Digboi Carbon Pvt Ltd, Kolkata V. C.I. T - I, kolkata, Kolkata

ITA 893/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4623 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT SUBHRA BISWAS
• Assessee Lawyers: SUBASH AGARWALA
• Keywords: Business income
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 893 / KOL / 2013 ASSESSMENT YEAR :2008-09 DIGBOI CARBON PVT. LTD. 19, CHANDNI CHOWK STREET, KOLKATA-700 072 [ PAN NO.AACCD 2107 L ] V/S . COMMISSIONER OF INCOME TAX-I, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SUBASH AGARWALA, ADVOCATE /BY RESPONDENT SHRI RAJAT SUBHRA BISWAS, CIT-DR /DATE OF HEARING 10-05-2016 /DATE OF PRONOUNCEMENT 05-07-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX, KOLKATA-I U/S 263 OF THE INCOME TAX ACT , 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 28.03.2013. ASSESSM ENT WAS FRAMED BY ITO WARD-3(1), KOLKATA VIDE HIS ORDER DATED 29.12.2010 FOR ASSESSMENT YEAR 2008-09. THE GROUNDS RAISED BY THE ASSESSEE PER ITS APPEAL ARE AS UNDER:- 1. THE ORDER OF THE LD. CIT PASSED U/S 263 IS BAD I N LAW AND ON FACTS AND IS LIABLE TO BE QUASHED. 2. THAT THE ORDER OF THE LD. CIT PASSED U/S 263 IS VOID AUTHORITIES BELOW INITIO INASMUCH AS IT LACKS PROPER AND VALID JURISDICTION UNDER THE LAW AND THE SAME IS LIABLE TO BE QUASHED. 3. FOR THAT THE LD. CIT ERRED IN EXERCISING THE POW ER OF REVISION FOR THE PURPOSE OF DIRECTING THE AO TO HOLD ANOTHER INVESTI GATION WHEN THE ORDER OF THE AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. ITA NO.893/KOL/2013 A.Y.2008-09 DIGBOI CARBON PVT. LTD. V. CIT-I KOL. PAGE 2 4. THAT THE LD. CIT ERRED IN PREFERRING TO TAKE A D IFFERENT VIEW AS A BASIS FOR AN ACTION U/S 263 WHEN THE AO HAD TAKEN A PARTICULAR V IEW IN RESPECT OF ALLOWABILITY OF THE SUBSIDES AND INCENTIVES AS DEDU CTION U/S 80IC AFTER CONSIDERING THE MATERIAL ON RECORD AND AFTER DUE IN VESTIGATION. 5. THAT THE LD. CIT WAS NOT JUSTIFIED IN EXERCISING THE POWER OF REVISION ON A DEBATABLE ISSUE. 2. THE COMMON ISSUES RAISED BY ASSESSEE IS THAT LD. CIT U/S 263 OF THE ACT ERRED IN EXERCISING HIS REVISIONARY POWER BY DI RECTING THE ASSESSING OFFICER TO FRAME THE FRESH ASSESSMENT ALTHOUGH THE ORDER OF AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 3. THE FACT IN BRIEF ARE THAT ASSESSEE IN THE PRESE NT CASE IS A LIMITED COMPANY AND IS ENGAGED IN MANUFACTURING BUSINESS OF CALCINED PETROLEUM COKE. THE ASSESSEE FILED ITS RETURN OF INCOME DATE D 20.09.2008 DECLARING NIL INCOME. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATI ON HAS CLAIMED DEDUCTION U/S 80IC(2)(A)(III) OF THE ACT FOR AN AMOUNT OF 2,82,71,598/-. THE AO FOR THE YEAR ASSESSED THE INCOME UNDER SECTION 143(3) OF TH E ACT. HOWEVER THE LD. CIT U/S. 263 OBSERVED THAT ASSESSEE HAS SHOWN CERTA IN INCOME BY WAY OF SUBSIDES AS DETAILED UNDER :- S.NO. NATURE OF SUBSIDY AMOUNT (RS) 1 TRANSPORT SUBSIDY 89,91,720/- 2 POWER SUBSIDY 2,70,601/- 3 INSURANCE SUBSIDY 6,89,518/- 4 CENTRAL INTEREST SUBSIDY 1,84,380/- 5 CAPITAL SUBSIDY 30,00,000/- 1,31,36,219/- IN THE OPINION OF LD. CIT, THESE SUBSIDIES AS DISCU SSED AFORESAID ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT BUT ASSE SSING OFFICER WHILE FRAMING THE ASSESSMENT U/S. 143(3) OF THE ACT HAS ALLOWED T HE SAME AS DEDUCTION U/S. 80IC OF THE ACT. ACCORDINGLY, LD. CIT OPINED THAT A SSESSEE HAS BEEN UNDER ASSESSED AND ACCORDINGLY ISSUED A NOTICE ON 26.03.2 013 FOR SEEKING CLARIFICATION ABOUT THE SUBSIDIES RECEIVED BY ASSES SEE. IN COMPLIANCE TO THE NOTICE, ASSESSEE SUBMITTED THAT THE SUBSIDIES ARE E LIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT IN THE LIGHT OF CO-ORDINATE BENCH C OF THIS TRIBUNAL IN THE ITA NO.893/KOL/2013 A.Y.2008-09 DIGBOI CARBON PVT. LTD. V. CIT-I KOL. PAGE 3 CASE OF GUWAHATI CARBON LTD. V. ITO IN ITA NO.1193/KOL/2006 DATED 31.03.2006. HOWEVER, LD. CIT REJECTED THE PLEA OF A SSESSEE BY OBSERVING THAT IN ONE OF THE GROUP CONCERN CASE OF THE ASSESSEE I .E. IN M/S BRAHMPUTRA CARBON LTD. FOR AY 2005-06, IN ITA NO. 282/KOL/2010 , HON'BLE ITAT KOLKATA DECIDED THE ISSUE OF SUBSIDY IN FAVOUR OF THE DEPAR TMENT BY PLACING THE RELIANCE ON THE DECISION OF HON'BLE GAUHATI HIGH CO URT IN THE CASE OF CIT VS. MEGHALAYA STEELS LTD. 332 ITR 91 (GUH). ACCORDINGLY, LD. CIT PASSED HIS ORDER U/S 263 OF THE ACT DIRECTING THE AO TO FRAME THE ASSESSMENT DE NOVO AS PER THE CONTENTS OF THIS ORDER PASSED U/S. 263 OF T HE ACT. 4. AGGRIEVED BY THE ORDER OF LD. CIT, THE ASSESSEE PREFERRED AN APPEAL BEFORE US. SHRI SUBASH AGARWAL, LD. AUTHORIZED REPRESENTATIVE APPEARED ON BEHALF OF ASSESSEE AND SHRI RAJAT SUBHRA BISWAS, LD. DEPARTME NTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 5. BEFORE US LD. AR FILED PAPER BOOK WHICH IS RUNNI NG PAGES 1 TO 57. THE LD. AR ALSO FILED COPIES OF JUDGMENTS OF HON'BLE SU PREME COURT AND HON'BLE GAUHATI HIGH COURT WHICH ARE RUNNING INTO PAGES FRO M 1 TO 53 RESPECTIVELY. THE LD. AR SUBMITTED THAT THE ASSESSEE DURING THE Y EAR HAS RECEIVED VARIOUS KINDS OF SUBSIDIES AS ENUMERATED ABOVE. OUT OF THE FIVE SUBSIDIES 4 SUBSIDIES NAMELY TRANSPORT, POWER, INSURANCE AND INTEREST SUBSIDIES ARE DULY COVERED BY THE JUDGMENT OF HON'BLE SUPREME COU RT IN THE CASE OF CIT V. MEGHALAYA STEELS LTD. (2016) 67 TAXMANN.COM 158 (SC) FOR THE DEDUCTION UNDER SECTION 80IC OF THE ACT, THE HEAD-NOTE OF THE ORDER IS REPRODUCED BELOW:- SECTION 80-IB , READ WITH SECTION 80-IC , OF THE INCOME-TAX ACT, 1961 DEDUCTIONS PROFITS AND GAINS FROM INDUSTRIAL UNDE RTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS (COMPUTATIO N OF DEDUCTION) ASSESSMENT YEAR 2004-05 ASSESSEE CLAIMED DEDUCTIO N FOR (A) TRANSPORT SUBSIDY; (B) INTEREST SUBSIDY; (C) POWER SUBSIDY; A ND (D) INSURANCE SUBSIDY, TREATING THEM AS PROFITS DERIVED FROM BUSINESS RE VENUE CONTENDED THAT SUBSIDIES SO RECEIVED HAD NO CLOSE AND DIRECT NEXUS WITH ASSESSEES BUSINESS AND THUS COULD NOT BE TREATED AS PROFITS D ERIVED FROM BUSINESS ITA NO.893/KOL/2013 A.Y.2008-09 DIGBOI CARBON PVT. LTD. V. CIT-I KOL. PAGE 4 WHETHER SUBSIDIES WERE REIMBURSED TO ASSESSEE FOR E LEMENTS OF COST RELATING TO MANUFACTURE OR SALE OF THEIR PRODUCTS AND, THUS, THEE WAS CERTAINLY A DIRECT NEXUS BETWEEN PROFITS OF ASSESSEES BUSINESS AND RE IMBURSEMENT OF SUCH SUBSIDIES HELD, YES WHETHER THEREFORE, DEDUCTIO N WAS ADMISSIBLE ON SUCH SUBSIDIES HELD, YES [PARA 18] [IN FAVOUR OF ASSES SEE] SECTION 28(I), READ WITH SECTION 56, OF THE INCOME- TAX ACT, 1961 BUSINESS INCOME CHARGEABLE AS (SUBSIDY) ASSESSMENT YEAR 2004-05 WHETHER HEAD INCOME FROM OTHER SOURCES IS A RESIDUARY HEAD OF INCOME THAT CAN BE AVAILED ONLY IF INCOME DOES NOT FALL UNDER ANY O F OTHER FOUR HEADS OF INCOME HELD, YES WHETHER SUBSIDIES FOR REIMBURS EMENT OF COST INCURRED IN PRODUCTION OF GOODS ARE INCLUDIBLE UNDER HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION AND, THEREFORE, CANNOT BE INCLUDED UNDER HEAD INCOME FROM OTHER SOURCES - HELD, YES [PARA 28] IN FAVOUR OF ASSESSEE] THE LD. AR FURTHER SUBMITTED THAT THE ALL THE AFORE SAID SUBSIDIES ARE GOVERNED BY NORTH EAST INDUSTRIAL AND INVESTMENT PROMOTION POLI CY (NEIIPP), 2007, FILE NO. 10(3)/2007-DBA-II/NER, ISSUED BY GOVERNMENT OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, DATED 1-4-2007 WITH THE PURP OSE OF INDUSTRIAL PROMOTION IN NORTH EAST REGION. THE INDUSTRY OF THE ASSESSEE IS SITUATED IN DIST. TINSUKIA, ASSAM. THE COPY OF THE SCHEME AS DI SCUSSED AFORESAID IS PLACED AT PAGE 47 OF THE PAPER BOOK. THE CAPITAL SU BSIDY OF 30 LACS WAS GIVEN UNDER THE SAID SCHEME BY GOVT. OF INDIA FOR T HE PROMOTION OF NORTH-EAST REGION. AS THE PURPOSE OF ALL THE SUBSIDIES WERE CO MMON AND THEREFORE THE TREATMENT OF CAPITAL SUBSIDY UNDER THE INCOME TAX A CT SHOULD BE AT PAR WITH OTHER SUBSIDIES. HE FURTHER SUBMITTED THAT ORDER 26 3 OF THE ACT PASSED BY LD. CIT WAS RELIED UPON THE JUDGMENT OF HON'BLE GAUHATI HIGH COURT IN THE CASE OF CIT V. MEGHALAYA STEELS LTD. (2013) 34 TAXMANN.COM 34 (GUH) HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE ON A LATER DATE VIDE ORDER DATED 29.05.2013. LD. AR FURTHER DREW OUR ATTENTION ON TH E OFFICE MEMORANDUM ISSUED BY THE MINISTRY OF COMMERCE AND INDUSTRY, NE W DELHI DATED 01.04.2007, WHEREIN THE SCHEME FOR VARIOUS SUBSIDIE S INCLUDING CAPITAL INVESTMENT SUBSIDY WAS MENTIONED. HE REQUESTED THE BENCH TO DECIDE THE ISSUE ON MERITS. ON THE OTHER HAND, LD. VEHEMENTLY RELIED ON THE ORD ER OF LD. CIT. ITA NO.893/KOL/2013 A.Y.2008-09 DIGBOI CARBON PVT. LTD. V. CIT-I KOL. PAGE 5 6. WE HAVE HEARD RIVAL PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. FROM THE AFORESAID DISCUSSION, WE FIND THAT THE PRESENT ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF ASSESSEE AND AGAI NST THE REVENUE BY THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF MEGHLAYA STEELS LTD. (SUPRA). HOWEVER WE FIND THAT THE DECISION OF HON'B LE SUPREME COURT DOES NOT TALK ABOUT CAPITAL SUBSIDY WHICH WAS RECEIVED BY AS SESSEE. IN THE INSTANT CASE, HOWEVER, WE FIND THAT SUBSIDIES ARE GOVERNED BY THE MINISTRY OF COMMERCE AND INDUSTRY BY OFFICE MEMORANDUM ISSUED O N 01.04.2007, GOVT. OF INDIA. BY VIRTUE OF O.M. THE SUBSIDIES PROVIDED ARE FOR EXCISE DUTY EXEMPTION, INCOME TAX EXEMPTION, CAPITAL INVESTMENT SUBSIDY, INTEREST SUBSIDY, INSURANCE SUBSIDY AND TRANSPORT SUBSIDY ET C. WE FURTHER FIND THAT ALL THE SUBSIDIES ARE GOVERNED BY THE AFORESAID INDUSTR IAL POLICY THEREFORE IN OUR CONSIDERED VIEW THE INCENTIVE GIVEN ON THE CAPITAL SUBSIDY TO ASSESSEE WILL ALSO BE ELIGIBLE UNDER DEDUCTION U/S. 80IC OF THE A CT. THEREFORE, WE SET ASIDE THE ORDER PASSED BY LD. CIT U/S 263 OF THE ACT AND HOLD THE SAME AS NOT SUSTAINABLE. THIS GROUND OF ASSESSEES APPEAL IS AL LOWED. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 05/ 07/2016 SD/- SD/- (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 05 / 07 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DIGBOI CARBON PVT. LTD.,19, CHANDNI CHOWK ST, KOLKATA-700 072 2. /RESPONDENT-CIT-I KOLKATA, AAYAKAR BHAWAN, P7, CHOWRIN GHEE SQ., KOLKATA-69 3. ) *+ , , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,