M/s Rupa & Company Limited, Kolkata V. DCIT, Cen. Cir. -2(3), Kolkata

ITSSA 11/KOL/2022

AI Insights

The case involves M/s. Rupa & Company Limited appealing against the orders of the Commissioner of Income-tax (Appeals)-20, Kolkata, which confirmed various disallowances made by the Assessing Officer. The primary issues revolved around the ad-hoc disallowances on credit card and foreign travel expenses, and the treatment of sales tax incentives received under the West Bengal Industrial Promotion Schemes. The Tribunal found that the disallowances were made without proper justification and that the sales tax incentives were capital in nature, thus not taxable as income.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128670 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-03-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 17-01-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 08-03-2022
• Other Referred Cases: Dhirajlal Girdharilal vs. CIT, ITO vs Shyamal Dey, CIT vs. Rasoi Ltd., ACIT vs. Shantinath Detergents Pvt. Ltd., ACIT vs. Budge Budge Refineries Ltd., DCIT vs. Birla Corporation Ltd., CIT vs. Ponni Sugars & Chemicals Ltd., DCIT vs. Reliance Industries Ltd., DCIT vs. Sovaispat Limited, DCIT vs. Emami Biotech Limited, DCIT vs. M/S Century Plyboards (I) Ltd., DCIT vs. Shyam Steel Industries Ltd., DCIT vs. M/s. Krishi Rasayan Exports Pvt. Ltd., PCIT vs. Ankit Metals & Power Ltd., PCIT vs. M/s. Krishi Rasayan Exports Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Retrospective amendment; Question of law; Competent authority; Capital receipt; Revised return; Rule 8D; Set aside
• Section: 37; 132; 244A; 142(1); 133A; 153A; 234B; 14A; 115JB; 250; 80IA; 143(2); 13; 22

Judgement Text

आयकर अपीलीय अधिकरण कोलकाता 'ए' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A’ BENCH, KOLKATA डॉ. मनीष बोरड, ल े खा सदस्य एवं श्री संजय शमा ा , न्याधयक सदस्य क े समक्ष Before DR. MANISH BORAD, ACCOUNTANT MEMBER & SONJOY SARMA, JUDICIAL MEMBER I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 Assessment Years: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited.................................Appellant [PAN: AABCR 2648 M] Vs. DCIT, Central Circle-2(3), Kolkata.........................Respondent Appearances by: Smt. Khushboo Rai, A/R, appeared on behalf of the Assessee. Sh. Biswanath Das, CIT, D/R, appeared on behalf of the Revenue. Date of concluding the hearing : January 18 th , 2023 Date of pronouncing the order : March 27 th , 2023 आद े श ORDER Per Manish Borad, Accountant Member: The captioned appeals filed by the assessee pertaining to the Assessment Years (in short “AY”) 2012-13, 2013-14 & 2014-15 are directed against separate orders passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-20, Kolkata [in short ld. “CIT(A)”] dated 10.01.2022. I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 2 of 34 2. The assessee is in appeal before this Tribunal raising the following grounds: For Assessment Year 2012-13: “1. That the Ld. CIT(A) was wrong in passing ex-parte order u/s 250 alleging that the assessee has not filed any written submission. The first notice of hearing dt. 16.07.2021 never received as the same is not found in the portal which is itself apparent from the portal. But the second notice of hearing dt. 17.12.2021, fixed for hearing dt. 29.12.2021, the adjournment petition dt. 28.12.2021 was uploaded in portal on 29.12.2021 to sought time to prepare written submission. The said adjournment sought for till 13.01.2022 as seen in portal but Ld. CIT(A) ignored the adjournment petition filed by assessee as well as date till adjournment sought for i.e. 13.01.2022 and passed the order u/s 250 on 10.01.2021. Thus, passing the ex-parte order ignoring the adjournment petition is complete denial of Natural Justice. 2. That the Ld. CIT(A) erred in confirming adhoc disallowance of Rs. 2,15,597/- being 10% of the credit card expenses of the directors 8i managerial persons alleging that the personal expenses incurred in name of sales promotion by family members and the spouses of the Directors. The said expenses were incurred for furtherance of the business by the Directors only and are allowable expenses. Hence, the adhoc disallowance confirmed by Ld. CIT(A) merely based upon assumption and presumption and totally relied upon Ld. AO findings is completely wrong and needs to be deleted. 3. That the Ld. CIT(A) erred in confirming adhoc disallowance of Rs.3,73,483/- being 10% of Foreign Travel Expenses alleging that the same was incurred by the spouses of the Directors. The said expenses were incurred only by the directors for business promotion company and are allowable expenses. Hence, the adhoc disallowance confirmed by Ld. CIT(A) merely based upon assumption and presumption and totally relied upon Ld. AO findings is completely wrong and needs to be deleted. 4. Additional Ground: 4.1 That on the facts and in the circumstances of the case, Sales Tax incentive amounting to Rs. 1,35,74,366/- availed during the year under consideration be treated as capital receipt following the I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 3 of 34 decision of jurisdictional High Court and hence be excluded in computing total income under the provisions of the Act. 4.2 That on the facts and in the circumstances of the case, Sales Tax incentive amounting to Rs. 1,35,74,366/- availed during the year under consideration be treated as capital receipt and hence be excluded in computing book profit as per Section 115JB of the Act. 4.3 That on the facts and in the circumstances of the case, deduction under section 80-IA of the Act on Steam Boiler, amounting to Rs. 5,02,60,771/- be granted in computing total income under the provisions of the Act. 4.4 That on the facts and in the circumstances of the case, interest under section 244A be re-computed considering that the additional grounds taken by the Appellant as lodged in the Return of Income. 4.4 That on the facts and in the circumstances of the case, interest under Section 234C of the Act, be re-computed considering that the additional grounds taken by the Appellant as lodged in the Return of Income. 5. That the assessee craves to leave or add, alter, amend or withdraw any or all of the ground(s) of appeal before or at the time of hearing.” For Assessment Year 2013-14: “1. That the Ld. CIT(A) was wrong in passing ex-parte order u/s 250 alleging that the assessee has not filed any written submission. The first notice of hearing dt. 16.07.2021 never received as the same is not found in the portal which is itself apparent from the portal. But the second notice of hearing dt. 17.12.2021, fixed for hearing dt. 29.12.2021, the adjournment petition dt. 28.12.2021 was uploaded in portal on 29.12.2021 to sought time to prepare written submission. The said adjournment sought for till 13.01.2022 as seen in portal but Ld. C1T(A) ignored the adjournment petition filed by assessee as well as date till adjournment sought for i.e. 13.01.2022 and passed the order u/s 250 on 10.01.2021. Thus, passing the ex-parte order ignoring the adjournment petition is complete denial of Natural Justice. 2. That the Ld. CIT(A) erred in confirming adhoc disallowance of Rs. 2,98,975/- being 10% of the credit card expenses of the directors & managerial persons alleging that the personal expenses incurred in name of sales promotion by family members and the spouses of the I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 4 of 34 Directors. The said expenses were incurred for Hence, the adhoc disallowance confirmed by Ld. CTT(A) merely based upon assumption and presumption and totally relied upon Ld. AO findings is completely wrong and needs to be deleted. 3. That the Ld. CIT(A) erred in confirming adhoc disallowance of Rs. 4,97,356/- being 10% of Foreign Travel Expenses alleging that the same was incurred by the spouses of the Directors. The said expenses were incurred only by the directors for business promotion company and are allowable expenses. Hence, the adhoc disallowance confirmed by Ld. CIT(A) merely based upon assumption and presumption and totally relied upon Ld. AO findings is completely wrong and needs to be deleted. 4. Additional Grounds: 4.1 That on the facts and in the circumstances of the case, Sales Tax incentive amounting to Rs. 1,24,406,609/-availed during the year under consideration be treated as capital receipt and hence be excluded in computing total income under the provisions of the Act. 4.2 That on the facts and in the circumstances of the case, Sales Tax incentive amounting to Rs. 1,24,406,609/-availed during the year under consideration be treated as capital receipt and hence be excluded in computing book profit as per Section 115JB of the Act. 4.3 That on the facts and in the circumstances of the case, deduction under section 80-IA of the Act on Steam Boiler, amounting to Rs. 7,57,16,661/- be granted in computing total income under the provisions of the Act. 4.4 That on the facts and in the circumstances of the case, interest under section 244A be re-computed considering that the additional grounds taken by the Appellant as lodged in the Return of Income. 4.5 That on the facts and in the circumstances of the case, interest under Section 234B and Section 234C of the Act, be re-computed considering that the additional grounds taken by the Appellant as lodged in the Return of Income. 5. That the assessee craves to leave or add, alter, amend or withdraw any or all of the ground(s) of appeal before or at the time of hearing.” I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 5 of 34 For Assessment Year 2014-15: “1. That the Ld. CIT(A) was wrong in passing ex-parte order u/s 250 alleging that the assessee has not filed any written submission. The first notice of hearing dt. 16.07.2021 never received as the same is not found in the portal which is itself apparent from the portal. But the second notice of hearing dt. 17.12.2021, fixed for hearing dt. 29.12.2021, the adjournment petition dt. 28.12.2021 was uploaded in portal on 29.12.2021 to sought time to prepare written submission. The said adjournment sought for till 13.01.2022 as seen in portal but Ld. CIT(A) ignored the adjournment petition filed by assessee as well as date till adjournment sought for i.e. 13.01.2022 and passed the order u/s 250 on 10.01.2021. Thus, passing the ex-parte order ignoring the adjournment petition is complete denial of Natural Justice. 2. That the Ld. CIT(A) erred in confirming adhoc disallowance of Rs. 3,13,096/- being 10% of the credit card expenses of the directors 8i managerial persons alleging that the personal expenses incurred in name of sales promotion by family members and the spouses of the Directors. The said expenses were incurred for furtherance of the business by the Directors only and are allowable expenses. Hence, the adhoc disallowance confirmed by Ld. CTT(A) merely based upon assumption and presumption and totally relied upon Ld. AO findings is completely wrong and needs to be deleted. 3. That the Ld. CIT(A) erred in confirming adhoc disallowance of Rs. 1,41,520/- being 10% of Foreign Travel Expenses alleging that the same was incurred by the spouses of the Directors. The said expenses were incurred only by the directors for business promotion company and are allowable expenses. Hence, the adhoc disallowance confirmed by Ld. CIT(A) merely based upon assumption and presumption and totally relied upon Ld. AO findings is completely wrong and needs to be deleted. 4. That the Ld. CIT(A) erred in confirming disallowance of a sum of Rs. 8,78,771/- on account of brokerage paid to M/s Dheer Marketing merely replied upon Ld. AO findings. Hence, the adhoc disallowance confirmed by Ld. CIT(A) merely based upon misinterpretation of facts given by the Ld. AO and disallowance so made needs to be deleted. 5. Additional Ground: 5.1 That on the facts and in the circumstances of the case, Sales Tax incentive amounting to Rs. 1,37,62,482/- availed during the year I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 6 of 34 under consideration be treated as capital receipt following the decision of jurisdictional High Court and hence be excluded in computing total income under the provisions of the Act. 5.2 That on the facts and in the circumstances of the case, Sales Tax incentive amounting to Rs. 1,37,62,482/- availed during the year under consideration be treated as capital receipt and hence be excluded in computing book profit as per Section 115JB of the Act. 5.3 That on the facts and in the circumstances of the case, deduction under section 80-IA of the Act on Steam Boiler, amounting to Rs. 8,50,27,978 /- be granted in computing total income under the provisions of the Act. 5.4 That on the facts and in the circumstances of the case, interest under section 244A be re-computed considering that the additional grounds taken by the Appellant as lodged in the Return of Income. 5.5 That on the facts and in the circumstances of the case, interest under Section 234B and 234C of the Act, be recomputed considering that the additional grounds taken by the Appellant as lodged in the Return of Income. 6. That the assessee craves to leave or add, alter, amend or withdraw any or all of the ground(s) of appeal before or at the time of hearing.” 3. As the issues raised in these appeals are common and the facts are identical, therefore, as agreed by both the parties, they are heard together and disposed off by way of this common order for the sake of convenience and brevity. 4. At the outset, ld. Counsel for the assessee requested for not pressing ground no. 4.3 for AY 2012-13 & AY 2013-14 and ground no. 5.3 for AY 2014-15 relating to deduction u/s 80IA of the Act on steam boiler. Since these grounds have not been pressed by the assessee, the same are dismissed as not pressed. 5. The first common issue for our consideration is ad-hoc disallowance at the rate of 10% on credit card expenses at Rs. 2,15,597/-, Rs. 2,98,975/- & Rs. 3,13,096/- for AY 2012-13, AY I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 7 of 34 2013-14 & AY 2014-15 respectively. The facts in brief are that the assessee company is engaged in manufacturing and trading in hosiery goods, electricity generation and other sources. Income of Rs. 55,15,90,040/- declared in the return for AY 2012-13 filed on 29.09.2012. Search and seizure operation was carried out on the assessee u/s 132 of the Act as well as survey operation u/s 133A of the Act on 07.11.2013. Assessment proceedings were carried out by issuance of notice u/s 153A of the Act followed by serving of notices u/s 143(2) & 142(1) of the Act. Ld. AO on examining the expenses made through credit card made an ad-hoc disallowance of Rs. 2,15,597/- applying the rate of 10%. Similar type of disallowances were made for AY 2013-14 & AY 2014-15 also. The assessee failed to get any relief before ld. CIT(A). Before us ld. Counsel for the assessee has contended that the alleged additions made by ld. AO are merely on suspicion and no defect has been pointed out in the details of the expenditure given by the assessee. On the strength of the judgment of Hon'ble Supreme Court of India in the case of Dhirajlal Girdharilal vs. CIT reported in [1954] 26 ITR 736 (SC) as well as the decision of this Tribunal in the case of ITO vs Shyamal Dey in ITA 410/KOL/2012 order dated 20.01.2016 thus prayed that such ad-hoc disallowances deserve to be deleted. 6. On the other hand, ld. D/R vehemently argued supporting the orders of both the lower authorities. 7. We have heard rival contentions and perused the records placed before us. The ad-hoc disallowance at the rate of 10% of the credit card expenses claimed in the profit and loss account has been made towards personal expenses and the said disallowance I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 8 of 34 amounts to Rs. 2,15,597/-, Rs. 2,98,975/- & Rs. 3,13,096/- for AY 2012-13 to AY 2014-15. Perusal of the assessment order indicates that the assessee company has declared income of Rs. 55.16 Cr approx. In the assessment order framed u/s 153A r.w.s. 143(3) of the Act ld. AO made only two disallowances; firstly towards personal expenses included in the credit card expenses and secondly the disallowance at the rate of 10% of the foreign travel expenses. Prima Facie the said disallowance is ad-hoc in nature. Ld. AO ought to have made reference to any of such expenses given in the books which could indicate that they are personal in nature. Merely making disallowance just for the sake of concluding the assessment is not a justified approach. Expenses through credit card have been claimed as general business expenditure in order to attend the business meetings. No specific defect has been pointed out by the Revenue authorities and as claimed by ld. Counsel for the assessee that in the subsequent years no such disallowance has been made in the scrutiny proceedings carried out for AY 2017-18, AY 2018-19 & AY 2020- 21. 8. We, therefore, in view of the decisions referred relied by ld. Counsel for the assessee hold that the alleged disallowance is based on merely conjectures, surmises and suspicion and the same deserves to be deleted. Thus, the addition for ad-hoc disallowance made for AY 2012-13, AY 2013-14 & AY 2014-15 at Rs. 2,15,597/-, Rs. 2,98,975/- & Rs. 3,13,096/- respectively stands deleted. The common ground no. 2 for AY 2012-13, AY 2013-14 & AY 2014-15 is allowed. I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 9 of 34 9. The next issue for our consideration is ad-hoc disallowance at the rate of 10% on foreign travel expenses at Rs. 3,73,483/-, Rs. 4,97,356/- & Rs. 1,41,520/- for AY 2012-13, AY 2013-14 & AY 2014-15. The said disallowance has been made by ld. AO in the similar fashion as was made for ad-hoc disallowance on credit card expenses. The submissions made by both the sides remain the same. Therefore, taking a consistent view and observing that the alleged disallowance for foreign travel expenses is merely ad-hoc in nature, we delete the said disallowance of Rs. 3,73,483/-, Rs. 4,97,356/- & Rs. 1,41,520/- for AY 2012-13, AY 2013-14 & AY 2014-15. The common ground no. 3 raised by the assessee is allowed. 10. The next issue for our consideration is disallowance of brokerage at Rs. 8,78,771/- made in the assessment order for AY 2014-15 and the assessee has challenged the same by raising ground no. 4 for AY 2014-15. Ld. AO made said disallowance observing that the brokerage expenses pertain to earlier years and was not paid for a long time and this being the expenses for earlier years has been booked for this year, therefore, cannot be allowed. The assessee did not get any relief before ld. CIT(A). Before us, ld. Counsel for the assessee has stated that the assessee company followed mercantile system of accounting. The brokerage was received and settled during the year and tax at source has been deducted thereon. 11. On the other hand, ld. D/R supported the orders of both the lower authorities. I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 10 of 34 12. We have heard rival contentions and perused the records placed before us. We notice that the brokerage expenses of Rs. 8,78,771/- has been claimed which has been paid to M/s. Dheer Marketing. The brokerage bill was received, accounted for and settled during the year under appeal. Tax at source has been deducted thereof. The genuineness of the brokerage expenses has not been doubted by the Revenue authorities. This being a genuine claim of business expenditure towards brokerage, the same deserves to be allowed. We, thus, set aside the finding of ld. CIT(A) and delete the said disallowance of brokerage expenses of Rs. 8,78,771/- and allow ground no. 4 for AY 2014-15 raised by the assessee. 13. The next common issue for our consideration raised through additional ground no. 4.1 for AY 2012-13 & AY 2013-14 and ground no. 5.1 for AY 2014-15 relates to claiming of sales tax incentive availed during the year as a capital receipt which was wrongly shown as Revenue in the audited financial statements. One more connected issue raised in the additional ground no. 4.2 for AY 2012-13 & AY 2013-14 and ground no. 5.2 for AY 2014-15 is that since the sales tax incentives availed during the year is a capital receipt, hence, it needs to be excluded for the purpose of computing book profit u/s 115JB of the Act. As far as raising of the above referred additional grounds at this stage of the proceedings is concerned, we find that the issue being legal in nature can be raised at any stage as held by the Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. vs. CIT reported in [1998] 229 ITR 383 (SC). Before us, ld. Counsel for the I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 11 of 34 assessee has made the following submissions for admitting the additional grounds of appeal raised in the instant appeals: “2.0 Admissibility of additional grounds: 2.1 All the aforesaid issues have been raised for the first time by way of additional grounds in the appeal. The question that arises is, whether any claim can be raised for the first time before the appellate authorities. This issue has been adjudicated by various appellate authorities from time to time. Some of the relevant judicial pronouncements on these issues are as under: 2.2 In the case of Jute Corporation of India Ltd. -vs.- CIT (1991) 187 UR 688 (SC), [Refer Page 1-6 of Case Law Paper Book ('CLPB')] three judge bench of the Apex Court relied upon the earlier three judge bench decision in the case of CIT -vs.- Kanpur Coal Syndicate (1964) 53 ITR 225 (SC) (in the context of Section 3l(3)(a) of the 1922 Act which corresponds to Sec. 251(1)(a) of the 1961 Act), where it has been held that the appellate commissioner has plenary power in disposing off an appeal. In this regard it is to be noted that Apex Court relied on the following findings in the decision of Kanpur Coal Syndicate (supra): "The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is co- terminus with that of the Income Tax Officer. He can do what the Income Tax Officer can do and also direct him to do what he has failed to do." The Apex Court in Jute Corporation (Supra), based on the above, further held, in the context of section 251(1)(a) of the 1961 Act, that there is no reason as to why the appellate commissioner cannot modify the assessment order or admit an additional ground even if not raised before the Income Tax Officer. According to the Apex Court, no exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. 2.3 The above decision of the Apex Court in Jute Corporation (Supra) has been followed in the subsequent decision of National Thermal Power Co. Ltd. -vs.-CIT (1998) 229 ITR 383 (SC), [Refer Page 7-9 of 'CLPB'] to hold that, where a Tribunal is only required to consider a question of law arising from the facts, which are on records, there is no reason why such question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of the assessee. I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 12 of 34 2.4 Incidentally, the Apex Court in the case of Goetze (India) Ltd. -vs.- CIT (2006) 284 ITR 323 (SC), has dealt with the power of the Assessing Officer to entertain a claim made before him, otherwise than through revised return filed on time and held that such claim cannot be entertained by the Assessing Officer. However, while concluding, the Apex Court made it abundantly clear that the said decision doesn't affect the power of the appellate authorities to admit additional ground. 2.5 The Hon'ble Bombay High Court in the case of CIT -vs.- Pruthvi Brokers & Shareholders Pvt. Ltd. (2012) 349 ITR 336 (Bom), after considering the decision in the case of Goetze (India) Ltd. (Supra) has held that the appellate authorities can adjudicate new claims raised before them though the Assessing Officer is not entitled to allow deduction which had not been claimed in the return. Similar view has also been taken in CIT —vs.— Jai Parabolic Springs Limited (2008) 306 ITR 42 (Del). 2.6 Reliance is also placed on in the case of CIT -vs.- K.S.Dattatreya (Deed.) through LR's (2011) 51 DTR 266 (Kar) wherein it has been held that - "Therefore, the scope of the power of the CTT(A) is too wide. The appellate authority has plenary powers in disposing of an appeal. An appeal is a continuation of the process of assessment and an assessment is but another name for adjudication of the tax liability to accord with the taxable event in the particular taxpayer's case. It can enhance the assessment, taking advantage of the opportunity afforded by the taxpayer's appeal, even though the appeal itself has been mooted only with a view to a reduction in the assessment. The scope of his powers is coterminous with that of the ITO. He can do what the ITO can do and also direct him to do what he has failed to do. The CIT(A) can modify the assessment order on an additional ground even if not raised before the ITO. The Act does not place ant restriction or limitation on exercise of appellate power It has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any prescribed by the statutory provisions." [Emphasis Added] Similar view has also been expressed in the case of JCIT -vs.- Hero Honda Finlease Ltd. (2008) 115 TTJ 752 (Del). I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 13 of 34 2.7 On the basis of the aforesaid decisions, it can be said that the powers exercised by CIT(Appeals) are vast than Assessing Officer. The CIT(Appeals) can do what the Assessing Officer can do and direct him to do what the Assessing Officer had failed to do in order to impart justice to the assessee as per the provisions of the Act. 2.8 In this connection it is further submitted that under Article 265 of the Constitution, the State is entitled to recover or realize only that tax which is imposed in accordance with law. It is the duty of the State to see that justice is done to its citizen. Therefore, shelter should not ordinarily be taken behind the procedural technicalities with a view to defeat a just claim of an assessee. Reliance is placed on the decision in the case of Taylor Instrument Co. (India) Ltd. -vs.- CIT (1992) 198 ITR 1 (Del). 2.9 In this regard, the Central Board of Revenue (now CBDT) vide Circular No. 14 (XL - 35) of 1955 dated 11-04-1955, states that, officers of the department must not take advantage of the ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every way particularly in the matter of claiming and securing relief. Although therefore the responsibility for claiming refunds and relief rests with the assessee on whom it is imposed by law, officers should draw their attention to any refunds or relief to which they appear to be clearly entitled but which they have omitted to claim for some reason or other. 2.10 The jurisdictional Hon'ble Kolkata Tribunal in the case of ITC Limited -vs.- ACIT (ITA No.685/Kol/2014 dated 27-11-2018) relying on the Apex court decision in the case of National Thermal Power Corporation (supra) has admitted the additional ground filed by the assessee and has held as under: "It emerges from a perusal of the case file that this taxpayer has preferred its additional ground(s) as well vide petition dated 27.08.2018 reasoning issues section 14A read with Rule 8D disallowance as well as that of ESOPs of Rs. 2,61,73,34,836/- allowable under section 37 followed by its deduction claimed for secondary and higher education cess (es) irrespectively. We quote Rule 11 of Income Tax Appellate Tribunal Rules as well as hon'ble apex court is land-mark decision in National Thermal Power Corporation 229 HR 383 (SC) to conclude that the assessee's above additional grounds deserve to be admitted to determine its appropriate tax liability. The Revenue's objections against admission of these additional ground stands declined therefore." I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 14 of 34 2.11 It is also a settled principle that nothing comes in the way of the appellant in seeking original claim of deduction in proceedings involving search assessment under section 153A as well. Reliance in this regard is placed on a recent ruling of jurisdictional ITAT in case of ACIT - vs. - Shantinath Detergents Pvt. Ltd. [in IT(SS)A No. 27 to 32/Kol/2019 dated 20-03-2020] [Refer Page 21-36 of CLPB] wherein the Hon'ble HAT while dealing with similar facts held as follows: 8. Coming to the former three assessment year(s) (2009-10, 2010-11 and 2011-12) as well, we see no substance in Revenue's above stated technical argument since the CIT(A)'s detailed discussion not only takes note of various judicial precedents (supra) but also the corresponding expression used in the statute i.e. "total income"u/s. 153A(l)(b) of the Act This tribunal's following co-ordinate benches have already adjudicated the very issue in assessee's favour:- i) Dorf Ketal Chemicals (I) Pvt. Ltd. vs. DOT ITA No.3736.Mum/2012 ii) M/s Narendra Vegetable Products Pvt. Ltd. Vs. ACITITA No. 118/Nag/2013 iii) Faisal Abbas vs. DCIT ITA Nos. 3485/Hyd/2015 & 946/Hyd/2015 iv) A Snnivasa Rama Raju vs. DCIT ITA No. 975/Hyd/2015 v) ACIT vs. N.N. Devadoss ITA No. 1219/Mad/2012 AH these co-ordinate benches are of the view that nothing comes in the way of the concerned assessee in seeking original claim of deduction in proceedings involving search assessment u/s. 153A as well. We thus express our concurrence with the CIT(A)'s impugned action entertaining the assessee's foregoing additional ground seeking to treat its sales tax incentive subsidy as capital and not revenue receipt which had been erroneously recorded under the latter head in the computation of income. We make it dear that purpose of an assessment framed under the provision of the Act is to determine the correct taxable income than that based on estopple only since the Income Tax Act does not involve adversarial proceedings as per (1972) 83 ITR 453 (SC) CAGH vs. V. W. Narayen, S.N. Swamnamat vs. CED (1973) 88 ITR 366 (Mad) & State of Tamil Nadu vs Arufrnurya & Co (1982) 51 STC 381 (Mad)(FB). 2.12 From the perusal of the aforesaid decisions, it could be seen that an assessee can raise a new ground for the first time before the I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 15 of 34 Appellate Authorities i.e., Learned ITAT. In view of the aforesaid discussion, the appellant humbly submits that it is now a settled law that the appellate authorities should entertain additional grounds raised by the appellant, to correctly assess the tax liability of the appellant in accordance with law.” 14. We have gone through the judgments and decisions referred by ld. Counsel for the assessee which remains uncontroverted by ld. D/R, are therefore, inclined to admit the additional grounds of appeal raised by the assessee as to whether the sales tax incentive is a capital receipt and is to be excluded for the purpose of computing book profit u/s 115JB of the Act. 14.1. The facts in brief for AY 2011-12 to AY 2013-14 pertaining to this additional ground that sales tax incentive received during the year is a capital receipt are that the following amount of Sales tax incentive for the years under consideration claimed in the books vis-a-vis incentive actually received is tabulated below: Rs. Period (FY) Asst. Year Accrued Income in the Books of Accounts Actual Claim Filed as per returns Amount Received 2011-12 2012-13 1,35,74,366 1,36,04,864 1,42,06,136 2012-13 2013-14 1,24,46,609 1,52,38,122 1,50,03,922 2013-14 2014-15 1,37,62,482 1,36,12,021 1,35,68,905 14.2. During the captioned assessment years, the appellant has availed Sales tax incentives granted by the Government of West Bengal, Finance (Taxation) department under West Bengal Industrial Promotion (Assistant to Industrial Unit) scheme 1994 ['Scheme 1994'] superseded by West Bengal Industrial Promotion I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 16 of 34 (Assistance to Industrial Units) Scheme, 2010 ['Scheme 2010’] (collectively referred as "IPA Scheme"), against payment of Value Added Tax under the West Bengal Value Added Tax Act, 2003 and Central Sales Tax Act, 1956. 14.3. Section 3 of the Scheme 1994 describes entitlement to the industrial promotion assistance and provides that where a registered dealer manufactures specified goods in his SSI unit and sells such goods in the State-intra-State or in the course of inter- State trade or commerce within the meaning of section 3 of the Central Sales Tax Act, 1956 (Act No. 74 of 1956), from any place in the State, such dealer shall be entitled to a payment of a sum equal to ninety per centum of the amount of sales tax paid by him, for any quarter under the Sales Tax Act in respect of sales of such goods, as industrial promotion assistance. The above Scheme is the earlier version of the present scheme floated by the Government of West Bengal in 2010 under which the appellant received the incentive, i.e., Scheme 2010. The above fact is clearly evident from the Circular No.2 dated 29-04-2010 issued by the Directorate of Commercial Tax, West Bengal. 14.4. The appellant has its manufacturing unit of Dyeing & Bleaching at Domjur, Jalan Industrial Complex, Gate-3, Howrah. The manufacturing activities started since 1999. It expanded substantial capacities in the year 2005-06 onwards. The appellant has the following registrations: The appellant's unit is registered as Small Scale Industries Unit and is registered under Central Sales Tax and under VAT. I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 17 of 34 14.5. In the return of income, the said amount was not excluded by the appellant while computing the total income under the normal provisions of the Act. Even during the course of assessment proceedings, no such claim was made by the appellant for the exclusion of incentive amount being capital receipt. 15. Before us ld. Counsel for the assessee had vehemently argued referring to the following written submissions: “2.1 It is submitted that the appellant obtained incentive in the form of Sales Tax assistance of as Industrial Promotional Assistance (IPA) under the IPA Scheme. On perusal of the scheme, it is seen that the object of the scheme was to promote the new industries in the backward areas in the state of West Bengal. The impugned incentive was not connected with the operations of the business, and it was solely provided for setting up of new industrial project or undertaking for major expansion in the existing industrial undertaking. The incentive was linked with the capital investment and subject to the maximum ceiling of incentive. 2.2 It is submitted that various appellate authorities have time and again held that the Sales Tax Incentive granted by the Government to the Assessee with the object to provide incentive to set up new industrial undertaking or substantial expansion of the existing undertakings was capital receipt and not revenue in nature. The authorities have held that if the object of the subsidy is to enable the assessee to run the business more profitably, the receipt is revenue receipt. On the other hand, if the object of the assistance is to enable the assessee to set up a new unit or to expand an existing unit, the receipt would be a capital receipt. Therefore, the object for which subsidy is given determines the nature of the subsidy and not the form of the mechanism through which the subsidy is given. The main eligibility condition as per the Scheme was to setup a new unit or carry out substantial expansion of an existing unit in a backward area. Thus, in the instant case, where the sales tax Incentive is received by the appellant for setting up industry in the backward region of the State of West Bengal, it would constitute capital receipt in the hands of the appellant, as it has been granted for carrying out capital investments in backward areas of the State and hence not taxable under normal provision of the Act. I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 18 of 34 2.3 In this regard, it will be imperative to refer to the object of the grant of subsidy by the State of West Bengal as reflected from the original resolution as well as the subsequent resolution which was amended with retrospective effect from 27-5-1994 those are quoted below: "No. 1460-F-TCalcutta, the 27-5-1994 Resolution Whereas certain industries in the State have been passing through an acute financial crisis and it had been considered necessary to extend financial assistance to tide over such crisis for promotion of such industries, it has been decided in the public interest to formulate a scheme to allow financial assistance to the manufacturing units in West Bengal of such industries for industrial promotion: Now therefore, the Governor is pleased hereby to sanction the implementation of the aforesaid scheme for allowing financial assistance for promotion of industrial units in West Bengal of certain industries in the manner hereinafter appearing: "Resolution No. 1460-F.T. Dated 27-5-1994 Whereas the Governor is of the opinion that Industrial Units manufacturing certain goods in West Bengal are in need of financial assistance for expansion of their capacities, modernization, and improving their marketing capabilities and accordingly it is necessary to formulate a Scheme of industrial promotion to assist such units for the purposes mentioned hereinbefore: Now, therefore, the Governor is pleased hereby to introduce a Scheme of industrial promotion to be implemented in the manner hereinafter appearing;" 2.4 Section 3 of the scheme describes entitlement to the industrial promotion assistance and the same is also quoted below: "3. Entitlement to the Industrial Promotion Assistance. —Where a registered dealer manufactures in his unit goods specified in Schedule A or manufactures in his SSI unit goods specified in Schedule B and sells such goods in the State-intra-State or in the course of inter-State trade or commerce within the meaning of section 3 of the Central Sales Tax Act, 1956 (Act No. 74 of 1956), from any place in the State, such dealer shall be entitled to a payment of a sum equal to ninety per centum of the amount of sales tax paid by him, for any quarter under I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 19 of 34 the Sales Tax Act in respect of sales of such goods, as industrial promotion assistance." 2.5 From the objects and the reasons of the aforesaid scheme as well as the entitlement as indicated in section 3 mentioned above, it is clear that the Government has decided to grant the subsidy by way of financial assistance to tide over the period of crisis for promotion of the industries mentioned in the scheme which have the manufacturing units in West Bengal and which are in need of financial assistance for expansion of their capacities, modernization, and improving their marketing capabilities. The above Scheme is the earlier version of the present scheme floated by the Government of West Bengal in 2010 under which the appellant received the incentive, i.e., Scheme 2010. The Scheme 1994 was superseded by Scheme 2010 and the said fact is clearly evident from the Circular No.2 dated 29-04-2010 issued by the Directorate of Commercial Tax, West Bengal [Refer Page 17-18 of 'PB'].” 16. Ld. Counsel for the assessee had relied on the following decisions: i) CIT vs. Rasoi Ltd. [2011] 11 taxmann.com 220 (Calcutta) ii) ACIT vs. Shantinath Detergents Pvt. Ltd. [in IT(SS)A No. 27 to 32/Kol/2019 dated 20-03-2020] iii) ACIT vs. Budge Budge Refineries Ltd. 2016 (10) TMI 1307 – ITAT Kolkata iv) DCIT vs. Birla Corporation Ltd. 2021 (1) TMI 154 – ITAT Kolkata v) CIT vs. Ponni Sugars & Chemicals Ltd. (2008) 306 INCOME TAX RETURN 392 (SC) vi) DCIT vs. Reliance Industries Ltd. (2004) 88 ITD 273 (Mum)(SB) 17. On the other hand, ld. D/R stated that the assessee has not raised this issue in the proceedings below and has itself claimed it as a Revenue income in the profit and loss account. However, ld. D/R failed to rebut the ratios laid down by the Hon'ble Courts before this Tribunal by placing any other binding precedence. I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 20 of 34 18. We have heard rival contentions and perused the records placed before us. We notice that the assessee company has shown the accrued income from the sales tax incentive for the following amount: AY 2012-13 AY 2013-14 AY 2014-15 1,35,74,366/- 1,24,46,609/- 1,37,62,482/- 19. We notice that the assessee company has manufacturing unit of dying and bleaching at Domjur, Howrah. The assessee obtained incentive in the form of sales tax assistance as industrial promotional assistance under the “IPA Scheme”. The objective of the scheme is to promote new industries in the backward area in the State of West Bengal and is solely provided for setting up of new industrial project or undertaking for major expansion in the existing industrial undertaking. Incentive is linked with the capital investment and subjected to the maximum ceiling of incentive. It would be relevant to go through the relevant content of the Sales and Incentive Scheme of the State of West Bengal, specially, Section 3 of the said Scheme and the same is extracted below: “3. Entitlement to the Industrial Promotion Assistance. —Where a registered dealer manufactures in his unit goods specified in Schedule A or manufactures in his SSI unit goods specified in Schedule B and sells such goods in the State-intra-State or in the course of inter-State trade or commerce within the meaning of section 3 of the Central Sales Tax Act, 1956 (Act No. 74 of 1956), from any place in the State, such dealer shall be entitled to a payment of a sum equal to ninety per centum of the amount of sales tax paid by him, for any quarter under the Sales Tax Act in respect of sales of such goods, as industrial promotion assistance.” 20. From perusal of the above objects we notice that the purpose of the said scheme is to grant subsidy by way of financial I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 21 of 34 assistance for promoting the manufacturing units in backward areas of West Bengal. Under similar type of sales tax incentive received by another assessee namely Rasoi Ltd. (supra) came for consideration before the Hon'ble Jurisdictional High Court in the case of CIT vs. Rasoi Ltd. [2011] 11 taxmann.com 220 (Calcutta) and the sum received by the assessee from such Sales Tax Incentive Scheme was treated as capital receipt and accordingly not accessible in the hands of the assessee. The relevant extract of the ratio laid down by the Hon'ble Jurisdictional High Court is reproduced below: “16. In the case before us, the object of the subsidy is for expansion of their capacities, modernization, and improving their marketing capabilities and, thus, those are for the assistance on capital account. Similarly, merely because the amount of subsidy was equivalent to 90 per cent of the sales tax paid by the beneficiary does not imply that the same was in the form of refund of sale tax paid. As pointed out by the Supreme Court in the case of Senairam Doongarmall v. CIT AIR 1961 SC 1579, it is the quality of the payment that is decisive of the character of the payment and not the method of the payment or its measure, and makes it fall within capital or revenue. Thus, in the case before us, the amount paid as subsidy was really capital in nature. 17. In the case of CIT v. Abhishek Industries Ltd. [2006] 156 Taxman 257 relied upon by Mr. Nizamuddin, a Division Bench of the Punjab and Haryana High Court was dealing with a case of subsidy granted in the form of sale tax exemption and thus, the Division Bench held that in the absence of any document or policy of the State Government to show the kind of subsidy it had granted it should be treated as a revenue receipt. In the case before us, having regard to the objects and reasons behind the grant of the subsidy we find that it is a case of capital receipt” 20.1. Similar issue was also decided in the case of DCIT -vs.- Strassenburg Pharmaceuticals Ltd. 2011 (1) TMI 1441 - ITAT Kolkata wherein the jurisdictional Kolkata ITAT held that the sole I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 22 of 34 purpose behind the grant of assistance is to tide over the financial crisis and promotion of industries and that these activities are related to capital field and cannot be linked up with day-to-day operations of the appellant in any manner. It was accordingly held that the subsidy was a capital receipt not chargeable to tax. It is important to note that the aforesaid decision of the Hon'ble ITAT was challenged by the Revenue before the Calcutta High Court. The Hon'ble High Court in its order dated 21 July 2011 (CIT -vs.- Stranssenburg Pharmaceuticals Ltd. 2011 (7) TMI 1240 - Calcutta HC) relied upon its own decision in case of Rasoi Ltd. (supra) and dismissed the department's appeal, thereby confirming the nontaxability of subsidy. 20.2. In the case of ACIT -vs.- Budge Budge Refineries Ltd. 2016 (10) TMI 1307 - ITAT Kolkata also, the jurisdictional Kolkata ITAT held that the sales tax subsidy received pursuant to the West Bengal Incentive Scheme 2000 was to be treated as capital receipt not chargeable to tax in the hands of the assessee. The Hon'ble ITAT relied upon the decision of the jurisdictional High Court in case of Rasoi Ltd. (supra) and Strassenburg Pharmaceuticals (supra) to confirm the nature of subsidy as a capital receipt not chargeable to tax. It is important to note that the aforesaid decision of the Hon'ble ITAT was challenged by the Revenue before the Calcutta High Court. The Hon'ble High Court in its order dated 8 February 2022 (Principal Commissioner of Income tax, Central-1, Kolkata versus M/s. Budge Budge Refineries Ltd. - 2022 (2) TMI 533 - Calcutta High Court) dismissed the Revenue's appeal, thereby confirming the non-taxability of subsidy. I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 23 of 34 20.3. In the case of DCIT -vs.- Shyam Steel Industries Ltd. 2017 (2) TMI 1456 - ITAT Kolkata, the jurisdictional Kolkata RAT decided on issue of whether the sum received by the assessee as Industrial Promotion Assistance under the West Bengal Incentive Scheme 2000 for establishing the industry in the state of West Bengal which is disbursable by way of sales tax paid is a capital receipt not chargeable to tax. Relying upon the decision in case of Budge Budge Refineries (supra), keeping in view the objects of the West Bengal Incentive Scheme 2000 and various judicial precedents, the Hon'ble ITAT held that the subsidy is to be treated as capital receipt not chargeable to tax in the hands of the assessee. It observed that sole purpose behind the grant of assistance is to tide over the financial crisis and promotion of industries and that both these activities are related to capital field and cannot be linked up with day-to-day operations of the appellant in any manner. 20.4. In the case of DCIT -vs.- Emami Biotech Limited 2019 (3) TMI 1833 - ITAT Kolkata, the sales tax incentives was held to be treated as a capital receipt. Relevant extract of the order of the jurisdictional ITAT is reproduced below: "34. Having regard to all the relevant facts of the case and keeping in view the legal position emanating from the various judicial pronouncements discussed above, we are of the view that the subsidy in question received by the assessee in the form of refund of sales tax under the West Bengal Incentive Scheme, 2004 was capital in nature as the purpose of the same was for the expansion of the existing industry of the assessee." 20.5. In the case of DCIT -vs.- Birla Corporation Ltd. 2021 (1) TMI 154 – ITAT Kolkata, the jurisdictional Kolkata ITAT has held that I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 24 of 34 the amount received by the assessee as Industrial Promotion Assistance from the State Govt is capital in nature. 20.6. In the case of DCIT -vs.- Sovaispat Limited 2020 (6) TMI 100 - ITAT Kolkata, it was held that the Industries Promotion Assistance [IPA] received as subsidies by the assessee under the West Bengal Incentive Scheme 2000 is capital receipt. Relevant extract of the order is reproduced below: “........since the subsidy was for setting up of large/medium/small scale eligible unit in group B and C areas in the State of West Bengal and the competent authority has issued the eligibility certificate (West Bengal Industrial Development Corporation Ltd.) to the assessee and since the assessee fulfils all the conditions as laid in the WBIS 2000 scheme, the industrial promotion assistance it received was on capital account. 13. In the light of the discussion above and relying on the ratio laid in the decision of the Hon'ble Calcutta High Court in M/s. Rasoi Ltd. (2011) 79 CCH 419, we uphold the order of the Id. CIT(A) since the subsidy/IPA was given to the assessee for setting up of mega project/unit in the district of Bankura, West Bengal ( as discussed supra). Therefore, we find no infirmity in the impugned order of the Id. CIT(A). We uphold the same.” 20.7. Further, in the case of Sahney Steel and Press Works Ltd and Others -vs.-CIT (1997) 228 ITR 253 (SC) the Apex Court has held that character of the subsidy in the hands of the recipient - whether revenue or capital - will have to be determined, having regard to the purpose for which the subsidy is given. If the purpose is to help the assessee to set up its business or complete a project rather than assisting it in carrying on its business operations, the monies must be treated as having been received for capital purpose. I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 25 of 34 20.8. Furthermore, reliance can also be placed on the decision of the Hon'ble Apex court in CIT -vs.- Ponni Sugars & Chemicals Ltd. (2008) 306 ITR 392 (SC) wherein the Apex Court has referred to the earlier decision of the Apex Court in the case of Sahney Steel (supra) and has held that - "The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt 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. The 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 loans taken by the assessee to set up new units or for substantial expansion of existing units. 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 the assessee to set up a new unit or to expand the existing unit then the receipt was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant." 20.9. The Hon'ble Apex Court in the case of CIT -vs.- Chaphalkar Brothers (Civil Appeal Nos. 6513-6514 of 2012, order dtd. 07-12- 2017)(SC) reaffirmed that the purpose test is the essential test that is to be adopted in determining the character of a subsidy. The outward form in which the subsidy is granted is not determinative of the issue. Since, in the given case object of granting entertainment duty subsidy was to promote the construction of I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 26 of 34 multiplex theatre complexes, the receipt of subsidy was held to be a capital receipt, not chargeable to tax. 20.10. Further, reliance is placed on the decision of the Apex Court in the case of CIT vs Shree Balaji Alloys [Civil Appeal No. 10061 of 2011] wherein the court upheld the decision of the Hon'ble High Court of Jammu & Kashmir in case of Shree Balaji Alloys -vs.- CIT (2011) 51 DTR 217 (J&K), which relying on the principles laid down by the Hon'ble Apex Court in the case of Sahney Steel and Press Works Ltd (Supra) & Ponni Sugars (supra) had held that subsidy received with the object of creating avenues for Perpetual Employment, to eradicate the social problem of unemployment in the State by accelerating industrial development is capital receipt. 20.11. Similar view was taken by the jurisdictional Calcutta High Court in the case of PCIT v. Ankit Metals & Power Ltd. (2019) 109 taxmann.com 93 (Cal.) wherein the assessee received subsidy under the WBIS 2000 scheme. The question that came up for adjudication was whether incentive received is capital or revenue in nature. The Hon'ble High Court held the following: "On perusal of the contents of the relevant portion under the incentive subsidy schemes in question we found that in the case of the assessee, the State Government under the West Bengal Incentive Scheme, 2000, and 'West Bengal Incentive to Power Intensive Industries Scheme, 2005', had actually granted the subsidy with the sole intention of setting up new industry and attracting private investment in the state of West Bengal in the specified areas in the present case Bankura which is industrially backward hence the same was of the nature of non-taxable Capital receipt. Thus according to the 'purpose test' laid out by the Hon'ble Supreme Court, various and High Courts including our Court the aforesaid subsidy should be treated as capital receipt in spite of the fact that computation of 'Power subsidy' is based on the power consumed by the assessee. It is well I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 27 of 34 established from submission of the assessee as enunciated above that once the purpose of a subsidy is established; the mode of computation is not relevant as held in the decisions of the Hon'ble Supreme Court in the case of Sahney Steel and Press Works Ltd. Vs. Commissioner of Income tax [1997] 228IRT 253(SC); CIT Vs. Ponni sugars and Chemicals Ltd. [2008] 306ITR 392 (SC) and the decision of our High Court in case of CIT Vs. Rasoi Ltd. 335 ITR 438 (Cal.) against which SLP has been dismissed. The mode of computation/form of subsidy is irrelevant. The mode of giving incentive is reimbursement of energy charges. The nature of subsidy depends on the purpose for which it is given. Hence the assessee draws support from the decisions already discussed earlier as the same principle will apply here. Thus, the entire reason behind receiving the subsidy is setting up of plant in the backward region of West Bengal, namely, Bankura. Accordingly, we hold the aforesaid incentive subsidies are 'capital receipts' and is not an 'income' liable to be taxed in relevant assessment year 2010-11 on the basis of discussion made above and further taking into consideration the definition of Income under Section 2(24) of the Income Tax Act, 1961, where sub- clause (xviii) has been inserted including 'subsidy' for the first time by Finance Act, 2015 w.e.f. April, 2016 i.e. assessment year 2016-17. The amendment has prospective effect and had no effect on the law on the subject discussed above applicable to the subject assessment years." 20.12. Similarly, in the case of DCIT -vs.- Reliance Industries Ltd. (2004) 88 ITD 273 (Mum)(SB) the Hon'ble Special Bench has held that where the object of the subsidy was to encourage the setting up of industries in the backward area and the incentive was not given to the assessee for assisting it in carrying out its business operations, the same is capital in nature. This was later affirmed by Bombay High Court in CIT vs. Reliance Industries Ltd. (2010) 339 ITR 632. 21. We, therefore, respectfully following the ratio laid down by the Hon'ble Courts, are inclined to hold that since the facts are similar I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 28 of 34 and the sales tax incentive received by the assessee is for setting up of industries in the backward areas of West Bengal and is not directly related to the revenue growth of the assessee company, we hold it to be a capital receipt not liable to tax. We therefore, allow the additional ground nos. 4.1 for AY 2012-13 & AY 2013-14 and ground no. 5.1 for AY 2014-15 raised by the assessee. 22. Now, as far as the exclusion of the sales tax incentive for the purpose of computing book profit u/s 115JB of the Act, ld. Counsel for the assessee has submitted that the issue is squarely covered in favour of the assessee by the judgment of Hon'ble Jurisdictional High Court in the case of PCIT vs. M/s. Krishi Rasayan Exports Pvt. Ltd. ITA No. 18/2021 order dated 14.09.2022, PCIT vs. Ankit Metals & Power Ltd. (2019) 109 taxmann.com 93 (Cal.). 23. On the other hand ld. D/R objected to the submissions made by ld. Counsel for the assessee but could not place any other binding precedence in favour of the Revenue. 24. We have heard rival contentions and perused the records placed before us. The issue raised in the additional ground is that whether the sales tax incentive received by the assessee during AY 2012-13 to AY 2014-15 is to be excluded for the purpose of computing book profit u/s 115JB of the Act. We notice that this issue is no longer res-integra and is squarely covered in favour of the assessee by plethora of judgments including that of the Hon'ble Jurisdictional High Court in the case of Ankit Metals & Power Ltd. (supra) and M/s. Krishi Rasayan Exports Pvt. Ltd. (supra). I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 29 of 34 24.1. Recently in the-recent Jurisdictional Hon'ble Calcutta High Court in the case of PCIT -vs.- M/s. Krishi Rasayan Exports Pvt. Ltd. (in ITA No. 18/2021 dated 14-09-2022) while dealing the question of inclusion of interest subsidy and excise refund for computation of book profits has held that where a receipt is not in the nature of income at all, it cannot be included in the book profit for the purpose of computation under section 115JB of the Act. It has been ruled that the 'interest subsidy' being a capital receipt does not fall within the meaning of income as defined in Section 2(24) of the Act and thus the same cannot be included in the computation of book profit. 24.2. Reference is also drawn to the principle laid down by the Hon'ble Calcutta High Court in the case of PCIT vs Ankit Metals & Power Ltd. (2019) 109 taxmann.com 93 (Cal.) wherein the assessee received subsidy under the WBIS 2000 scheme. The question that came up for consideration was whether the subsidy received under the said scheme was capital or revenue in nature. The Hon'ble High Court held the following: "On perusal of the contents of the relevant portion under the incentive subsidy schemes in question we found that in the case of the assessee, the State Government under the West Bengal Incentive Scheme, 2000, and 'West Bengal Incentive to Power Intensive Industries Scheme, 2005', had actually granted the subsidy with the sole intention of setting up new industry and attracting private investment in the state of West Bengal in the specified areas in the present case Bankura which is industrially backward hence the same was of the nature of non-taxable Capital receipt. Thus according to the 'purpose test' laid out by the Hon'ble Supreme Court, various and High Courts including our Court the aforesaid subsidy should be treated as capital receipt in spite of the fact that computation of 'Power subsidy' is based on the power consumed by the assessee. It is well established from submission of the assessee as enunciated above I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 30 of 34 that once the purpose of a subsidy is established; the mode of computation is not relevant as held in the decisions of the Hon'ble Supreme Court in the case of Sahney Steel and Press Works Ltd. Vs. Commissioner of Income tax [1997] 228 ITR 253(SC); CIT Vs. Ponni sugars and Chemicals Ltd. [2008] 306 ITR 392 (SC) and the decision of our High Court in case of CIT Vs. Rasoi Ltd. 335 ITR 438 (Cal.) against which SLP has been dismissed. The mode of computation/form of subsidy is irrelevant. The mode of giving incentive is reimbursement of energy charges. The nature of subsidy depends on the purpose for which it is given. Hence the assessee draws support from the decisions already discussed earlier as the same principle will apply here. Thus, the entire reason behind receiving the subsidy is setting up of plant in the backward region of West Bengal, namely, Bankura. Accordingly, we hold the aforesaid incentive subsidies are 'capital receipts' and is not an 'income' liable to be taxed in relevant assessment year 2010-11 on the basis of discussion made above and further taking into consideration the definition of Income under Section 2(24) of the Income Tax Act, 1961, where sub- clause (xviii) has been inserted including 'subsidy' for the first time by Finance Act, 2015 w.e.f. April, 2016 i.e. assessment year 2016-17. The amendment has prospective effect and had no effect on the law on the subject discussed above applicable to the subject assessment years." 24.3. In the case of Sunrise Biscuit Co. Pvt. Ltd. -vs.- Income Tax Officer, Ward-1 (5), Guwahati I.T.A. No. 92/Gau/2019 the Hon'ble Guwahati Tribunal was dealing with the issue of whether subsidy received by the Assessee was capital in nature and therefore not eligible to income-tax, both under normal computational provisions as well as book profit u/s 115JB of the Act. This Tribunal relied upon of the judgement of the Hon'ble Supreme Court in the cases of Sahney Steel & Press Works (supra) & Ponni Sugar & Chemicals Ltd. (supra) and had held that the object or purpose for which the subsidy was given was relevant. It was held that the source of subsidy is immaterial, form of subsidy is equally immaterial and the time at which the subsidy is paid is also I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 31 of 34 immaterial. It was held that the purpose of the scheme which enabled the grant of subsidy to the assessee was the only material factor in determining the taxability of such receipts. Further, placing reliance on the decision of the jurisdictional Hon'ble Kolkata Tribunal in case of DCIT vs. M/s. Century Plyboards (I) Ltd. in ITA No. 2149/Kol/2019, it was held that such capital subsidy received by the assessee is also liable to be excluded from the computation of book profit. Relevant extract of the order of this Tribunal is reproduced below: "24. As regards the issue relating to treatment of this VAT subsidy while computing book profit u/s 115JB of the Act, we note that this exact issue was considered by us while deciding the case of DCIT vs. M/s. Century Plyboards (I) Ltd. in ITA No. 2149/Kol/2019 (supra) and it was held that such capital subsidy received by the assessee is also liable to be excluded from the computation of book profit. The relevant findings are as follows: 45. Now coming to the issue relating to treatment of these subsidies while computing book profit u/s 115JB, we note that the Hon'ble Apex Court in the case of Apollo Tyres Ltd. vs. CIT (255 ITR 273) held that the AO has the power to rework the book profit if the profits are computed not in accordance with Part II and Part III of Schedule VI to the Companies Act, 1956. The Hon'ble Supreme Court in their subsequent decision rendered in the case of Indo Rama Synthetics (I) Ltd vs. CIT (330 ITR 363) further held that, the object of MAT provisions is to bring out the true working result of the companies. As held in the preceding paras, the subsidies received by the assessee were capital in nature and therefore not liable to tax. In the circumstances therefore, inclusion of such capital receipt in the computation of book profit u/s 115JB would defeat two fundamental principles. Firstly, it would levy tax on receipt which is not in the nature of income at all and secondly it would not result in arriving at real working results of the company. We thus find merit in the assessee's claim that the said subsidies being capital in nature, deserves to be excluded from the computation of book profit u/s 115JB of the Act. I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 32 of 34 46. It is noted that in the context of similar State Industrial Scheme, the jurisdictional Hon'ble Calcutta High Court in the case of Pr. CIT Vs Ankit Metal and Power Ltd (416 ITR 591) held that subsidies received for setting up new industry is not in the nature of income and therefore cannot be deemed as income for the purposes of computing book profit u/s 115JB of the Act. In the decided case the assessee had received interest subsidy under the WB Incentive Scheme, 2000 and power subsidy under the Power Intensive Industries Scheme, 2005 for setting up Sponge Iron Plant in Bankura. Before this Tribunal, the assessee claimed that receipt of such subsidies in form of remission of interest and power / electricity duty payments etc. was capita! receipt not liable to tax both under the normal computational provisions as well as book profit u/s 115JB of the Act. The Tribunal answered the issue in favour of the assessee. On appeal by the Revenue, the Hon'ble High Court upheld the order of this Tribunal by observing as under: "26. Now the second issue which requires adjudication is as to whether the aforesaid incentive subsidies received by the assessee from the Government of West Bengal under the schemes in question are to be included for the purpose of computation of book profit under Section 115JB of the Income Tax Act, 1961 as contended by the revenue by relying on the decision in the case of Apollo Tyres Ltd. (supra). 27. In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capita! receipt' and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under Section 115JBoftheAct, 1961. In the case of Apollo Tyres Ltd. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961." ................ I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 33 of 34 26. The admitted factual and legal position in the present case is that subsidies in question is not in the nature of income. Therefore they cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s.115JB of the Act. We hold accordingly and confirm the order of the CIT(A) in this regard. In light of the aforesaid discussion, we are of the view that the subsidies in question should be excluded for the purpose of determination of book profits u/s.115JB of the Act. We hold accordingly and dismiss Gr.No.2 raised by the Revenue. ........................ 25. For the reasons set out above therefore, we allow the grounds taken by the assessee and direct the AO to deduct the VAT subsidy of 18,78,84,902/- both while computing income under normal computational provisions and book profit u/s 115JB of the Act for the relevant A Y 2014-15.” 24.4. The Hon'ble Kolkata ITAT in case of DCIT -vs.- M/S Century Plyboards (I) Ltd. (ITA No. 2149/Kol/2019 and C.O. No. 22/Kol/2020 In ITA No.2149/Kol/2019) relied upon finding of its coordinate bench in the case of Sicpa India (P) Ltd. -vs.- DCIT [2017] 186 TTJ 289 (Kli.) wherein it has been held that subsidies cannot be regarded as income even for the purpose of book profits u/s.115JB of the Act though credited in the profit and loss account and have to be excluded for arriving at the book profits u/s.115JB of the Act. 25. From perusal of the above judgments, we are inclined to hold that the sales tax incentive which is the capital receipt (as held above in the preceding para) given to the assessee for achieving industrialization in the backward areas of West Bengal, is not required to be included in the book profit for computing the tax liability u/s 115JB of the Act. Thus, we allow the additional ground I.T.(S.S.)A. Nos.: 9, 10 & 11/Kol/2022 AYs: 2012-13, 2013-14 & 2014-15 M/s. Rupa & Company Limited. Page 34 of 34 no. 4.2 for AY 2012-13 & AY 2013-14 and ground no. 5.2 for AY 2014-15. 26. All the other grounds of appeal for AY 2012-13 to AY 2014- 15 are general and consequential in nature which need no adjudication. 27. In the result, the appeals filed by the assessee for AY 2012- 13, AY 2013-14 & AY 2014-15 are partly allowed. Kolkata, the 27 th March, 2023 Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 27.03.2023 Bidhan (P.S.) Copy of the order forwarded to: 1. M/s. Rupa & Company Limited., 1, Metro Towers, 8 th Floor, Ho Chi Minh Sarani, Kolkata-700 071. 2. DCIT, Central Circle-2(3), Kolkata. 3. CIT(A)-20, Kolkata. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata