum No. 1(10)/2001-NER issued by DIP, Ministry of Commerce and Industry, GOI dated 07.01.2003 read with Notification No. 50/2003-CE dated 10.06.2003, it is eligible for 100% excise duty exemption in respect of goods manufactured and cleared from the said unit for a period of 10 years from the date of commencement of commercial production. The content of the above referred Office Memorandum dated 07.01.2003 of Ministry of Commerce and Industry, Govt. of India are reproduced below: “Subject: New Industrial Policy and other concessions for the state of Uttaranchal and the state of Himachal Pradesh. 1. The Hon'ble Prime Minister, during the visit to Uttaranchal from 29 th to 31 st March, 2002, had, inter-alia made an announcement that Tax and Central Excise concessions to attract investments in the industrial sector will be worked out for the Special Category States including Uttaranchal. The industries eligible for such incentives will be environment friendly with potential for local employment generation and use of local resources. 2. In pursuance of the above announcement, discussion on Strategy and Action Plan for Development of Industries and generation of I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 12 of 27 employment in the states of Uttaranchal and Himachal Pradesh were held with the various related Ministries/agencies on the issue, inter- alia, infrastructure, development, financial concessions and to provide easy market access, The new initiatives would provide the required incentives as well as an enabling environment for industrial development, improve availability of capital and increase market access to provide a fillip to the private investment in the state. 3. Accordingly, it has been decided to provide the following package of incentives for the states of Uttaranchal and Himachal Pradesh 3.1 Fiscal Incentives to new Industrial Units and to existing units on their substantial expansion: (1) New industrial units and existing industrial units on their substantial expansion as defined, set up in Growth Centres, Industrial Infrastructure Development Centres (IIDCs), Industrial Estates, Export Processing Zones, Theme Parks (Food Processing Parks, Software Technology Parks, etc.) as stated in Annexure-I and other areas as notified from time to time by the Central Government, are entitled to: (a) 100% (hundred percent) outright excise duty exemption for a period of 10 years from the date of commencement of commercial production. (b) 100% income tax exemption for initial period of five years and thereafter 30% for companies and 25% for other than companies for a further period of five years for the entire states of Uttaranchal and Himachal Pradesh from the date of commencement of commercial production.” 19. From perusal of the above notification, we observe that the incentives in the form of excise duty exemption are given with an object to achieve industrialization in the backward areas of Himachal Pradesh and Uttaranchal and to generate employment opportunities. Such kind of facility of excise duty exemption has a positive impact on the overall economic development of the States in which such units are located. Before us, ld. Counsel for the assessee in support of the contention that excise duty exemptions I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 13 of 27 are capital receipts and not chargeable to tax under the normal provisions of the Act referred to the following written submissions: “2.6.2 Reliance is placed on the principles laid down by the decision of the Hon'ble Apex Court in the case of CIT -vs.- Ponni Sugars & Chemicals Ltd. (2008) 306 ITR 392 (SC) (Refer Page 420-426 of Paper Book) wherein it was held that- 'The importance of the judgement of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt was on capita! account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant." While giving the aforesaid decision, Hon'ble Apex court has considered the object behind the payment of the incentive subsidy and applied the test laid down by the Hon'ble Apex Court in Sahney Steel & Press Works Ltd. vs. CIT (1997) 228 ITR 253 (SC) (Refer Page No. 427-433 of Paper Book) and held that the incentive received under the scheme was not in the course of the trade but was of capital nature. In case of Sahney Steel & Press Works Ltd. (supra), it was held that the character of the subsidy in the hands of recipient - whether revenue or capital - will have to be determined by having regard to the purpose for which the subsidy is given. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 14 of 27 2.6.3 The Ld. Commissioner of Income Tax (Appeals), Dibrugarh, in erstwhile parent company M/s Greenply Industries Ltd.'s case for Assessment Year 2014-15, has vide order dated 25-03-2019, directed the AO to treat the receipt of Excise Duty Exemption as capital receipt and allowed the claim of exclusion of Excise Duty Exemption in computation of total income. Copy of the order is enclosed in (Page No. 68-107 of Additional Paper Book). Relevant para of the Ld. CIT(A) order is reproduced below: “10.3.1 The point to be decided boils down to whether assessee's receipt on account of Central Excise Duty Refund is capital receipt or not. From the notes to audited accounts, it is seen that the assessee was enjoying Central Excise duty exemption from its Units at Rudrapur (Uttrakhand) and Tizit (Nagaland). This is a matter of record. In the case of Shree Balaji Alloy (supra), Hon'ble J & K Court after due consideration of Hon'ble Apex's Court order in the case of Sahney Steel (supra) & Ponni Sugars & Chemical (supra) had taken the view that Central Excise Duty Refund is a capital receipt. The decision of Hon'ble High Court was confirmed by Hon'ble Apex Court in the case of CIT Vs. Shree Balaji Alloy Ltd (supra). The matter has now reached finality. In view of decision of Hon'ble Apex Court on the matter the AO is directed to treat assessee's receipt of Excise Duty Refund as capital receipt. This will have the effect of reduction in claim of deduction u/s 80-IC." The Revenue has also not filed any appeal before the Hon'ble ITAT against the order of Ld. CIT(A), Dibrugarh on the above ground. The Appeal filed by the Revenue was only for Transfer Pricing related relief allowed by the Ld. CIT(A) to the appellant. The Ld. CIT(A) inadvertently did not adjudicate the appellants ground of exclusion of excise duty from book profit for purposes of section 115JB. Accordingly, M/s Greenply Industries Ltd. raised the said ground before the Hon'ble Guwahati Tribunal in ITA 232 & 359/Gau/2019 dated 21.06.2022 from which it is evident that Department has not challenged the above issue in appeal before ITAT. 2.6.4 The principle for deciding the nature of subsidy has also been spelt out by the Hon'ble Jammu & Kashmir High Court in Shree Balaji Alloys & Ors. -vs.- CIT (2011) 51 DTR 217 (J&K) wherein it has been held that Excise Duty Refund and Interest Subsidy received for the purpose of eradication of unemployment in the state by acceleration of industrial development and removing backwardness of the area that lagged behind in industrial development is to be treated as capital receipt. The aggrieved department in case of Shree Balaji I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 15 of 27 Alloys, had preferred an appeal before the Apex Court. The Apex Court following the principles laid down in the case of Ponni Sugar (supra), has allowed the claim of Excise duty incentive as capital receipt in case of CIT -vs.- Shree Balaji Alloys (2016) 138 DTR 36 (SC) (Refer Page 434-435 of Paper Book) vide order dated 19-04-2016. 2.6.5 In the case of CIT v Chaphalkar Brothers Pune [2018] 252 Taxman 360 (SC), the Hon'ble Supreme Court confirming the above decision of Jammu & Kashmir High Court in the case of CIT v Shree Balaji Alloys (supra) held that once the object of the subsidy was to industrialize the State and to generate employment in the State, the fact that subsidy took a particular from and was granted only after commencement of production would make no difference. 2.6.6 In the case of Mr. Brijkishore Ramvilas Maniyar -vs.- DCIT (ITA No. 8851/MUM/2010), the Hon'ble Tribunal relying on the decision in the case of Shree Balaji Alloys (Supra) has held that excise duty incentive is a capital receipt. 2.6.7 Further reliance is placed on the decision of Gujarat High Court in the case of CIT -vs.- Tripti Menthol Industries (2013) 217 Taxman 102 (Guj) wherein the Hon'ble High Court by placing reliance on the decision in the case of Shree Balaji Alloys (Supra), has held that excise duty refund is a capital receipt not liable to tax. It has further been held that the incentives were provided to the industrial units, in terms of the new industrial policy, for accelerated industrial development in the State, for creation of such industrial atmosphere and environment which would provide additional permanent source of employment to the unemployed in the State of Jammu and Kashmir, and were in fact in the nature of creation of new assets of industrial atmosphere and environment, having the potential of employment generation to achieve a social object. Such incentives, designed to achieve public purpose, cannot, by any stretch of reasoning, be construed as production or operational incentives for the benefit of assessee alone. 2.6.8 Similar view was taken by the Hon'ble Calcutta High Court in the case of PCIT vs Ankit Metals & Power Ltd. (2019) ITA 155 of 2018 (Cal.) (Refer Page 436-451 of Paper Book) wherein the assessee received subsidy under the WBIS 2000 scheme. The question that came up for or revenue in nature. The Hon'ble High Court held the following: I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 16 of 27 "On perusal of the contents of the relevant portion under the incentive subsidy schemes in question we found that in the case of the assessee, the State Government under the West Bengal Incentive Scheme, 2000, and 'West Bengal Incentive to Power Intensive Industries Scheme, 2005', had actually granted the subsidy with the sole intention of setting up new industry and attracting private investment in the state of West Bengal in the specified areas in the present case Bankura which is industrially backward hence the same was of the nature of non-taxable Capital receipt. Thus, according to the purpose test' laid out by the Hon'ble Supreme Court, various and High Courts including our Court the aforesaid subsidy should be treated as capital receipt in spite of the fact that computation of 'Power subsidy' is based on the power consumed by the assessee. It is well established from submission of the assessee as enunciated above that once the purpose of a subsidy is established; the mode of computation is not relevant as held in the decisions of the Hon 'bie Supreme Court in the case of Sahney Steel and Press Works Ltd. Vs. Commissioner of Income tax [1997] 228IRT253 (SC); CITVs. Ponni sugars and Chemicals Ltd. [2008] 306 ITR 392 (SC) and the decision of our High Court in case of CIT Vs. Rasoi Ltd. 335 ITR 438 (Cal.) against which SLP has been dismissed. The mode of computation/form of subsidy is irrelevant. The mode of giving incentive is reimbursement of energy charges. The nature of subsidy depends on the purpose for which it is given. Hence the assessee draws support from the decisions already discussed earlier as the same principle will apply here. Thus, the entire reason behind receiving the subsidy is setting up of plant in the backward region of West Bengal, namely, Bankura. Accordingly, we hold the aforesaid incentive subsidies are 'capital receipts' and is not an 'income' liable to be taxed in relevant assessment year 2010-11 on the basis of discussion made above and further taking into consideration the definition of Income under Section 2(24) of the Income Tax Act, 1961, where sub-clause (xviii) has been inserted including 'subsidy' for the first time by Finance Act, 2015 w.e.f. April, 2016 i.e. assessment year 2016-17. The amendment has prospective effect and had no effect on the law on the subject discussed above applicable to the subject assessment years. 2.6.9 Further, the Special Bench of the Amritsar Tribunal in the case of Sh. Vinod Kumar Jain -Vs.- ITO (2013) 22 ITR 567 (Amritsar) (SB) relying on the decision of Shree Balaji Alloys (Supra) has held that I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 17 of 27 refund of excise duty is to be treated as capital receipt, not chargeable to tax. 2.6.10 Recently, the Hon'ble Mumbai Tribunal in case of DCIT vs. Welspun India Limited (ITA No. 5725/Mum/2015) has held that excise duty and sales tax exemption are capital receipt and to be excluded in computation of total income. 2.6.11 Reliance in this regard is also placed on the decision of Hon'ble Kolkata High Court in CIT -vs.- Rasoi Ltd (2011) 335 ITR 438 (Cal), wherein the assessee received sales tax incentive under West Bengal Incentive Scheme by way of refund of 90% of the sales tax paid in any quarter. The Hon'ble High Court held that where the subsidy is given for expansion of capacities, modernization and improving the marketing capabilities to tide over the crises of promotion of industry in the state then the same is to be treated as capital in nature. 2.6.12 Similarly, Hon'ble Special Bench in the case of DCIT -vs.- Reliance Industries Ltd. (2004) 88 ITD 273 (Mum)(SB) (Refer Page No. 400-419 of Paper Book) the has held that where the object of the subsidy was to encourage the setting up of industries in the backward area and the incentive was not given to the assessee for assisting it in carrying out its business operations, the same is capital in nature.” 20. Before us, ld. Counsel for the assessee has also referred to the recent decision of this Tribunal in the case of parent company of assessee namely Greenply Industries Limited (supra) wherein similar issue came for adjudication and after considering the settled judicial precedents it was held that such excise duty exemptions are capital receipts and are neither chargeable to tax under normal provisions of the Income Tax Act nor to be included as part of the book profit for computing the minimum alternative tax as per the provisions of Section 115JB of the Act. The relevant finding of this Tribunal in Greenply Industries Limited (supra) is reproduced below: “10. We have heard the rival contentions and perused the relevant material available on record. We note that the assessee runs two I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 18 of 27 manufacturing units in the name of Rudrapur Plywood Unit and Rudrapur MDF Unit and both are covered by the Excise Notification No.50/2003 dated 10.06.2003. Both the units are located in backward areas and are eligible for 100% excise duty exemption in respect of goods manufactured and cleared from such units for a period of 10 years from the date of commencement of commercial production. The assessee has claimed the excise duty exemption from these two units at Rs.87,98,09,432/- which is in the nature of capital receipt not liable to be taxed. We also find that though the said amount is reflected in the Profit & Loss Account of the assessee and the amount being capital receipt has not been objected by the ld. CIT(Appeals) also, who has allowed deduction of the said amount vide his order dated 25.03.2019 under normal provisions of the Act, however, the order is silent on the exclusion of the said amount while computing the book profit under section 115JB of the Act, therefore, the issue is for our examination that “whether the excise duty exemption which is a capital receipt and not chargeable to tax under the normal provisions of the Act, is to be considered as a part of book profit for computing the book profit under section 115JB of the Act”. 11. We will like to first go through the judicial jurisprudence available for the issue in hand. We find that in the case of Sunrise Biscuit Co. Pvt. Limited –vs.- ITO, ward -1(5), Guwahati ITA No. 92/Gau/2019 (page 87-102 of the case law paper book), the Hon’ble Guwahati Tribunal was dealing with the issue whether subsidy received by the assessee was capital in nature and, therefore, not exigible to income- tax, both under normal computational provisions as well as book profit u/s 115JB. The Hon’ble ITAT relied upon of the judgement of the Hon’ble Supreme Court in the cases of Sahney Steel & Press Works (supra) & Ponni Sugar & Chemicals Ltd. (supra) and had held that the object or purpose for which the subsidy was given was relevant. It was held that the source of subsidy is immaterial, form of subsidy is equally immaterial and the time at which the subsidy is paid is also immaterial. It was held that the purpose of the scheme which enabled the grant of subsidy to the assessee was the only material factor in determining the taxability of such receipts. Further, placing reliance on the decision of the Hon’ble Kolkata Tribunal in case of DCIT vs. M/s. Century Plyboards (I) Ltd, in ITA No. 2149/Kol/2019 (Refer Page 103-122 of the Case Law Paperbook), it was held that such capital subsidy received by the assessee is also liable to be excluded from the computation of book profit. Relevant extract of the order of the Hon’ble Tribunal is reproduced below: I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 19 of 27 “24. As regards the issue relating to treatment of this VA T subsidy while computing book profit u/s 115JB of the Act, we note that this exact issue was considered by us while deciding the case of DCIT vs. M/s. Century Plyboards (!) Ltd. in ITA No. 2149/Kol/2019 (supra) and it was held that such capital subsidy received by the assessee is also liable to be excluded from the computation of book profit. The relevant findings are as follows: 45. Now coming to the issue relating to treatment of these subsidies while computing book profit u/s 115JB, we note that the Hon’ble Apex Court in the case of Apollo Tyres Ltd. vs. CIT (255 ITR 273) held that the AO has the power to rework the book profit if the profits are computed not in accordance with Part II and Part III of Schedule VI to the Companies Act, 1956. The Hon’ble Supreme Court in their subsequent decision rendered in the case of Indo Rama Synthetics (!) Ltd vs. CIT (330 ITR 363) further held that, the object of MAT provisions is to bring out the true working result of the companies. As held in the preceding paras, the subsidies received by the assessee were capital in nature and therefore not liable to tax. In the circumstances therefore, inclusion of such capital receipt in the computation of book profit u/s 115JB would defeat two fundamental principles. Firstly, it would levy tax on receipt which is not in the nature of income at all and secondly it would not result in arriving at real working results of the company. We thus find merit in the assessee’s claim that the said subsidies being capital in nature, deserves to be excluded from the computation of book profit u/s 115JB of the Act. 46. It is noted that in the context of similar State Industrial Scheme, the Jurisdictional Hon’ble Calcutta High Court in the case of Pr. CIT Vs Ankit Metal and Power Ltd (416 ITR 591) held that subsidies received for setting up new industry is not in the nature of income and therefore cannot be deemed as income for the purposes of computing book profit u/s 115JB of the Act. In the decided case the assessee had received interest subsidy under the WB Incentive Scheme, 2000 and power subsidy under the Power Intensive Industries Scheme, 2005 for setting up Sponge Iron Plant in Bankura. Before this Tribunal, the assessee claimed that receipt of such subsidies in form of remission of interest and power/electricity duty payments etc. was capital receipt not liable to tax both under the normal computational provisions as well as book profit u/s 115JB of the Act. The Tribunal answered the issue in favour of the assessee. On appeal by the I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 20 of 27 Revenue, the Hon’ble High Court upheld the order of this Tribunal by observing as under: “26. Now the second issue which requires adjudication is as to whether the aforesaid incentive subsidies received by the assessee from the Government of West Bengal under the schemes in question are to be included for the purpose of computation of book profit under Section 115JB of the Income Tax Act, 1961 as contended by the revenue by reiving on the decision in the case of Apollo Tyres Ltd, (supra). 27. In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt' and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of Apollo Tyres Ltd, (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961.” 26. The admitted factual and legal position in the present case is that subsidies in question is not in the nature of income. Therefore they cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s. 115JB of the Act. We hold accordingly and confirm the order of the CIT(A) in this regard. In light of the aforesaid discussion, we are of the view that the subsidies in question should be excluded for the purpose of determination of book profits u/s. 115JB of the Act. We hold accordingly and dismiss Gr.No.2 raised by the Revenue. ......... 25. For the reasons set out above therefore, we allow the grounds taken by the assessee and direct the AO to deduct the VAT subsidy of Rs.8,78,84,902/- both while computing income under normal I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 21 of 27 computational provisions and book profit u/s 115JB of the Act for the relevant AY 2014-15.” 12. The Hon’ble Kolkata ITAT in case of DCIT -vs.- M/S Century Plyboards (I) Ltd. (ITA No. 2149/Kol/2019 And C.O. No. 22/Kol/2020 In ITA No.2149/Kol/2019) relied upon finding of its coordinate bench in the case of Sicpa India (P) Ltd. - vs.- DCIT T20171 186 TTJ 289 (Kol.) (Refer Page 123-150 of the Case Law Paper book) wherein it has been held that subsidies cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s. 115JB of the Act. 13. Coordinate Bench Delhi in case of Uflex Limited -vs.- ACIT 2022 (1) TMI 731 - ITAT Delhi held that CENVAT credit, as received by the Assessee, in accordance with the incentive scheme for J & K as formulated by the Central Government is a capital receipt not liable to tax, accordingly the same cannot be part of book profit under Section 115JB also. Relevant extract of the order of the Hon’ble ITAT is reproduced below: “14. Regarding issue raised vide Ground No. 7, that the aforesaid subsidy being capital in nature it will also not form part of the book profit u/s 115JB. Before us the Ld. Counsel for the assessee submitted that the CENVA T credit as received by the appellant under the incentive scheme for J&K as formulated by the Central Government and treated the same as a capital receipt not liable to tax by the J&K High Court in the case of Shree Balaji Alloys (supra) and also affirmed by the Hon’ble Supreme Court, that it will not form part of the income chargeable to tax u/s 4 of the Act and once the same is treated as capital receipt not chargeable to tax under the Income- tax Act, then same has to be excluded while computing the income under the MAT provisions in terms of Section 115-JB of the Act. Because Section 115-JB is also meant for the purpose of levy of tax on income and the basic things will have to be kept in mind that receipts which have to be included in the profit should be having the characteristic of income. There is a fundamental difference between the income and capital that the income is liable to tax, whereas capital is not liable to tax. In the case of Padmaraje R. Kadambande vs. CIT in 195 ITR 877, the Hon’ble Supreme Court held that the capital receipts are not income within the definition of Section 2(24) of the Act and hence are not chargeable under the Income Tax Act. The learned counsel further stated that the provision of Section 115-JB of the Act is alternative mechanism for computation of income based on book profit without I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 22 of 27 claiming any deduction or incentive allowable under the Act, but the fact remains that taxability has to be restricted to the income and once a receipt is considered as capital, it should be excluded even while computing book profit u/s. 115-JB of the Act. He relied upon the following judgments: (i) ITA No. 923/Bang/2009 dated 13th January 2017 JSW Steels Ltd. -vs. ACIT (ii) ITA No. 5124/Del/2011 dated 29th June 2018 Montage Enterprises Pvt. Ltd. vs. DCIT (iii) ITA No. 2199/Del/2009 dated 20th March 2019 Ultimate Flexipack Ltd. vs. DCIT (iv) 416 ITR 591 (Cal) Pr. CIT vs. Ankit Metal 85 Power Ltd. (v) Appeal No. 1132 of 2014 dated 4th January 2017 CIT vs. Harinagar Sugar Mills Ltd. (Bombay) (vi) ITA Nos. 614, 615 & 635/JP/2010 dated 9th September 2011 - Shree Cement - Appeal by Revenue, the Hon’ble Rajasthan High Court in Appeal Nos. 204 of 2010 and 85 of 2014 vide order dated 22nd August 2017 has not admitted any question of law in appeal filed by Revenue. 15. Since we have already held that the CENVAT credit, as received by the appellant, in accordance with the incentive scheme for J & K as formulated by the Central Government is a capital receipt not liable to tax, accordingly the same cannot be part of book profit under Section 115JB also. Consequently, ground No. 7 is also allowed.” 14. Coordinate Delhi ITAT in case of M/S BR Agrotech Ltd, -vs.- ACIT (2021 (9) TMI 233 - ITAT DELHI) decided in favour of the Assessee holding that only that receipt which forms part of the “income” are to be taxed. The capital receipts which are otherwise not subject to tax under the normal provisions of the Act are not envisaged to be taxed under the provisions of “Minimum Alternate Tax”. Once a receipt is not considered as income, the same cannot be subjected to tax under this Act as such receipt naturally classified under capital receipt, which was never meant to be taxed cannot be taxed even u/ s 115 JB. Relevant extract of the order of the ITAT is reproduced below: “23. The similar view has been taken by various Co- ordinate Benches of IT AT, to mention a few, IT AT Delhi in the case of Montage Enterprises Pvt. Ltd. vs. DCIT in IT A No 5124/Del/2011, in the case I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 23 of 27 of Malana Power Co. Ltd. in ITA No. 3957 & 1550/Del/2015 and ITAT Mumbai in the case of Shivalik Venture Pvt. Ltd. vs. DCIT in ITA No. 2008/ Mum/2012 wherein it was held that capital subsidy shall be excluded in computing book profit u/ s 115JB of the Act. 24. To conclude, (a) Not considering the subsequent interpretation of law through the judgment of the Hon’ble Supreme Court or the Hon’ble jurisdictional High court would constitute a mistake apparent from record. (b) The Excise subsidy refund is to be treated as capital receipt. (c) Capital receipts are liable to be excluded for the purpose of computation of book profit u/s 115” 15. In case of ACIT -vs.- Shree Cement Ltd (ITA No. 614/JP/2010) order dated 09- 09-2011. (Refer Page No. 716-751 of Paper Book), the Coordinate Jaipur Bench of ITAT was dealing with the issue as to whether subsidy received which was admittedly capital in nature can be subject to MAT. The ITAT held that there was never any intention behind introduction of section 115JB to tax something which is not taxable at all. It was held that tax incentives needs to be excluded in computing Book Profits u/s 115JB being capital receipt not having any element of income embedded therein and not representing the real working results of the company. The Tribunal further held that: With the above discussions, the only issue left to be considered is whether exclusion of the above capital receipt is in line with the principles as laid down by Hon'ble Apex Court in the case of Apollo Tyres (supra). In the case of Apollo Tyres (supra), the question before the Apex Court was whether an AO can, while assessing a company for income tax u/s 115J of the IT Act, question the correctness of the P&L a/c prepared in accordance with requirements of Parts II and III of Sch. VI to the Companies Act. From the question as framed before the Apex Court it is clear that the issue before the Hon'ble Court was with regard to power of the AO to recast audited accounts prepared in accordance with Part II and Part III of the Sch. VI to the Companies Act. Therefore, for applicability of the decision of the Apex Court the prerequisite is that the accounts are prepared in accordance with Part II arid Part III to Sch. VI of the Companies Act. If however the P&L accounts are not in accordance with Part II and III of Sch. VI to the Companies Act, the said decision cannot be applied and in that situation it does not prohibit the needful adjustment. I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 24 of 27 16. By placing reliance on the above decision in the case of Shree Cement Limited (Supra), carbon credit being a capital receipt was held to be excludible while computing Book Profit in the following cases- ACIT -vs.- Shree Cement Ltd. NTA No. 504/JP/2012, order dtd. 27- 01- 2014 ACIT -vs.-M/s L.H. Sugar Factory Limited NTA No. 417 & 418/LKW/2013, order dtd. 09-02-2016. 17. Hon’ble Bombay High Court in the case of CIT -vs.- Harinagar Sugar Mills Ltd. (ITA No. 1132 of 2014), order dtd. 04-01-2017 (Refer Page No. 752-755 of Paper Book) has held that the object or purpose of the subsidy decides its character - whether on revenue or capital account. The point of time at which subsidy is paid and the source of subsidy are immaterial. Where the receipt was on capital account, the same needs to be excluded in computing Book Profit u/s 115JB. 18. In the case of DCIT -vs.- Binani Industries Ltd. (ITA No. 144/Kol/2013, order dtd 02-03-20161. (Refer Page No. 772-789 of Paper Book), it was held that receipt from forfeiture of share warrants credited to the P & L A/c and disclosed in the notes to accounts being a capital receipt shall be excluded in computing Book Profit. It held that in order to determine the real profit of the assessee as laid down by the Hon’ble Apex Court in the case of Indo Rama Synthetics (supra) adjustment need to be made to the disclosures made in the notes on accounts forming part of the profit and loss account of the assessee and the profits arrived after such adjustment should be considered for the purpose of computation of book profits u/s 115JB of the Act. 19. In the case of ACIT -vs.- The Nilgiri Tea Estate Ltd. (2014) 65 SOT 14 (Cochin) (URO) (Refer Page 151 -156 of the Case Law Paperbook) wherein it was held that any income, which does not fall within the purview of Total Income u/s 5 of the IT Act, cannot be taxed under any other provisions of the Act. Further, the Hon’ble Tribunal held that the provisions of Chapter XII-B of the Act do not operate to extend the scope of Total Income but provides an alternative basis for computing the income and hence income which is not chargeable to tax cannot be included in the computation of Book Profit u/s 115JB. 20. In the case of Sutlej Cotton Mills Ltd -vs.- ACIT (1993) 45 ITD 22 (Cal) (SB) (Refer Page 157-201 of the Case Law Paperbook), it was held that according to standard accounting practice, capital receipt cannot be part of the profit. Therefore, capital receipts which do not have the character of income cannot be liable to income-tax by adding I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 25 of 27 it to the book profit. When an amount which forms part of the book profit itself cannot be taxed under s. 115J, when it does not have the income character it has to be accepted that when what is routed through the P&L account and carried to reserve is of a capital receipt and does not have an income character. It cannot be added back to the book profits merely because of the enabling provision in the Expln. to s. 115J for the purpose of imposing a tax thereon. 21. After going through the above referred judgments and decisions and on examining the facts of the instant case, we find that the excise duty exemption has been admittedly the capital receipt and the finding of the ld. CIT(Appeals) that the excise duty exemption is not liable to be taxed under the normal provisions of the Income Tax Act being not in dispute for us, the alleged capital receipt cannot be categorised as part of the book profit. In the case of assessee being covered by the excise duty notification, such sum collected on the goods manufactured and sold is in the nature of incentive subsidy given for establishing the units in backward areas and to generate employment opportunities. The said fact is evident from the office memorandum dated 07.01.2003 of Ministry of Commerce and Industry, which reads as under: 3.4 On perusal of the above, it can be seen that incentive in the form of Excise Duty Exemption has been given with an objective to achieve industrialization in the backward areas of Himachal Pradesh and Uttaranchal and to generate employment opportunities. The object of the assistance was not to enable the businessman to run the business more profitably but encourage a businessman to set up a new unit or expand the existing unit for overall economic development of the state. Hence, the incentives granted by the Government of India vide Office Memorandum No. 1(10)/2001-NER issued by DIPP, Ministry of Commerce and Industry, GOI dated 07-01-2003 read with Notification No. No.50/2003- CE dated 10-06-2003, will be treated as capital receipt and not liable to tax. In this regard, statement showing computation of excise duty exemption received during the year aggregating to Rs. 87,98,09,432/- along with copy of Excise Returns (in case of Rudrapur Unit 1) and copy of Form A (in case of Rudrapur Unit 2) has been enclosed (Refer Page No. 599-683 of Paper Book). 22. In the light of above decision as well as the Memorandum issued by the Ministry of Commerce & Industry, we find that the excise duty exemption is purely capital receipt and is neither chargeable to tax under the normal provisions of the Income Tax Act nor is to be included as part of the book profit for computing the minimum I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 26 of 27 alternative tax as per the provisions of section 115JB of the Act. Thus Ground No. 2 raised by the assessee is allowed.” 21. From perusal of the above judgments and decisions and more specifically from the recent decision of this Tribunal in assessee’s parent company case of Greenply Industries Limited (supra), we find that they are squarely applicable on the issues raised in the instant appeal and there remains no dispute that the alleged sum of excise duty exemption received by the assessee is a capital receipt not chargeable to tax and it is to be excluded for the purpose of computing book profit u/s 115JB of the Act. We also find that this Tribunal after considering the settled judicial pronouncements has clearly held that the excise duty exemption received by the assessee during the course of running manufacturing units in the backward areas, notified by the Ministry of Commerce and Industry are to be considered as capital receipt not chargeable to tax and they also need to be excluded from the book profit for the purpose of computing MAT u/s 115JB of the Act. 22. We, therefore, respectfully following the settled judicial precedence, are of the considered view that the alleged sum of excise duty exemption of Rs. 19,25,59,001/- is a capital receipt not chargeable to tax and even for the purpose of computing MAT u/s 115JB of the Act the said sum needs to be reduced from the net profit shown in the audited profit and loss account. Therefore, ground nos. 2 & 3 raised by the assessee are allowed. 23. As far as ground no. 4 is concerned the same relates to computation of interest u/s 244A of the Act considering the I.T.A. No.: 402/Gau/2019 Assessment Year: 2015-16 Greenlam Industries Limited. Page 27 of 27 additional grounds. Since we have already allowed the additional ground nos. 2 & 3 raised by the assessee, this ground no. 4 remains to be consequential in nature and, therefore, the Revenue authorities shall re-compute the interest u/s 244A of the Act. 24. Ground no. 5 is general in nature which needs no adjudication. 25. In the result, appeal filed by the assessee is allowed as per the terms indicated above. Kolkata, the 19 th December, 2022. Sd/- Sd/- [Rajpal Yadav] [Manish Borad] Vice President Accountant Member Dated: 19.12.2022 Bidhan (P.S.) Copy of the order forwarded to: 1. Greenlam Industries Limited, Makum Road, P.O. Tinsukia, Assam-786125. 2. ACIT, Circle-Tinsukia, Assam. 3. CIT(A), Dibrugarh. 4. CIT- 5. CIT(DR), Guwahati Bench, Guwahati. True copy By order Assistant Registrar ITAT, Kolkata Benches Kolkata