Dy.Comm.of Income Tax,Circle-4, Nagpur V. M/s Kasturchand Fertilizers Private Limited, Nagpur

ITA 41/NAG/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9620 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 10-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H WANARE
• Keywords: Audit objection; Capital receipt
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR E-BENCH, NAGPUR (THROUGH VIDEO CONFERENCE AT MUMBAI) . . , . / BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER / AND , . . SHRI RAJENDRA, ACCOUNTANT MEMBER . / ITA NO. 41/NAG/2011 / ASSESSMENT YEAR 2004-05 DY. COMMISSIONER OF INCOME TAX, CIRCLE 4, ROOM NO. 301, 3 RD FLOOR, SARAF CHAMBER, SADAR, NAGPUR. VS. M/S. KASTURCHAND FERTILIZERS PVT. LTD., GEETA MANDIR COMPLEX, COTTON MARKET, NAGPUR. PAN: AABCK 6178 K ( / APPELLANT ) ( / RESPONDENT ) REVENUE BY : SHRI H. WANARE, ASSESSEE BY : NONE ! '#$ / DATE OF HEARING : 17-12-2012 %& ! '#$ / DATE OF PRONOUNCEMENT : 17-12-2012 '( / O R D E R PER RAJENDRA, AM THE PRESENT APPEAL IS DIRECTED AGAINST THE ORDER DT . 20-12-2010 PASSED BY THE CIT(A)-II, NAGPUR. THE EFFECTIVE GROUND OF APPEAL FILED BY THE ASSESSING OFFICER (AO) READS AS UNDER: ITA NO. 41/NAG/2011 M/S. KASTURCHAND FERTILIZERS PVT. LTD., 2 WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), ERRED IN TREATING THE RECEIPT OF STATE CAPITAL INCENTIVE OF RS. 20,00,000/- AS CAPITAL RECEIPT THROUGH THE SAME IS REVENUE RECEIPT 2. ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF MANUFA CTURING FERTILIZERS, FILED ITS RETURN OF INCOME ON 30-10-2004 DECLARING NIL IN COME. INITIALLY, THE RETURN WAS PROCESSED U/S. 143(1) OF THE INCOME-TAX ACT, 1961 ( ACT), ON 24-02-2005. LATER ON NOTICE U/S. 148 WAS ISSUED ON 11-09-2006. ASSESSME NT U/S. 143(3) R.W.S. 147 OF THE ACT WAS FINALIZED BY THE AO ON 28-12-2007. AN ADDI TION AMOUNTING TO RS. 20 LAKHS WAS MADE TO THE INCOME OF THE ASSESSEE-COMPANY BY T HE AO ON ACCOUNT OF INCENTIVE RECEIVED FROM THE STATE OF MAHARASHTRA. 3. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEA L AUTHORITY (FAA) CHALLENGING THE RE-OPENING OF THE ASSESSMENT AS WEL L AS THE ADDITION MADE BY THE AO. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE-C OMPANY, FAA HELD THAT RE-OPENING WAS WITHOUT ANY SPECIFIC INFORMATION, THAT THERE WA S NO ESCAPEMENT OF INCOME, THAT THE INFORMATION REGARDING AMOUNT OF SUBSIDY WAS AVA ILABLE IN THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE, THAT RE-OPENING OF AS SESSMENT ON THE BASIS OF AN OPINION OF THE AUDIT OBJECTION WAS AGAINST THE PRINCIPLE L AID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF INDIAN AND EASTERN NEWSPAPER SOCIETY VS. CIT (SC) (119 ITR 996) , THAT AO HAD NOT DISPOSED OFF THE OBJECTIONS FILE D BY THE APPELLANT BEFORE PASSING THE ORDER U/S. 143(3) OF THE ACT. FINALLY, IT WAS HELD THAT ACTION OF THE AO WAS UNTENABLE. 4. BEFORE US, DEPARTMENTAL REPRESENTATIVE (DR) SUBMITT ED THAT INCENTIVE AMOUNTING TO RS. 20 LAKHS WAS A REVENUE RECEIPT, TH AT SUBSIDY WAS RECEIVED AFTER COMMENCEMENT OF THE PRODUCTION, THAT SAME WAS NOT F OR THE PURPOSE OF STARTING OF A NEW INDUSTRIAL UNIT. AUTHORISED REPRESENTATIVE (AR ) SUBMITTED THAT INCENTIVE WAS FOR SETTING UP OF A NEW UNIT FOR MANUFACTURING FERTILIZ ERS, THAT ELIGIBILITY CERTIFICATE ISSUED BY THE STATE GOVERNMENT CLEARLY STATED THE S UBSIDY WAS GRANTED FOR THE NEW UNIT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PUT BEFORE US. IN OUR CONSIDERED OPINION, DATE OF DISBURSEMENT OF AMO UNT RELATING TO ANY INCENTIVE/SUBSIDY CANNOT BE THE CRITERIA OF TREATIN G IT AS REVENUE/CAPITAL RECEIPT. AS PER THE ESTABLISHED PRINCIPLES OF TAXATION-JURISPRU DENCE, THE CHARACTER OF THE SUBSIDY HAS TO BE DECIDED AFTER CONSIDERING THE PURPOSE FOR WHICH THE SAME IS GRANTED. IN THE CASE UNDER CONSIDERATION, AO HAS NOT CHALLENGED THE BASIC FACT THAT SPECIAL CAPITAL INCENTIVE WAS GRANTED FOR SETTING UP A NEW UNIT IN BACKWARD AREA. IN THESE CIRCUMSTANCES, WE FIND THAT ORDER OF THE FAA DOES N OT SUFFER FROM ANY LEGAL INFIRMITY, GROUND NO.1 IS DECIDED AGAINST THE AO. APPEAL FIL ED BY THE AO IS DISMISSED. 6. WE HAVE ALREADY DISCUSSED THE ORDER OF THE FAA, WHE RE IT HAS BEEN HELD THAT ITA NO. 41/NAG/2011 M/S. KASTURCHAND FERTILIZERS PVT. LTD., 3 ORDER OF THE AO PASSED BY HIM U/S. 143(3) R.W.S 147 WAS NOT AS PER THE PROVISIONS OF THE LAW. WE FIND THAT AO HAS NOT CHALLENGED THE FI NDING OF THE FAA. IN THESE CIRCUMSTANCES ALSO, THE ORDER OF THE AO CANNOT BE U PHELD. THUS, CONSIDERING THE FACTS OF THE CASE AND THE PROVISIONS OF LAW, APPEAL FILE D BY THE AO HAS TO BE DISMISSED. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISS ED. ORDER PRONOUNCED BY E-BENCH AT MUMBAI ON THIS 17 TH DAY OF DECEMBER, 2012. SD/- SD/- ( . . / R.K. GUPTA ) ( / RAJENDRA ) ') / JUDICIAL MEMBER $ ') / ACCOUNTANT MEMBER *+ MUMBAI, ,' DATE: 17 TH DECEMBER, 2012 TNMM COPY TO: 1. APPELLANT 2. RESPONDENT 3. THE CONCERNED CIT (A) 4. THE CONCERNED CIT 5. DR, ITAT, NAGPUR 6. GUARD FILE -' ' //TRUE COPY// BY ORDER, ASST. REGISTRAR, ITAT