M/s. Raghuvir Cotton Ginning & Pressing Pvt. Ltd., V. The Assistant Commissioner of Income Tax, Circle-1, RAJKOT-GUJARAT

ITA 618/RJT/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5916 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 12-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT B JHAVERI
• Keywords: Opportunity of being heard; Capital receipt

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI T.K. SHARMA AND SHRI B.R. JAIN ITA NO. 618/RJT/2012 ASSTT. YEAR : 2005-06 PAN : AABCR 4140 G M/S. RAGHUVIR COTTON GINNING & PRESSING (P) LTD. V S. THE ACIT HADAMTALA, TAL: KOTDA SANGANI CIRCLE- 1 RAJKOT RAJKOT (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CHETAN AGARWAL RESPONDENT BY : DR. JAYANT B JHAVERI DATE OF HEARING : 09.01.2014. DATE OF PRONOUNCEMENT : 27.01.2014 ORDER DATE OF ORDER : 27/01/2014. PER B.R. JAIN, A.M. THIS APPEAL BY THE ASSESSEE AGAINST THE ORDER DAT ED 30-08-2012 OF SHRI PREM PRAKASH LD. CIT (APPEALS)-I, RAJKOT IN VARIOUS GROU NDS CHALLENGES THE SUSTENANCE OF ADDITION OF RS. 15.00 LACS ON ACCOUNT OF STATE SUB SIDY AS REVENUE RECEIPT. 2.1 BRIEFLY THE FACTS ARE THAT THE ASSESSEE IS IN B USINESS OF MANUFACTURING AND JOB WORK OF GINNING & PRESSING OF COTTON AND ALLIED ITEMS. D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE VIDE SANCTION LETTER DATED 17-07-2003 RECEIVED AN AMOUNT OF RS. 15.00 LACS AS STATE CASH SUBSIDY UNDER 1995-2000 SCHEME INS/10 95-2000(5)-1 OF 11-09-05 BY COMPANY DISTRICT INDUSTRIES CENTRE, RAJKOT. THE ASS ESSEE CLAIMED THE SAME AS CAPITAL RECEIPT. SINCE THE ASSESSEE WAS NOT ABLE TO JUSTIFY ITS CLAIM BY PRODUCING THE RELEVANT EVIDENCES WITH REGARD TO NATURE AND PURPOSE OF STAT E SUBSIDY SANCTIONED TO IT, THE AO APPLYING THE JUDGEMENT BY HON'BLE APEX COURT IN THE CASE OF SAHNEY STEEL & PRESSING 2 WORKS LTD. VS. CIT, (1997) 228 ITR 253 TREATED THE SAME AS TRADING RECEIPT AND BROUGHT IT TO TAX AS INCOME OF THE YEAR UNDER CONSIDERATION . 2.2 THE LD. CIT(A) VIDE PARA 3.3 OF THE IMPUGNED OR DER REJECTED THE ASSESSEE'S GROUND FOR THE SIMILAR REASONS AS WERE TAKEN BY THE ASSESS ING AUTHORITY. THE OPERATIVE PORTION OF HIS ORDER IS REPRODUCED AS UNDER:- 3.3 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE APPELLA NT. IT IS FOUND THAT THE APPELLANT HAS FAILED TO EXPLAIN THE NATURE OF SUBSIDY RECEIVED FROM GOVERNMENT AUTHORITY AND THE TERMS AN D CONDITIONS OF ITS UTILIZATION. SUBSIDY WAS RECEIVED AFTER COMM ENCEMENT OF BUSINESS. ONUS LIES ON THE APPELLANT TO PROVE THAT SUBSIDY RECEIVED IS CAPITAL IN NATURE AND IT IS NOT GIVEN FOR ASSIST ING IT IN CARRYING OUT THE BUSINESS OPERATION AND IT IS NOT GIVEN AFTER CO MMENCEMENT OF PRODUCTION. RELIANCE IS PLACED ON SAHNEY STEEL & PR ESSING WORKS LTD. VS. CIT, 228 ITR 253; RAJARAM MAIZE PRODUCTS 2 51 ITR 427 (SC); CIT VS. S. KUMAR TYRE MFG. CO. 226 ITR 325 (M AD); CIT VS. VARINDER AGRO CHEMICALS LTD. 290 ITR 147 (P&H); WARDEX PHARMACEUTICALS P. LTD. VS. ACIT, 307 ITR 387 (MAD. ). ON THE FACTS AND LEGAL POSITION OF THIS APPEAL, IT IS HELD THAT AO IS RIGHT IN TREATING SUBSIDY OF RS. 15,00,000/- AS REVENUE RECE IPT AND THEREFORE THE ADDITION OF THE SAME AS INCOME IS UPHELD. THIS GROUND OF APPEAL STANDS DISMISSED. 2.3 THE ASSESSEE'S COUNSEL LAID ON RECORD THE COPY OF SANCTION LETTER DATED 17-07-2003 INDICATING THE SANCTION OF STATE CASH SUBSIDY OF RS . 15.00 LACS ON THE ELIGIBLE ASSETS AND PLACED RELIANCE ON THE JUDGEMENT DATED 16-09-2008 B Y HON'BLE APEX COURT IN THE CASE OF CIT VS. PONNI SUGAR & CHEMCIALS LTD. IN CIVIL APPEA L NO. 5694 OF 2008 AND CONTENDS THAT THE LOWER AUTHORITIES HAVE ERRED IN TREATING THE SUBSIDY AS REVENUE RECEIPT. 2.4 ON THE OTHER HAND, THE LD. DR CONTENDS THAT THE ASSESSEE HAD NOT LAID THE SCHEME FOR EXAMINATION BY THE AUTHORITIES BELOW. THE AUTHO RITIES BELOW THUS DECIDED THIS MATTER AGAINST THE ASSESSEE FOR LACK OF EVIDENCE ON RECORD . THERE IS THUS NO ERROR IN THEIR ORDERS. 2.5 HEARD PARTIES WITH REFERENCE TO MATERIAL ON REC ORD AND CASE LAWS BROUGHT TO OUR NOTICE. IN THE CASE OF CIT VS. PONNI SUGAR & CHEMIC ALS LTD. (SUPRA), THE HON'BLE APEX 3 COURT HAS LAID DOWN THAT THE CHARACTER OF THE REC EIPT 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. T HE 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 LOA NS TAKEN BY THE ASSESSEE TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF EXISTING UNIT S. 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 T HE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT THEN THE RECEIPT OF THE S UBSIDY WAS ON CAPITAL ACCOUNT. THEREFORE, IT IS THE OBJECT FOR WHICH THE SUBSIDY/A SSISTANCE IS GIVEN WHICH DETERMINES THE NATURE OF THE INCENTIVE SUBSIDY. THE FORM OF THE ME CHANISM THROUGH WHICH THE SUBSIDY IS GIVEN IS IRRELEVANT. IN THE PRESENT CASE IN APPEA L, THE AUTHORITIES BELOW DID NOT HAVE BENEFIT OF THE SCHEME AS THE ASSESSEE FAILED TO LA Y DOWN THE SAME FOR EXAMINATION BY THE ASSESSING AUTHORITY AS WELL AS BY THE LD. CIT(A) WH EN THEY TOOK DECISION IN ITS CASE. IT, THEREFORE, IS IMPERATIVE THAT THE ASSESSEE IS AFFOR DED LAST OPPORTUNITY TO ASSIST THE AO FOR DETERMINATION OF THE TRUE CHARACTER OF THE RECEIPT IN HIS CASE. THE ASSESSEE SHALL BE UNDER THE BOUNDEN DUTY TO LAY DOWN THE COMPLETE SCHEME SP ELLING OUT THE PURPOSE FOR WHICH SUBSIDY IS GIVEN SO THAT DECISION IS TAKEN BY THE A O IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD. 4 3.0 IN THE RESULT, THE APPEAL BY THE ASSESSEE STAND S ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN TERMS OF RULE 34(4) OF THE INC OME TAX APPELLATE TRIBUNAL RULES, 1963. SD/- SD/- (T.K. SHARMA) ( B. R. JAIN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MISHRA COPY FORWARDED TO :- 1. M/S. RAGHUVIR COTTON GINNING & PRESSING (P) LTD. , RAJKOT 2. THE ACIT, CIRCLE- 1, RAJKOT BY ORDER 3. THE CIT (A) 4. THE CIT 5. THE D/R 6. GUARD FILE (ITA NO. 618/RJT/2012) AR ITAT, RAJKOT. TRUE COPY