DCIT CIR 4(2)(2), MUMBAI V. HARINAGAR SUGAR MILLS P. LTD, MUMBAI

ITA 5584/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9455 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 10-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Assessee Lawyers: JAYESH DESAI
• Keywords: Depreciation; Capital receipt
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH H, MU MBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTNAT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5584/MUM/2015 (ASSESSMENT YEAR- 2012-13) DCIT-4(2)(2), ROOM NO. 640, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VS. M/S HARINAGAR SUGAR MILLS LTD. 207, KALBADEVI ROAD, MUMBAI-400002 PAN: AAACH2831H (APPELLANT) (RESPONDENT) REVENUE BY : SHRI M.C. OMI NINGSHEN (DR) ASSESSEE BY : SHRI JAYESH DESAI (AR) DATE OF HEARING : 18.09.2017 DATE OF PRONOUNCEMENT : 18.09.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF THE INC OME-TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-8, MUMBAI DATED 03.09.2015 FOR THE AY 2012-13. THE REVENUE HAS RAISED THE FOLLOWING GROUN DS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN STATING THAT THE CAPITAL SUBSIDY RECEIVED UNDER THE BIHAR INCENTIVE PACKAGE IS NOT TO BE DEDUCTED FROM WDV OF THE PLANT AND MACHINERY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT SUBSIDY RECEIVED BY THE WAY O F REIMBURSEMENT OF COMMERCIAL TAX (VAT) IS NOT A REVENUE RECEIPT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)ERRED IN DIRECTING THE AO TO DELETE THE ADDIT ION MADE TO BOOK PROFITS ON ACCOUNT OF EXCESS DEPRECIATION AND SUBSIDY RECEI VED BY THE WAY OF COMMERCIAL TAX (VAT). 2. AT THE OUTSET OF HEARING, THE LD. AUTHORIZED REPRES ENTATIVE (AR) OF THE ASSESSEE SUBMITTED THAT THE GROUNDS OF APPEAL RAISED BY REVE NUE ARE COVERED IN FAVOUR OF ITA NO.5584/M/2015 - M/S HARINAGAR SUGAR MILLS LTD. 2 ASSESSEE IN ASSESSEES OWN CASE FOR AY 2011-12. IT WAS FURTHER SUBMITTED THAT THE TRIBUNAL VIDE ORDER DATED 22.06.2016 IN ITA NO. 567 5/MUM/2014 FOR AY-2011- 12, FOLLOWED THE DECISION FOR AY 2008-09 & 2009-10. AGAINST THE ORDERS OF TRIBUNAL FOR AY 2008-09 AND 2009-10, THE REVENUE FI LED APPEAL BEFORE THE HONBLE BOMBAY HIGH COURT IN ITA NO. 1132/2014 FOR AY 2008-09 VIDE ITA NO. 1710/2014 FOR AY 2009-10 AND BOTH THE APPEAL OF THE REVENUE HAS BEEN DISMISSED VIDE ORDER DATED 04.01.2017 & 03.04.2017 RESPECTIVELY. THE LD. DR FOR THE REVENUE FAIRLY CONCEDED THAT THE TRIBUNAL WHILE PASSING ORDER FOR AY 2011-12 IN ITA NO. 5675/MUM/2014 HAS FOLLOWED THE DECISION OF TRIBUNAL IN AY 2008-09 & 2009-10 AND THE APPEAL OF THE REVENUE AGAINST TH E SAID ORDERS HAVE BEEN DISMISSED BY HONBLE BOMBAY HIGH COURT. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE SEEN THAT THE REVENUE HAS RAISED THE IDENTICAL GROUNDS OF APPEAL IN APPEAL FOR AY 2011-12 IN ITA NO. 5675/MUM/2014 AND THE FACTS OF THE APPEAL U NDER CONSIDERATION IS ALSO SIMILAR. THE COORDINATE BENCH OF THE TRIBUNAL IN AP PEAL FOR AY 2011-12, PASSED THE FOLLOWING ORDER: 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN STATING THAT THE CAPITAL SUBSIDY RECEIVED UNDER THE BIHAR INCENTIVE PACKAGE IS NOT TO BE DEDUCTED FROM WDV OF THE PLANT AND MACHINERY ? 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT SUBSIDY RECEIVED BY THE WAY O F REIMBURSEMENT OF COMMERCIAL TAX (VAT) IS NOT A REVENUE RECEIPT ? 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE AO TO DELETE THE ADDITION MA DE TO BOOK PROFITS ON ACCOUNT OF EXCESS DEPRECIATION AND SUBSIDY RECEIVED BY THE WAY OF REIMBURSEMENT OF COMMERCIAL TAX (VAT) ? ITA NO.5584/M/2015 - M/S HARINAGAR SUGAR MILLS LTD. 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SUGAR, ALCOHOL, BISCUIT AND WIN D ENERGY. THE ASSESSEE COMPANY ALSO OWN SUGARCANE FARMS IN WHICH THE SUGAR CANE IS GROWN AND WHICH IS CONSUMED BY THE SUGAR MILLS OF THE ASSESSEE COMPANY. 4. THE A.O. OBSERVED THAT THE ASSESSEE COMPANY HAS RECEIVED CAPITAL SUBSIDY OF RS. 4,11,43,000/- BEING 10% OF INVESTMENT IN MACHINERIE S AND EQUIPMENTS AND SUBSIDY OF RS. 2,26,70,311/- BY WAY OF REIMBURSEMENT OF EXCISE DUTY UNDER BIHAR INCENTIVE PACKAGE 2006 FOR UNDERTAKING EXPANSION OF ITS CAP ACITY FROM 8500 TCD TO 10000 TCD IN THE PREVIOUS YEAR 2007-08 (ASSESSMENT YEAR 2 008-09). THE ASSESSEE COMPANY HAS TREATED THE SAID SUBSIDY AS CAPITAL RECEIPT AND CREDITED THE AMOUNT TO THE CAPITAL RESERVE ACCOUNT, WITHOUT CREDITING THE SAME TO THE PROFIT & LOSS ACCOUNT. HOWEVER, THE AO HAS REJECTED THE CLAIM OF THE ASSESSEE COMPA NY BY TREATING THE SAID RECEIPT AS CAPITAL RECEIPTS AND THE CAPITAL SUBSIDY OF RS. 4,1 1,43,000/- BEING 10% OF INVESTMENT IN MACHINERY AND EQUIPMENTS WAS REDUCED FROM THE CO ST OF PLANT AND MACHINERY AND PROPORTIONATE DEPRECIATION WAS DISALLOWED, AND ALSO SUBSIDY OF RS. 2,26,70,311/- BY WAY OF REIMBURSEMENT OF EXCISE DUTY WAS TREATED AS REVENUE IN NATURE AND ADDED TO THE INCOME OF THE ASSESSEE COMPANY BY THE AO VIDE ASSESSMENT ORDERS U/S 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2008-09. SIMILARLY, THE A.O. OBSERVED THAT THE ASSESSEE COMPANY HAD RECEIVED CAPITAL SUBSIDY OF RS . 3 CRORES UNDER BIHAR INCENTIVE PACKAGE 2006 FOR SETTING UP OF THE DISTILLERY UNI T BEING 10% OF INVESTMENT IN MACHINERIES AND EQUIPMENTS FOR ESTABLISHMENT OF DIS TILLERY PLANT AND SUBSIDY OF RS. 4,13,51,468/- BY WAY OF REIMBURSEMENT OF EXCISE DUT Y UNDER BIHAR INCENTIVE PACKAGE 2006 FOR UNDERTAKING EXPANSION OF ITS CAPACITY FROM 8500 CTD TO 10000 TCD IN THE PREVIOUS YEAR 2008-09 (ASSESSMENT YEAR 2009-10). AG AIN, THE AO HELD THAT CAPITAL SUBSIDY OF RS. 3 CRORES BEING 10% OF INVESTMENT IN MACHINERIES AND EQUIPMENTS IS TO BE REDUCED FROM THE COST OF PLANT & MACHINERY AND PROPORTIONATE DEPRECIATION WAS DISALLOWED AND SUBSIDY OF RS. 4,13,51,468/- BY WAY OF REIMBURSEMENT OF EXCISE DUTY WAS TREATED AS REVENUE IN NATURE AND WAS ADDED BY T HE AO TO THE TOTAL INCOME OF THE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR 2009-10 V IDE ASSESSMENT ORDERS PASSED U/S 143(3) OF THE ACT. FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10, THE M ATTER WENT UP TO THE TRIBUNAL AND THE TRIBUNAL IN ITA NO. 772/MUM/2012 FOR THE ASSESS MENT YEAR 2008-09 VIDE ORDERS DATED 31ST JANUARY, 2014 HELD THAT CAPITAL SUBSIDY BEING 10% OF INVESTMENT IN MACHINERIES AND EQUIPMENTS IS NOT REQUIRED TO BE D EDUCTED FROM THE COST OF PLANT AND MACHINERY AND ALSO THE SUBSIDY RECEIVED AS EXCISE D UTY REIMBURSEMENT CANNOT BE TAKEN AS REVENUE RECEIPT AND THE A.O. IS NOT ENTITL ED TO ADD THE ABOVE TWO ITEMS TO THE BOOK PROFIT COMPUTED U/S 115JB OF THE ACT. THE REL EVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 2.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIAL ON THIS GROUND OF APPEAL. A READING OF THE INCENTIVE PACKAGE RESOLUTI ON OF THE BIHAR GOVERNMENT DATED 12.09.2006 INDICATES THAT THE OBJECT OF THE S AID SCHEME IS FOR THE DEVELOPMENT OF SUGAR INDUSTRY IN THE STATE AND ESTA BLISHMENT OF NEW SUGAR MILLS, ESTABLISHMENT OF CO-INDUSTRIES BASED ON SUGARCANE A ND TO SUPPLEMENT THE EFFORTS IN EXPANDING CAPACITY OF PRESENT SUGAR MILLS, AND I N ORDER TO SOLVE THE PROBLEM OF ADDITIONAL FINANCIAL LOAD FACED BY THE INVESTORS AND IN ORDER TO MINIMIZE THE BURDEN ON THEM THE SURPLUS FUNDS SO GENERATED BY TH E STATE INCENTIVE POLICY ITA NO.5584/M/2015 - M/S HARINAGAR SUGAR MILLS LTD. 4 COULD BE USED FOR REPAYMENT OF TERM LOAN TAKEN FROM CENTRAL FINANCIAL INSTITUTIONS AND BANKS SO THAT THESE PROJECTS COULD BECOME VIABLE. PARA 2 OF THE SAID RESOLUTION FURTHER STATES THAT UNDER THE NEW I NDUSTRIAL POLICY OF THE STATE, UNDER THE PROVISIONS OF ATTRACTING CAPITAL INVESTME NT FOR TECHNICAL DEVELOPMENT AND EXPANSION OF CAPACITY OF THE SUGAR FACTORY AS W ELL AS FOR THE ESTABLISHMENT OF NEW SUGAR MILLS, APPROVAL OF A PLANNED SUGAR INDUS TRY INCENTIVE PACKAGE WAS DISCUSSED SO THAT THE ENTREPRENEURS OF THE PRIVATE SECTOR COULD BE ATTRACTED FOR THE ESTABLISHMENT OF SUGAR INDUSTRY AND OTHER INDUS TRIES BASED ON SUGARCANE OR SUGARCANE JUICE COULD BE ATTRACTED AND WORKING/ INS TALLED SUGAR MILLS ALSO MAY EXPAND THEIR CAPACITY AND MAY ESTABLISH OTHER INDUS TRIES BASED ON CO-PRODUCTS OF THE SUGARCANE IN THE STATE. 2.3.1 IT IS PERTINENT TO MENTION THAT THE LD. CIT(A ) HAS STATED THAT THE WORDING OF THE SAID SCHEME READ TOGETHER WITH THE SAID GUIDELI NES ISSUED BY THE BIHAR GOVERNMENT INDICATES THAT THE SUBSIDY IS GRANTED WI TH THE OBJECT OF INCENTIVE FOR THE ENTREPRENEURS TO ESTABLISH SUGAR INDUSTRY/EXPAN D THE CAPACITY IN THE STATE OF BIHAR AND THUS THE SAID SUBSIDY IS GIVEN FOR SETTIN G UP OF INDUSTRY OR EXPANSION OF INDUSTRY IN THE STATE OF BIHAR. WE CONCUR WITH T HE SAID OBSERVATION OF THE LD. CIT(A) THAT THE SAID SUBSIDY IS GIVEN FOR SETTING U P OF INDUSTRY OR EXPANSION OF INDUSTRY IN THE STATE OF BIHAR WHICH IS THE OBJECT OF THE SCHEME. IN THIS CONNECTION, IT IS RELEVANT TO STATE THAT IN THE CAS E OF SASISRI EXTRACTIONS LTD. (SUPRA), THE TRIBUNAL HAS HELD THAT WHERE SUBSIDY I S GRANTED AS PERCENTAGE OF FIXED CAPITAL COST TAKEN AS BASIS FOR DETERMINING T HE SUBSIDY THAT WOULD ONLY BE A MEASURE ADOPTED UNDER THE SCHEME TO QUANTIFY SUBSID Y, THE SAME COULD NOT BE CONSIDERED AS A PAYMENT DIRECTLY OR INDIRECTLY TO M EET ANY PORTION OF THE ACTUAL COST. THE SAME VIEW HAS BEEN FOLLOWED BY THE TRIBUN AL IN A SUBSEQUENT CASE, NAMELY M/S. GODREJ AGROVET LTD. (SUPRA), THE ORDER TO WHICH THE PRESENT ACCOUNTANT MEMBER IS ALSO A PARTY. IT IS PERTINENT TO MENTION THAT IN THE APPEAL PREFERRED BEFORE THE HIGH COURT AGAINST THE SAID DE CISION OF THE TRIBUNAL, THE REVENUE HAS NOT DISPUTED THE DECISION OF THE TRIBUN AL IN THE APPEAL BEFORE THE HONBLE HIGH COURT. THIS SUGGESTS THAT THE REVENUE HAS ACCEPTED THE DECISION OF THE TRIBUNAL IN THE SAID CASE. THE HONBLE APEX COU RT, IN THE CASE OF P.J. CHEMICALS LTD. (SUPRA), HAS HELD THAT THE EXPRESSIO N ACTUAL COST IN SECTION 43(1) OF THE INCOME TAX ACT NEEDS TO BE INTERPRETED LIBERALLY AND SUBSIDY DOES NOT PARTAKE THE INCIDENTS WHICH ATTRACT THE CONDITI ONS FOR ITS DEDUCTIBILITY FROM ACTUAL COST. THE AMOUNT OF SUBSIDY IS NOT TO BE DED UCTED FROM THE ACTUAL COST AND SECTION 43(1) FOR THE PURPOSE OF CALCULATION OF DEP RECIATION. ALSO, THE TRIBUNAL IN THE CASE OF INVENTAA CHEMICAL LTD (SUPRA) HAS HE LD THAT IF PAYMENT OF SUBSIDY IS NOT RELATED TO ACTUAL ACQUISITION OF ASSETS AND SUBSIDY IS GRANTED ON CAPITAL INVESTMENT ON LAND, BUILDING AND MACHINERY, SUCH SU BSIDY CANNOT BE REDUCED FROM THE VALUE OF ASSET (WDV). APPLYING THESE RATIO TO THE FACTS OF THE ASSESSEES CASE, AFTER NOTING THAT THE REVENUE HAS NOT BROUGHT ON RECORD THAT THE SUBSIDY RECEIVED BY THE ASSESSEE IS DIRECTLY OR INDIRECTLY RESULTED IN ACQUISITION OF ANY ASSET, WE ARE OF THE CONSIDERED OPINION THAT THE CA PITAL SUBSIDY OF RS.4,11,43,000/- RECEIVED BY THE ASSESSEE COMPANY U NDER BIHAR INCENTIVE PACKAGE 2006 FOR UNDERTAKING EXPANSION OF ITS CAPA CITY FROM 8500 TCD TO 10000 TCD CANNOT BE DEDUCTED FROM WDV OF PLANT AND MACHINERY. SINCE THE LD.CIT(A) HAS CORRECTLY APPRECIATED THE FACTS AND T HE POSITION OF LAW AFOREMENTIONED FOR REVERSING THE ORDER OF THE AO, W E DO NOT FIND ANY INFIRMITY IN ITA NO.5584/M/2015 - M/S HARINAGAR SUGAR MILLS LTD. 5 THE DECISION OF THE LD.CIT(A) ON THIS COUNT AND THU S THE SAME IS UPHELD. RESULTANTLY, GROUND NO.1 IS DISMISSED. ***** ***** 3.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD. IT IS NOT DISPUTED THAT THE SUBSIDY SCHEME FORMULATED BY THE GOVERNMENT OF BIHAR IS FOR THE PURPOSE OF ATTRACTING CAPITAL INVESTMENT AND TO ENCOURAGE SETTING UP THE INDUSTRY/EXPAND THE EXISTING UNIT. IT IS PERTINENT TO MENTION THAT THE CHARACTER OF A SUBSIDY IN THE HANDS OF THE ASSESSEE HAS TO BE DE TERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. THE POINT O F TIME AT WHICH THE SUBSIDY IS PAID AND THE SOURCE OR THE FORMS OF SUBSIDY ARE IMM ATERIAL. IF THE OBJECT OF THE SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE IN SETTING UP THE NEW UNIT OR TO EXPAND THE EXISTING UNIT, THEN THE RECEIPT OF THE SUBSIDY IS TO BE TREATED ON CAPITAL ACCOUNT. THIS ESTABLISHED POSITION OF LAW HAS BEEN RECOGNISED BY VARIOUS JUDICIAL PRONOUNCEMENTS WHICH HAVE BEEN RELIED BY T HE LD.CIT(A) IN HIS ORDER AND ALSO THE DECISIONS RELIED ON BY THE LD.COUNSEL FOR THE ASSESSEE AS AFOREMENTIONED. IN VIEW OF THAT MATTER WE DO NOT FI ND INFIRMITY IN THE DECISION OF THE LD.CIT(A) IN DELETING THE IMPUGNED ADDITION MAD E BY THE AO AND THUS THE ORDER OF THE LD.CIT(A) ON THIS COUNT IS UPHELD. GRO UND NO. 2 IS DISMISSED. ***** ***** 4.1 HAVING HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL ON RECORD, IT IS NOTED THAT THE ISSUE RAISED IN THIS GROUND IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT IN THE CA SE OF APOLLO TYRES LTD. VS. CIT 250 ITR 273, WHEREIN IT HAS BEEN HELD THAT THE AO WHILE COMPUTING THE INCOME UNDER SECTION 115J HAS ONLY THE POWER TO EXA MINE WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE SAID ACT . THE AO, THEREAFTER, HAS THE LIMITED POWER OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. TO PUT IT DIFFEREN TLY THE AO DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWS IN T HE P&L ACCOUNT EXCEPT TO THE EXTENT PROVIDED FOR THE EXPLANATION OF SECTION 115J . ALSO, IT IS NOTED THAT WHILE DECIDING GROUNDS NO. 1 & 2 IN RESPECT OF THE ADDITI ONS UNDER NORMAL PROVISIONS OF THE INCOME IN RESPECT OF TREATMENT OF THE SAID S UBSIDY, WE CONFIRMED THE DELETIONS MADE BY THE LD.CIT (A) AND HENCE THE ADDI TIONS MADE IN COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB IS NOT SUSTAINAB LE. SINCE, THE FACTS AND POSITION OF LAW AS AFOREMENTIONED HAS BEEN CORRECTL Y APPRECIATED BY THE LD.CIT(A) FOR ARRIVING AT THE DECISION IN DELETING THE IMPUGNED ADDITIONS MADE ON THIS COUNT, WE DO NOT FIND ANY JUSTIFIABLE REASO N TO INTERFERE WITH THE DECISION OF THE LD.CIT(A) AND THE SAME IS UPHELD. RESULTANTL Y, GROUND NO. 3 IS DISMISSED. FURTHER, FOR ASSESSMENT YEAR 2009-10 IN ITA NO. 447 4/MUM/2012 DATED 28TH FEBRUARY, 2014, THE TRIBUNAL FOLLOWED THE DECISION IN ASSESSEE COMPANYS OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO. 772/MUM/ 2012 DATED 31ST JANUARY, 2014. SIMILARLY, FOR THE ASSESSMENT YEAR 2010-11 IN ITA N O. 2221/MUM/2014 DATED 12TH APRIL, 2016, THE TRIBUNAL AGAIN FOLLOWED ITS DECISI ON FOR THE ASSESSMENT YEAR 2008-09 AND 2009-10 IN ITA NO 772/MUM/2012 DATED 31-01-2014 AND ITA NO. 2221/MUM/2014 DATED 12-04-2016 AND DISMISSED THE AP PEAL OF THE REVENUE. ITA NO.5584/M/2015 - M/S HARINAGAR SUGAR MILLS LTD. 6 5. WE HAVE OBSERVED THAT THE GROUND NO. 1 IN THE IN STANT APPEAL IS IDENTICAL TO THE GROUND RAISED IN THE APPEAL FOR ASSESSMENT YEARS 20 08-09 AND 2009-10 WHICH WAS ALSO ALLOWED BY LEARNED CIT(A) IN THE INSTANT ASSESSMENT YEAR FOLLOWING THE AFORE-STATED DECISIONS OF THE TRIBUNAL IN ASSESSEE COMPANYS OWN CASE FOR THE ASSESSMENT YEAR 2008-09 AND 2009-10, HENCE, RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO-ORDINATE BENCHES OF THIS TRIBUNAL IN ASSESSEE COMPANYS OWN CASE AS SET OUT ABOVE, WE HOLD THAT THE CAPITAL SUBSIDY RECEIVED UNDER THE BIHAR I NCENTIVE PACKAGE 2006 IS NOT REQUIRED TO BE DEDUCTED FROM WDV OF PLANT AND MACHI NERY AND WE DISMISS GROUND NO 1 RAISED BY THE REVENUE. WE ORDER ACCORDINGLY. 6. FURTHER, WE HAVE OBSERVED THAT THE ASSESSEE COMP ANY DURING THE PREVIOUS YEAR RELEVANT TO THE INSTANT ASSESSMENT YEAR RECEIVED RE IMBURSEMENT OF COMMERCIAL TAXES(VAT) ON MOLASSES UNDER BIHAR INCENTIVE PACKAG E 2006 AMOUNTING TO RS.43,89,465/- FOR SETTING UP DISTILLERY UNIT. THE ASSESSEE COMPANY HAS ESTABLISHED THE DISTILLERY UNIT IN FINANCIAL YEAR 2007-08. THE GOV ERNMENT OF BIHAR HAS FORMULATED THE INCENTIVE SCHEME TO PROMOTE ESTABLISHMENT OF NEW UN ITS AND FOR EXPANSION OF CAPACITY OF EXISTING UNITS. AS PER THIS SCHEME, THE DISTILL ERY IS ENTITLED FOR REIMBURSEMENT OF COMMERCIAL TAXES (VAT) PAID ON PURCHASE OF MOLASSES FOR PRODUCTION OF ALCOHOL AND THE SAID BENEFIT WILL BE AVAILABLE FOR FIVE YEARS F ROM THE DATE OF ESTABLISHMENT OF DISTILLERY UNIT. THE ASSESSEE COMPANY HAD EXPANDED ITS CAPACITY IN THE FINANCIAL YEAR 2006-07 UNDER THIS SCHEME AND THE SUGAR MILLS ARE E NTITLED FOR REIMBURSEMENT OF EXCISE DUTY ON ADDITIONAL SUGAR PRODUCED DUE TO EXP ANSION OF THE CAPACITY. THIS BENEFIT IS AVAILABLE FOR FIVE YEARS FROM THE DATE O F EXPANSION OF THE CAPACITY OF THE PLANT AND THE ASSESSEE COMPANY HAD RECEIVED SUBSIDY OF REIMBURSEMENT OF EXCISE DUTY IN ASSESSMENT YEARS 2008-09 AND 2009-10 AND SUBSIDY BY WAY OF REIMBURSEMENT OF COMMERCIAL TAX PAID ON MOLASSES IN THE ASSESSMENT Y EAR 2010-11 AND THE SAME WAS NOT OFFERED FOR TAX IN ASSESSMENT YEARS 2008-09, 20 09-10 AND 2010-11 WHICH WERE CONSIDERED AS REVENUE RECEIPTS BY THE AO. THE TRIB UNAL HAS ALREADY HELD THAT REIMBURSEMENT OF SUBSIDY BY WAY OF EXCISE DUTY IS A CAPITAL RECEIPT VIDE TRIBUNALS ORDERS IN ASSESSEE COMPANYS OWN CASE IN ITA NO. 77 2/MUM/2012 DATED 31.01.2014 FOR ASSESSMENT YEAR 2008-09, ITA NO. 4474/MUM/2012 VIDE ORDERS DATED 28-02-2014 FOR ASSESSMENT YEAR 2009-10 AND ITA NO. 2221/MUM/20 14 FOR ASSESSMENT YEAR 2010- 11. THE DECISION OF THE TRIBUNAL IN ITA NO. 772/MUM /2012 IS REPRODUCED HEREUNDER: 3. IN GROUND NO. 2 THE REVENUE HAS AGITATED THE AC TION OF THE LD.CIT(A) IN TREATING THE SUBSIDY RECEIVED AS EXCISE DUTY REIMBU RSEMENT IS NOT A REVENUE RECEIPT. 3.1 BRIEFLY STATED, THE ASSESSEE COMPANY HAD RECEIV ED SUBSIDY OF RS.2,26,70,311/- BY WAY OF REIMBURSEMENT OF EXCISE DUTY UNDER THE 'BIHAR INCENTIVE PACKAGE 2006' WHICH THE ASSESSEE COMPANY TREATED AS CAPITAL RECEIPT. HOWEVER, IN THE ASSESSMENT FRAMED, THE AO TREATED T HE SAME AS REVENUE RECEIPT. ACCORDING TO THE AO, THE SUBSIDY IN THE FORM OF REI MBURSEMENT OF EXCISE DUTY WENT ON TO REDUCE THE COST OF THE ASSESSEE AND THE PAYMENT OF EXCISE DUTY FORMS PART OF P&L ACCOUNT, THE PAYMENT OF WHICH HAD TO BE TREATED AS REVENUE RECEIPT/REVENUE EXPENSE. ACCORDINGLY, THE AO TREATE D THE IMPUGNED AMOUNT AS REVENUE RECEIPT AND THEREBY MADE AN ADDITION OF RS. 2,26,70,311/- TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD.CIT(A) DE LETED THE IMPUGNED ADDITION AS THE INCENTIVE SCHEME WAS FORMULATED BY THE GOVER NMENT OF BIHAR FOR ATTRACTING CAPITAL INCENTIVE AND TO ENCOURAGE SETTI NG UP THE INDUSTRY/EXPAND THE ITA NO.5584/M/2015 - M/S HARINAGAR SUGAR MILLS LTD. 7 UNIT. THE LD.CIT(A) IN HIS ORDER, RELIED ON VARIOUS DECISIONS WHERE IT HAS BEEN HELD THAT WHEN THE SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE IN SETTING UP THE NEW UNIT OR TO EXPAND THE EXISTING UNIT, THEN THE RECEI PT OF THE SUBSIDY IS ON CAPITAL ACCOUNT. AGGRIEVED BY THE IMPUGNED DECISION THE REV ENUE HAS RAISED THIS GRANTED IN THE APPEAL BEFORE US. 3.2 BEFORE US, THE LD. DR HAS CONTENDED THAT THE RE IMBURSEMENT OF THE EXCISE DUTY HAS TO BE TREATED AS REVENUE RECEIPT BY RELYIN G ON THE ORDER OF THE AO. ON THE OTHER HAND, THE LD.SENIOR COUNSEL FOR THE ASSES SEE HAS ARGUED THAT THE LD.CIT(A) HAS CORRECTLY DELETED THE IMPUGNED ADDITI ON BY TREATING THE REIMBURSEMENT OF EXCISE DUTY AS CAPITAL IN NATURE B Y RELYING ON THE DECISIONS OF THE HON'BLE APEX COURT IN THE CASES OF MEPCO INDUST RIES LTD. VS. CIT 319 ITR 208, CIT VS. PONNI SUGARS AND CHEMICALS LTD. 306 IT R 392, THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS RASOI LTD . 335 ITR 438 (CAL), THE DECISION OF THE HIGH COURT OF GUJARAT IN THE CASE O F CIT VS. TRIPTI MENTHOL INDUSTRIES 35 TAXMANN.COM 515 (GUJARAT) AND THE DEC ISION OF THE J&K HIGH COURT IN THE CASE OF SHREE BALAJI ALLOYS VS. CIT 33 3 ITR 335 (J&K). 3.3 WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD. IT IS NOT DISPUTED THAT THE SUBSIDY SCHEME FORMULATED BY THE GOVERNMENT OF BIHAR IS FOR THE PURPOSE OF ATTRACTING CAPITAL INVESTMENT AND TO ENCOURAGE SETTING UP THE INDUSTRY/EXPAND THE EXISTING UNIT. IT IS PERTINENT TO MENTION THAT THE CHARACTER OF A SUBSIDY IN THE HANDS OF THE ASSESSEE HAS TO BE DE TERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. THE POINT O F TIME AT WHICH THE SUBSIDY IS PAID AND THE SOURCE OR THE FORMS OF SUBSIDY ARE IMM ATERIAL. IF THE OBJECT OF THE THE SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE IN SET TING UP THE NEW UNIT OR TO EXPAND THE EXISTING UNIT, THEN THE RECEIPT OF THE S UBSIDY IS TO BE TREATED ON CAPITAL ACCOUNT. THIS ESTABLISHED POSITION OF LAW H AS BEEN RECOGNISED BY VARIOUS JUDICIAL PRONOUNCEMENTS WHICH HAVE BEEN RELIED BY T HE LD.CIT(A) IN HIS ORDER AND ALSO THE DECISIONS RELIED ON BY THE LD.COUNSEL FOR THE ASSESSEE AS AFOREMENTIONED. IN VIEW OF THAT MATTER WE DO NOT FI ND INFIRMITY IN THE DECISION OF THE LD.CIT(A) IN DELETING THE IMPUGNED ADDITION MAD E BY THE AO AND THUS THE ORDER OF THE LD.CIT(A) ON THIS COUNT IS UPHELD. GRO UND NO. 2 IS DISMISSED. IN THE INSTANT ASSESSMENT YEAR, THE ASSESSEE COMPA NY HAS RECEIVED SUBSIDY BY WAY OF REIMBURSEMENT OF COMMERCIAL TAXES(VAT) PAID UNDER B IHAR INCENTIVE SCHEME 2006 OF RS.43,89,465/- ON PURCHASE OF MOLASSES. IT IS NO T DISPUTED THAT THE SUBSIDY SCHEME FORMULATED BY THE GOVERNMENT OF BIHAR IS FOR THE PU RPOSE OF ATTRACTING CAPITAL INVESTMENT AND TO ENCOURAGE SETTING UP THE INDUSTRY /EXPAND THE EXISTING UNIT. IT IS PERTINENT TO MENTION THAT THE CHARACTER OF A SUBSID Y IN THE HANDS OF THE TAX-PAYER HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. THE POINT OF TIME AT WHICH THE SUBSIDY IS PAID AND THE SOURCE OR THE FORMS OF SUBSIDY ARE IMMATERIAL. IF THE OBJECT OF THE SUBSIDY SCHEME IS TO ENABLE THE TAX-PAYER IN SETTING UP THE NEW UNIT OR TO EXPAND THE EXISTING UNIT, THEN T HE RECEIPT OF THE SUBSIDY IS TO BE TREATED ON CAPITAL ACCOUNT. WE HAVE OBSERVED THAT T HE LEARNED CIT(A) HAS ALSO ALLOWED THE CLAIM OF THE ASSESSEE COMPANY IN TREATING REIMB URSEMENT OF COMMERCIAL TAXES(VAT) BASED UPON THE DECISION OF THE TRIBUNAL FOR EARLIER YEARS WITH RESPECT TO THE REIMBURSEMENT OF EXCISE DUTY HOLDING THAT THE S UBSIDY RECEIVED BY THE ASSESSEE BY WAY OF REIMBURSEMENT OF COMMERCIAL TAXES(VAT) IS FO R SETTING UP OF A NEW UNIT/EXPANSION OF EXISTING UNIT AND IS A CAPITAL RE CEIPT NOT EXIGIBLE TO TAX. WE HAVE OBSERVED THAT THE REIMBURSEMENT OF COMMERCIAL TAXES (VAT) ON PURCHASE OF MOLASSES ITA NO.5584/M/2015 - M/S HARINAGAR SUGAR MILLS LTD. 8 UNDER BIHAR INCENTIVE PACKAGE 2006 IS GIVEN TO PROM OTE ESTABLISHMENT OF NEW UNITS AND FOR EXPANSION OF CAPACITY OF EXISTING UNITS. A S PER THIS SCHEME, THE DISTILLERY IS ENTITLED FOR REIMBURSEMENT OF COMMERCIAL TAXES (VAT ) PAID ON PURCHASE OF MOLASSES FOR PRODUCTION OF ALCOHOL AND THE SAID BENEFIT WILL BE AVAILABLE FOR FIVE YEARS FROM THE DATE OF ESTABLISHMENT OF DISTILLERY UNIT. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) WITH RESPECT TO THIS IS SUE ALSO AS THIS SCHEME OF REIMBURSEMENT OF COMMERCIAL TAXES(VAT) ON PURCHASE OF MOLASSES UNDER BIHAR INCENTIVE PACKAGE 2006 IS SIMILAR TO SCHEME OF REIM BURSEMENT OF EXCISE DUTY UNDER BIHAR INCENTIVE PACKAGE 2006 AND WE HOLD THAT THIS IS A CAPITAL RECEIPT WHICH IS NOT CHARGEABLE TO TAX. WE ORDER ACCORDINGLY. 7. WITH RESPECT TO GROUND NO. 3, WE HAVE OBSERVED T HAT THE TRIBUNAL HAS TAKEN CONSISTENT VIEW IN THE PRECEDING ASSESSMENT YEARS I N THE DECISIONS OF THE TRIBUNAL IN ASSESSEE COMPANYS OWN CASE IN ITA NO. 772/MUM/2012 DATED 31.01.2014 FOR THE ASSESSMENT YEAR 2008-09, ITA NO. 4474/MUM/2012 VIDE ORDERS DATED 28-02-2014 FOR THE ASSESSMENT YEAR 2009-10 AND ITA NO. 2221/MUM/20 14 VIDE ORDERS DATED 12-04- 2016 FOR THE ASSESSMENT YEAR 2010-11, THAT AO IS NO T ENTITLED TO ADD THE CAPITAL SUBSIDY AND EXCISE DUTY REIMBURSEMENTS RECEIVED BY THE ASSESSEE COMPANY UNDER BIHAR INCENTIVE PACKAGE 2006 TO THE BOOK PROFIT COM PUTED U/S. 115JB OF THE ACT. THE DECISION OF THE TRIBUNAL IN ITA NO. 772/MUM/2012 FO R THE ASSESSMENT YEAR 2008-09 IS REPRODUCED HEREUNDER: 4.1 HAVING HEARD BOTH THE SIDES AND PERUSED THE MA TERIAL ON RECORD, IT IS NOTED THAT THE ISSUE RAISED IN THIS GROUND IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT IN THE CA SE OF APOLLO TYRES LTD. VS. CIT 250 ITR 273, WHEREIN IT HAS BEEN HELD THAT THE AO WHILE COMPUTING THE INCOME UNDER SECTION 115J HAS ONLY THE POWER TO EXA MINE WHETHER THE BOOKS OF ACCOUNT ARE CERTIFIED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAINTAINED IN ACCORDANCE WITH THE SAID ACT . THE AO, THEREAFTER, HAS THE LIMITED POWER OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. TO PUT IT DIFFEREN TLY THE AO DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWS IN T HE P&L ACCOUNT EXCEPT TO THE EXTENT PROVIDED FOR THE EXPLANATION OF SECTION 115J . ALSO, IT IS NOTED THAT WHILE DECIDING GROUNDS NO. 1 & 2 IN RESPECT OF THE ADDITI ONS UNDER NORMAL PROVISIONS OF THE INCOME IN RESPECT OF TREATMENT OF THE SAID S UBSIDY, WE CONFIRMED THE DELETIONS MADE BY THE LD.CIT (A) AND HENCE THE ADDI TIONS MADE IN COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB IS NOT SUSTAINAB LE. SINCE, THE FACTS AND POSITION OF LAW AS AFOREMENTIONED HAS BEEN CORRECTL Y APPRECIATED BY THE LD.CIT(A) FOR ARRIVING AT THE DECISION IN DELETING THE IMPUGNED ADDITIONS MADE ON THIS COUNT, WE DO NOT FIND ANY JUSTIFIABLE REASO N TO INTERFERE WITH THE DECISION OF THE LD.CIT(A) AND THE SAME IS UPHELD. RESULTANTL Y, GROUND NO. 3 IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR PRECEDING ASSESSMENT YEARS AS SET OUT ABOVE, WE HO LD THAT AO IS NOT ENTITLED TO ADD CAPITAL SUBSIDY AND REIMBURSEMENT OF COMMERCIAL TAX ES(VAT) TO THE BOOK PROFIT U/S 115JB OF THE ACT. WE MAY CLARIFY THAT WE HAVE ALREA DY HELD THE REIMBURSEMENT OF COMMERCIAL TAXES(VAT) RECEIVED UNDER BIHAR INCENTIV E PACKAGE 2006 BEING CAPITAL RECEIPTS NOT EXIGIBLE TO TAX IN PRECEDING PARAS OF THIS ORDER. WE ORDER ACCORDINGLY. ITA NO.5584/M/2015 - M/S HARINAGAR SUGAR MILLS LTD. 9 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N ITA N0. 5675/MUM/2014 FOR THE ASSESSMENT YEAR 2011-12 IS DISMISSED AS INDICATED A BOVE. 4. IN VIEW OF THE ABOVE REFEREED DECISION OF CO-ORDIN ATE BENCH ON IDENTICAL GROUND OF APPEAL ON SIMILAR FACTS, AND RESPECTFULLY FOLLOW ING THE DECISION OF CO-ORDINATE BENCH, THE APPEAL OF THE REVENUE IS DISMISSED. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DAY OF SEPTEMBER 2017. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 18 /09/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/