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

ITA 5675/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2858 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 09-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KUMAR SINGH
• Assessee Lawyers: JAYESH DESAI
• Keywords: Depreciation; Capital receipt
• Section: 143(3); 115JB; 11

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 5675 /MUM/2014 ( / ASSESSMENT YEAR : 2011-12) DY. COMMISSIONER OF INCOME TAX - 4(2), ROOM NO. 642, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / V. M/S HARINAGAR SUGAR MILLS LTD., WORLD TRADE CENTRE, CENTRE NO. 1, 10 TH FLOOR, CUFFE PARADE, COLABA, MUMBAI- 400 005. ./ PAN : AAACH2831H ( / APPELLANT ) .. ( / RESPONDENT ) REVENUE BY SHRI AMIT KUMAR SINGH ,DR ASSESSEE BY : SHRI JAYESH DESAI / DATE OF HEARING : 30-03-2016 / DATE OF PRONOUNCEMENT : 22-06-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE REVENUE, BEING ITA NO. 5 675/MUM/2014, IS DIRECTED AGAINST THE APPELLATE ORDERS DATED 21-07-2 014 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 8, MUMBAI (HE REINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2011-12, THE APPE LLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDE R DATED 27-12-2013 PASSED BY THE LEARNED ASSESSING OFFICER (HEREINAFTE R CALLED THE AO) U/S 143(3) OF THE INCOME TAX ACT,1961 (HEREINAFTER CALL ED THE ACT). ITA 5675/MUM/2014 2 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN T HE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN STATING THAT THE CAPITAL SUBSIDY RE CEIVED 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 AN D IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT SUBSIDY RECEIVED BY THE WAY OF REIMBURSEMENT OF COMMERCIAL TAX (VAT) IS NOT A REVEN UE RECEIPT ? 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD.CIT(A) ERRED IN DIRECTING THE AO TO DELETE THE ADDI TION MADE TO BOOK PROFITS ON ACCOUNT OF EXCESS DEPRECIATION AND SUBSIDY RECEIVED BY THE WAY OF REIMBURSEMENT OF COMMERCIAL TAX (VAT) ? 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF SUGAR, ALCOHOL, BI SCUIT AND WIND ENERGY. THE ASSESSEE COMPANY ALSO OWN SUGARCANE FARMS IN WH ICH THE SUGAR CANE IS GROWN AND WHICH IS CONSUMED BY THE SUGAR MILLS OF T HE 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 MAC HINERIES AND EQUIPMENTS AND SUBSIDY OF RS. 2,26,70,311/- BY WAY OF REIMBURS EMENT OF EXCISE DUTY UNDER BIHAR INCENTIVE PACKAGE 2006 FOR UNDERTAKIN G EXPANSION OF ITS CAPACITY FROM 8500 TCD TO 10000 TCD IN THE PREVIOUS YEAR 2007-08 (ASSESSMENT YEAR 2008-09). THE ASSESSEE COMPANY HA S 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. 4,11,43,000/- BEING 10% OF INVESTMENT IN MACHINERY AND EQUIPMENTS WAS R EDUCED FROM THE COST OF PLANT AND MACHINERY AND PROPORTIONATE DEPRECIATI ON WAS DISALLOWED , AND ITA 5675/MUM/2014 3 ALSO SUBSIDY OF RS. 2,26,70,311/- BY WAY OF REIMBUR SEMENT OF EXCISE DUTY WAS TREATED AS REVENUE IN NATURE AND ADDED TO THE I NCOME 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. OBSERV ED THAT THE ASSESSEE COMPANY HAD RECEIVED CAPITAL SUBSIDY OF RS. 3 CRORE S 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 EXC ISE DUTY UNDER BIHAR INCENTIVE PACKAGE 2006 FOR UNDERTAKING EXPANSION OF ITS CAPACITY FROM 8500 CTD TO 10000 TCD IN THE PREVIOUS YEAR 2008-09 (ASSE SSMENT YEAR 2009-10). AGAIN, THE AO HELD THAT CAPITAL SUBSIDY OF RS. 3 CR ORES BEING 10% OF INVESTMENT IN MACHINERIES AND EQUIPMENTS IS TO BE REDUCED FROM THE COST OF PLANT & MACHINERY AND PROPORTIONATE DEPRECIATION WA S DISALLOWED AND SUBSIDY OF RS. 4,13,51,468/- BY WAY OF REIMBURSEMEN T OF EXCISE DUTY WAS TREATED AS REVENUE IN NATURE AND WAS ADDED BY THE A O TO THE TOTAL INCOME OF THE ASSESSEE COMPANY FOR THE ASSESSMENT YEAR 2009- 10 VIDE 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 F OR THE ASSESSMENT YEAR 2008-09 VIDE ORDERS DATED 31 ST JANUARY, 2014 HELD THAT CAPITAL SUBSIDY BEING 10% OF INVESTMENT IN MACHINERIES AND EQUIPMENTS IS NOT REQUIRED TO BE DEDUCTED FROM THE COST OF PLANT AND MACHINERY AND A LSO THE SUBSIDY RECEIVED AS EXCISE DUTY REIMBURSEMENT CANNOT BE TAKEN AS REV ENUE RECEIPT AND THE A.O. IS NOT ENTITLED TO ADD THE ABOVE TWO ITEMS TO THE BOOK PROFIT COMPUTED U/S 115JB OF THE ACT. THE RELEVANT 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 PACKAG E RESOLUTION OF THE BIHAR GOVERNMENT DATED 12.09.2006 INDICATES THAT TH E OBJECT OF THE SAID SCHEME IS FOR THE DEVELOPMENT OF SUGAR INDUSTRY IN THE STATE AND ITA 5675/MUM/2014 4 ESTABLISHMENT OF NEW SUGAR MILLS, ESTABLISHMENT OF CO-INDUSTRIES BASED ON SUGARCANE AND TO SUPPLEMENT THE EFFORTS IN EXPAN DING CAPACITY OF PRESENT SUGAR MILLS, AND IN ORDER TO SOLVE THE PROB LEM OF ADDITIONAL FINANCIAL LOAD FACED BY THE INVESTORS AND IN ORDER TO MINIMIZE THE BURDEN ON THEM THE SURPLUS FUNDS SO GENERATED BY THE STATE INCENTIVE POLICY 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 TH E NEW INDUSTRIAL POLICY OF THE STATE, UNDER THE PROVISIONS OF ATTRACTING CA PITAL INVESTMENT FOR TECHNICAL DEVELOPMENT AND EXPANSION OF CAPACITY OF THE SUGAR FACTORY AS WELL AS FOR THE ESTABLISHMENT OF NEW SUGAR MILLS, A PPROVAL OF A PLANNED SUGAR INDUSTRY INCENTIVE PACKAGE WAS DISCUSSED SO THAT THE ENTREPRENEURS OF THE PRIVATE SECTOR COULD BE ATTRAC TED FOR THE ESTABLISHMENT OF SUGAR INDUSTRY AND OTHER INDUSTRIE S BASED ON SUGARCANE OR SUGARCANE JUICE COULD BE ATTRACTED AND WORKING/ INSTALLED SUGAR MILLS ALSO MAY EXPAND THEIR CAPACITY AND MAY ESTABLISH OTHER INDUSTRIES 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 S AID GUIDELINES ISSUED BY THE BIHAR GOVERNMENT INDICATES THAT THE SUBSIDY IS GRANTED WITH THE OBJECT OF INCENTIVE FOR THE ENTREPRENEURS TO ESTABL ISH SUGAR INDUSTRY/EXPAND THE CAPACITY IN THE STATE OF BIHAR AND THUS THE SAID SUBSIDY IS GIVEN FOR SETTING UP OF INDUSTRY OR EXPA NSION OF INDUSTRY IN THE STATE OF BIHAR. WE CONCUR WITH THE SAID OBSERVATION OF THE LD.CIT(A) THAT THE SAID SUBSIDY IS GIVEN FOR SETTING UP OF INDUSTR Y 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 SUBS IDY IS GRANTED AS PERCENTAGE OF FIXED CAPITAL COST TAKEN AS BASIS FOR DETERMINING THE SUBSIDY THAT WOULD ONLY BE A MEASURE ADOPTED UNDER THE SCHEME TO QUANTIFY SUBSIDY, THE SAME COULD NOT BE CONSIDERED AS A PAYMENT DIRECTLY OR INDIRECTLY TO MEET ANY PORTION OF THE A CTUAL COST. THE SAME VIEW HAS BEEN FOLLOWED BY THE TRIBUNAL IN A SUBSEQU ENT CASE, NAMELY M/S. GODREJ AGROVET LTD. (SUPRA), THE ORDER TO WHIC H 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 DECISION OF THE TRIBUNAL, THE REVENUE HAS NOT DISPUTED THE DECISION OF THE TRIBUNAL IN THE APPEAL BEFORE THE HONBLE HIGH COURT. THIS SUGGESTS THAT THE REVENUE HAS ACCEPTED THE DECISION OF THE TRIBUNAL IN THE SA ID CASE. THE HONBLE APEX COURT, IN THE CASE OF P.J. CHEMICALS LTD. (SUP RA), HAS HELD THAT THE EXPRESSION ACTUAL COST IN SECTION 43(1) OF THE IN COME TAX ACT NEEDS TO BE INTERPRETED LIBERALLY AND SUBSIDY DOES NOT PARTAKE THE INCIDENTS WHICH ATTRACT THE CONDITIONS FOR ITS DEDUCTIBILITY FROM A CTUAL COST. THE AMOUNT OF SUBSIDY IS NOT TO BE DEDUCTED FROM THE ACTUAL COST AND SECTION 43(1) FOR THE PURPOSE OF CALCULATION OF DEPRECIATION. ALSO, T HE TRIBUNAL IN THE CASE OF INVENTAA CHEMICAL LTD (SUPRA) HAS HELD THAT IF P AYMENT OF SUBSIDY IS NOT RELATED TO ACTUAL ACQUISITION OF ASSETS AND SUB SIDY IS GRANTED ON ITA 5675/MUM/2014 5 CAPITAL INVESTMENT ON LAND, BUILDING AND MACHINERY, SUCH SUBSIDY 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 CAPITAL SUBSIDY OF RS.4,11,43,000/ - RECEIVED BY THE ASSESSEE COMPANY UNDER BIHAR INCENTIVE PACKAGE 200 6 FOR UNDERTAKING EXPANSION OF ITS CAPACITY FROM 8500 TCD TO 10000 TC D CANNOT BE DEDUCTED FROM WDV OF PLANT AND MACHINERY. SINCE THE LD.CIT(A) HAS CORRECTLY APPRECIATED THE FACTS AND THE POSITION OF LAW AFOREMENTIONED FOR REVERSING THE ORDER OF THE AO, WE DO NOT FIND ANY I NFIRMITY IN THE DECISION OF THE LD.CIT(A) ON THIS COUNT AND THUS 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 INVE STMENT AND TO ENCOURAGE SETTING UP THE INDUSTRY/EXPAND THE EXISTING UNIT. I T IS PERTINENT TO MENTION THAT THE CHARACTER OF A SUBSIDY IN THE HAND S OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WH ICH THE SUBSIDY IS GIVEN. THE POINT OF TIME AT WHICH THE SUBSIDY IS PA ID AND THE SOURCE OR THE FORMS OF SUBSIDY ARE IMMATERIAL. IF THE OBJECT OF THE SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE IN SETTING UP THE NEW UNI T OR TO EXPAND THE EXISTING UNIT, THEN THE RECEIPT OF THE SUBSIDY IS T O 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.CO UNSEL FOR THE ASSESSEE AS AFOREMENTIONED. IN VIEW OF THAT MATTER WE DO NOT FIND INFIRMITY IN THE DECISION OF THE LD.CIT(A) IN DELETING THE IMPUGNED ADDITION MADE BY THE AO AND THUS THE ORDER OF THE LD.CIT(A) ON THIS COUN T IS UPHELD. GROUND 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 SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE APEX CO URT IN THE CASE OF APOLLO TYRES LTD. VS. CIT 250 ITR 273, WHEREIN IT H AS BEEN HELD THAT THE AO WHILE COMPUTING THE INCOME UNDER SECTION 115J H AS ONLY THE POWER TO EXAMINE WHETHER THE BOOKS OF ACCOUNT ARE CERTIFI ED BY THE AUTHORITIES ITA 5675/MUM/2014 6 UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAI NTAINED IN ACCORDANCE WITH THE SAID ACT. THE AO, THEREAFTER, H AS THE LIMITED POWER OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. TO PUT IT DIFFERENTLY THE AO DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWS IN THE P&L ACCOUN T 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 SUBSIDY, WE CONFIRMED THE DELETIONS MADE BY THE LD.CIT (A) AND HENCE THE ADDITIONS MADE IN COMPUTATION OF BOOK PROFIT UNDER SECTION 11 5JB IS NOT SUSTAINABLE. SINCE, THE FACTS AND POSITION OF LAW A S AFOREMENTIONED HAS BEEN CORRECTLY APPRECIATED BY THE LD.CIT(A) FOR ARR IVING AT THE DECISION IN DELETING THE IMPUGNED ADDITIONS MADE ON THIS COUNT, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH THE DECISION O F THE LD.CIT(A) AND THE SAME IS UPHELD. RESULTANTLY, GROUND NO. 3 IS DISMIS SED. FURTHER, FOR ASSESSMENT YEAR 2009-10 IN ITA NO. 447 4/MUM/2012 DATED 28 TH 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 31 ST JANUARY, 2014. SIMILARLY , FOR THE ASSESSMENT YEA R 2010-11 IN ITA NO. 2221/MUM/2014 DATED 12 TH APRIL, 2016, THE TRIBUNAL AGAIN FOLLOWED ITS DECISION FOR THE ASSESSMENT YEAR 2008-09 AND 2009-1 0 IN ITA NO 772/MUM/2012 DATED 31-01-2014 AND ITA NO. 2221/MUM/ 2014 DATED 12- 04-2016 AND DISMISSED THE APPEAL OF THE REVENUE. 5. WE HAVE OBSERVED THAT THE GROUND NO. 1 IN THE IN STANT APPEAL IS IDENTICAL TO THE GROUND RAISED IN THE APPEAL FOR AS SESSMENT YEARS 2008-09 AND 2009-10 WHICH WAS ALSO ALLOWED BY LEARNED CIT(A ) IN THE INSTANT ASSESSMENT YEAR FOLLOWING THE AFORE-STATED DECISION S 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 INCENTIVE 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 ACCORDI NGLY. ITA 5675/MUM/2014 7 6. FURTHER, WE HAVE OBSERVED THAT THE ASSESSEE COMP ANY DURING THE PREVIOUS YEAR RELEVANT TO THE INSTANT ASSESSMENT YE AR RECEIVED REIMBURSEMENT OF COMMERCIAL TAXES(VAT) ON MOLASSES UNDER BIHAR IN CENTIVE PACKAGE 2006 AMOUNTING TO RS.43,89,465/- FOR SETTING UP DISTILLE RY UNIT . THE ASSESSEE COMPANY HAS ESTABLISHED THE DISTILLERY UNIT IN FINA NCIAL YEAR 2007-08. THE GOVERNMENT OF BIHAR HAS FORMULATED THE INCENTIVE SC HEME TO PROMOTE ESTABLISHMENT OF NEW UNITS AND FOR EXPANSION OF CAP ACITY OF EXISTING UNITS. AS PER THIS SCHEME, THE DISTILLERY IS ENTITLED FOR REI MBURSEMENT OF COMMERCIAL TAXES (VAT) PAID ON PURCHASE OF MOLASSES FOR PRODUC TION OF ALCOHOL AND THE SAID BENEFIT WILL BE AVAILABLE FOR FIVE YEARS FROM 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 SU GAR MILLS ARE ENTITLED FOR REIMBURSEMENT OF EXCISE DUTY ON ADDITIONAL SUGAR PR ODUCED DUE TO EXPANSION OF THE CAPACITY. THIS BENEFIT IS AVAILABLE FOR FIV E YEARS FROM THE DATE OF EXPANSION OF THE CAPACITY OF THE PLANT AND THE ASSE SSEE COMPANY HAD RECEIVED SUBSIDY OF REIMBURSEMENT OF EXCISE DUTY IN ASSESSME NT YEARS 2008-09 AND 2009-10 AND SUBSIDY BY WAY OF REIMBURSEMENT OF COMM ERCIAL TAX PAID ON MOLASSES IN THE ASSESSMENT YEAR 2010-11 AND THE SAM E WAS NOT OFFERED FOR TAX IN ASSESSMENT YEARS 2008-09, 2009-10 AND 2010-1 1 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. 772/MUM/2012 DATED 31.01.2014 FOR ASSESSMENT YEAR 2008-09, ITA N O. 4474/MUM/2012 VIDE ORDERS DATED 28-02-2014 FOR ASSESSMENT YEAR 20 09-10 AND ITA NO. 2221/MUM/2014 FOR ASSESSMENT YEAR 2010-11. THE DECI SION 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. ITA 5675/MUM/2014 8 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 THE SAME AS REVENUE RECEIPT. ACCORDING TO THE AO, THE SUBSIDY I N THE FORM OF REIMBURSEMENT OF EXCISE DUTY WENT ON TO REDUCE THE COST OF THE ASSESSEE AND THE PAYMENT OF EXCISE DUTY FORMS PART OF P&L ACCOUNT, T HE PAYMENT OF WHICH HAD TO BE TREATED AS REVENUE RECEIPT/REVENUE EXPENSE. A CCORDINGLY, THE AO TREATED THE IMPUGNED AMOUNT AS REVENUE RECEIPT AND THEREBY MADE AN ADDITION OF RS.2,26,70,311/- TO THE TOTAL INCOME OF THE ASSESSE E. ON APPEAL, THE LD.CIT(A) DELETED THE IMPUGNED ADDITION AS THE INCENTIVE SCHE ME WAS FORMULATED BY THE GOVERNMENT OF BIHAR FOR ATTRACTING CAPITAL INCENTIV E AND TO ENCOURAGE SETTING UP THE INDUSTRY/EXPAND THE UNIT. THE LD.CIT(A) IN H IS ORDER, RELIED ON VARIOUS DECISIONS WHERE IT HAS BEEN HELD THAT WHEN THE SUBS IDY SCHEME IS TO ENABLE THE ASSESSEE IN SETTING UP THE NEW UNIT OR TO EXPAND TH E EXISTING UNIT, THEN THE RECEIPT OF THE SUBSIDY IS ON CAPITAL ACCOUNT. AGGRI EVED BY THE IMPUGNED DECISION THE REVENUE 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 IND USTRIES 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 ITA 5675/MUM/2014 9 OF A SUBSIDY IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. THE POI NT OF TIME AT WHICH THE SUBSIDY IS PAID AND THE SOURCE OR THE FORMS OF SUBS IDY ARE IMMATERIAL. IF THE OBJECT OF THE THE SUBSIDY SCHEME IS TO ENABLE THE A SSESSEE IN SETTING UP THE NEW UNIT OR TO EXPAND THE EXISTING UNIT, THEN THE RECEI PT OF THE SUBSIDY IS TO BE TREATED ON CAPITAL ACCOUNT. THIS ESTABLISHED POSITI ON OF LAW HAS BEEN RECOGNISED BY VARIOUS JUDICIAL PRONOUNCEMENTS WHICH HAVE BEEN RELIED BY THE LD.CIT(A) IN HIS ORDER AND ALSO THE DECISIONS RELIE D ON BY THE LD.COUNSEL FOR THE ASSESSEE AS AFOREMENTIONED. IN VIEW OF THAT MAT TER WE DO NOT FIND INFIRMITY IN THE DECISION OF THE LD.CIT(A) IN DELETING THE IM PUGNED ADDITION MADE BY THE AO AND THUS THE ORDER OF THE LD.CIT(A) ON THIS COUN T IS UPHELD. GROUND NO. 2 IS DISMISSED. IN THE INSTANT ASSESSMENT YEAR, THE ASSESSEE COMPA NY HAS RECEIVED SUBSIDY BY WAY OF REIMBURSEMENT OF COMMERCIAL TAXES(VAT) PA ID UNDER BIHAR INCENTIVE SCHEME 2006 OF RS.43,89,465/- ON PURCHASE OF MOLASSES. IT IS NOT DISPUTED THAT THE SUBSIDY SCHEME FORMULATED BY THE GOVERNMENT OF BIHAR IS FOR THE PURPOSE OF ATTRACTING CAPITAL INVESTMENT AN D TO ENCOURAGE SETTING UP THE INDUSTRY/EXPAND THE EXISTING UNIT. IT IS PERTIN ENT TO MENTION THAT THE CHARACTER OF A SUBSIDY IN THE HANDS OF THE TAX-PAYE R HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY I S 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 U NIT, THEN THE RECEIPT OF THE SUBSIDY IS TO BE TREATED ON CAPITAL ACCOUNT. WE HAV E OBSERVED THAT THE LEARNED CIT(A) HAS ALSO ALLOWED THE CLAIM OF THE ASSESSEE C OMPANY IN TREATING REIMBURSEMENT OF COMMERCIAL TAXES(VAT) BASED UPON T HE DECISION OF THE TRIBUNAL FOR EARLIER YEARS WITH RESPECT TO THE REIM BURSEMENT OF EXCISE DUTY HOLDING THAT THE SUBSIDY RECEIVED BY THE ASSESSEE B Y WAY OF REIMBURSEMENT OF COMMERCIAL TAXES(VAT) IS FOR SETTING UP OF A NEW UN IT/EXPANSION OF EXISTING UNIT AND IS A CAPITAL RECEIPT NOT EXIGIBLE TO TAX. WE HAVE OBSERVED THAT THE ITA 5675/MUM/2014 10 REIMBURSEMENT OF COMMERCIAL TAXES (VAT) ON PURCHASE OF MOLASSES UNDER BIHAR INCENTIVE PACKAGE 2006 IS GIVEN TO PROMOTE ES TABLISHMENT OF NEW UNITS AND FOR EXPANSION OF CAPACITY OF EXISTING UNITS. A S PER THIS SCHEME, THE DISTILLERY IS ENTITLED FOR REIMBURSEMENT OF COMMERC IAL 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 ESTABLISH MENT OF DISTILLERY UNIT. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) WITH RESPECT TO THIS ISSUE ALSO AS THIS SCHEME OF REIMBU RSEMENT OF COMMERCIAL TAXES(VAT) ON PURCHASE OF MOLASSES UNDER BIHAR INCE NTIVE PACKAGE 2006 IS SIMILAR TO SCHEME OF REIMBURSEMENT OF EXCISE DUTY U NDER BIHAR INCENTIVE PACKAGE 2006 AND WE HOLD THAT THIS IS A CAPITAL REC EIPT WHICH IS NOT CHARGEABLE TO TAX. WE ORDER ACCORDINGLY. 7. WITH RESPECT TO GROUND NO. 3 , WE HAVE OBSERVED THAT THE TRIBUNAL HAS TAKEN CONSISTENT VIEW IN THE PRECEDING ASSESSMENT Y EARS IN 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, I TA NO. 4474/MUM/2012 VIDE ORDERS DATED 28-02-2014 FOR THE ASSESSMENT YEA R 2009-10 AND ITA NO. 2221/MUM/2014 VIDE ORDERS DATED 12-04-2016 FOR THE ASSESSMENT YEAR 2010-11 , THAT AO IS NOT ENTITLED TO ADD THE CAPITA L SUBSIDY AND EXCISE DUTY REIMBURSEMENTS RECEIVED BY THE ASSESSEE COMPANY UND ER BIHAR INCENTIVE PACKAGE 2006 TO THE BOOK PROFIT COMPUTED 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 SQ UARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF APOLLO TYRES LTD. VS. CIT 250 ITR 273, WHEREIN IT H AS BEEN HELD THAT THE AO WHILE COMPUTING THE INCOME UNDER SECTION 115J H AS ONLY THE POWER TO EXAMINE WHETHER THE BOOKS OF ACCOUNT ARE CERTIFI ED BY THE AUTHORITIES UNDER THE COMPANIES ACT AS HAVING BEEN PROPERLY MAI NTAINED IN ACCORDANCE WITH THE SAID ACT. THE AO, THEREAFTER, H AS THE LIMITED POWER ITA 5675/MUM/2014 11 OF MAKING INCREASES AND REDUCTIONS AS PROVIDED FOR IN THE EXPLANATION TO THE SAID SECTION. TO PUT IT DIFFERENTLY THE AO DOES NOT HAVE THE JURISDICTION TO GO BEHIND THE NET PROFIT SHOWS IN THE P&L ACCOUN T 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 SUBSIDY, WE CONFIRMED THE DELETIONS MADE BY THE LD.CIT (A) AND HENCE THE ADDITIONS MADE IN COMPUTATION OF BOOK PROFIT UNDER SECTION 11 5JB IS NOT SUSTAINABLE. SINCE, THE FACTS AND POSITION OF LAW A S AFOREMENTIONED HAS BEEN CORRECTLY APPRECIATED BY THE LD.CIT(A) FOR ARR IVING AT THE DECISION IN DELETING THE IMPUGNED ADDITIONS MADE ON THIS COUNT, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WITH THE DECISION O F THE LD.CIT(A) AND THE SAME IS UPHELD. RESULTANTLY, GROUND NO. 3 IS DISMIS SED. 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 COMMERC IAL TAXES(VAT) TO THE BOOK PROFIT U/S 115JB OF THE ACT. WE MAY CLARIFY TH AT WE HAVE ALREADY HELD THE REIMBURSEMENT OF COMMERCIAL TAXES(VAT) RECEIVED UNDER BIHAR INCENTIVE PACKAGE 2006 BEING CAPITAL RECEIPTS NOT EXIGIBLE TO TAX IN PRECEDING PARAS OF THIS ORDER. WE ORDER ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N ITA N0. 5675/MUM/2014 FOR THE ASSESSMENT YEAR 2011-12 IS DI SMISSED AS INDICATED ABOVE . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JUNE, 2016. # $% &' 22-06-2016 ( ) SD/- SD/- (SANJAY GARG) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 22-06-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS ITA 5675/MUM/2014 12 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI H BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI