OSAKA ALLOYS & STEEL PRIVATE LIMITED,JALANDHAR V. DCIT/ACIT, CIRCLE-1, JLD, JALANDHAR

ITA 60/ASR/2025

AI Insights

The case involves Osaka Alloys & Steel Pvt. Ltd., which appealed against the order of the CIT(A) concerning the inclusion of an excise duty refund in the computation of book profits under section 115JB for the assessment year 2012-13. The assessee argued that the excise duty refund was a capital receipt and should not be included in the book profits, a view supported by various judicial precedents. The AO had initially included this amount in the book profits, leading to an increased tax liability, which the assessee contested. The Tribunal examined whether the adjustments made by the AO were appropriate under section 154 of the Income Tax Act, focusing on the absence of a separate SCN and the debatable nature of the issue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714339 (ITAT-AMRITSAR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2012-2013
• Other Referred Cases: T.S. Balaram, ITO v. Volkart Bros., Commissioner of Income Tax v. R.T.C.L. Ltd., Assistant Commissioner of Income Tax, Central Circle-18, New Delhi v. Uflex Ltd., Commissioner of Income Tax v. Reliance Industries Ltd., Principal Commissioner of Income Tax v. Lanshree Products & Services Ltd., Principal Commissioner of Income Tax-1 v. M/s Setco Automotive Ltd, Principal Commissioner of Income Tax v. Steco Automotive Ltd., Banswara Syntex Ltd. v. Assistant Commissioner of Income Tax, Circle, Chittorgarh, Maccaferri Environmental Solutions (P.) Ltd. v. Income Tax Officer, Ward-3(2), Mumbai, Setco Automotive Ltd. v. ACIT Panchamahal Circle Godhra
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Opportunity of being heard; Revised return; Capital receipt; Principle of natural justice; Revision of order
• Section: 143(3); 154; 263; 115JB; 80IB

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (HYBRID COURT) BEFORE SH. MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER AND SH. UDAYAN DASGUPTA, JUDICIAL MEMBER I.T.A. No. 60Asr/2025 Assessment Year: 2012-13 Osaka Alloys & Steel Pvt. Ltd., 428 Mota Singh Nagar, Jalandhar Punjab 144001 [PAN: AAACO7097G] (Appellant) Vs. DCIT/ACIT, Circle-1, Jalandhar (Respondent) Appellant by Respondent by : : Sh. Rohit Kapoor, Adv. & Sh. V.S. Aggarwal, ITP Sh. Charan Dass, Sr. D. R. Date of Hearing Date of Pronouncement : : 09.07.2025 07.08.2025 ORDER Per Udayan Dasgupta, J.M.: This appeal is filed by the assessee against the order of ld.CIT(A) NFAC, Delhi dated 02.12.2024 passed u/s 250of the Income Tax Act, 1961 which has emanated from the order of the ACIT, Circle-2, Jalandhar dated 30.03.2018 passed u/s 154of the I.T. Act, 1961. Printed from counselvise.com 2 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 2. Grounds of appeal taken by the assessee in Form No. 36 are as follows: “1. That order u/s 250 of the Income Tax Act, 1961 passed by Commissioner of Income Tax, Jalandhar is illegal, bad in law and without jurisdiction. 2. The CIT(A) has erred in appreciating that the calculation of book profit under section 115 JB is a debatable issue, and as such, it cannot be rectified under Section 154 of the Income Tax Act. Section 154 of the Income Tax Act permits rectification only for mistakes that are \"apparent from the record,\" ie, clear, undisputed errors requiring no detailed interpretation. 3. The CIT(A) has erred in failing to recognize that no prior notice was issued before disallowing the excise duty credit of Rs. 5,26,484/-. 4. That the Ld. CIT (A) has erred in law and facts and has failed to appreciate that the AO having taken a view that the subsidies amounting to Rs. 5,26,484/- are capital in nature and then erred in not giving the same treatment while working out book profit u/s 115JB. 5. The Ld. CIT(A) failed to correctly interpret that once a receipt is not classified as income under section 2(24) of the Income Tax Act, 1961, it cannot be considered as part of book profit under section 115JB. It is a settled position of law that for the purpose of computing book profit, only receipts that qualify as income can be included. As such, the subsidy, not being income, should not have been included in the book profit computation. 6. That the Appellant requests for leave to add or amend the grounds of appeal before the appeal is heard or disposed.” Printed from counselvise.com 3 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 3. Brief facts emerging from the record are that the assessee is engaged in the business of manufacturing of Lead Ingots, Lead Alloy Ingots, Lead Oxides, unit being located at Samba, J & K, and has filed its original return on 29/09/2012, declaring income at NIL after claiming deduction u/s 80IB(4)of the Act amounting to Rs.17,38,227/-, and tax was paid u/s 115 JB ( MAT ) amounting to Rs.1,24,552/- (with applicable interest ). 4. Thereafter, the assessee filed a revised return on 31/08/2013, revising the MAT computation u/s 115JB, determining MAT payable at Rs.5,821/- (and claiming refund of excess tax paid), by reducing the book profits to the extent of the capital receipts relating to excise duty refund of Rs.5,69,745/-. 5. The assessment was completed u/s 143(1) by the AO - CPC, Bangaluru, vide intimation, dated 28/11/2013, denying the claim of Rs.17.38 lakhs u/s 80IB(4)of the Act. 6. Subsequently, on a rectification application u/s 154 of the Act , the AO allowed the claim of Rs.17.38 lakhs u/s 80IB(4) vide order dated 30/03/2018, but enhanced the book profits by Rs.5,69,745/- for the purpose of calculation of MAT and determined MAT payable at Rs.1,24,557/- (against Rs.5,821/- as returned by the assessee). Printed from counselvise.com 4 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 7. The matter carried in appeal has been dismissed by the Ld first appellate authority on the ground that the issue of exclusion of capital subsidy for the purpose of computation of book profits has never been deliberated or claimed in proceedings u/s 154 and even otherwise also in the instant case the deduction u/s 80IB is allowed at Rs.17.38 lakhs and adjusted book profits being much lesser at Rs. 6 lakhs only, (as per computation of AO), the claim of the assessee is already accommodated. The observation of the Ld. CIT (A) are as follows: “6.2 Though the issue dealt in the order u/s 154, relates to taxation of book profit without allowing deduction of 80IB available under the normal provisions of the Act, while computing a book profit, the appellant had filed an appeal on a tangential issue in respect of exclusion of capital subsidy in computing the book profit, which was never deliberated or claimed during the proceedings at the time of passing the original order u/s 154. Moreover, even at the time of appellate proceedings, no evidence was brought on record to indicate the actual quantum subsidy received and the treatment given to it in the books of accounts. 6.3 Notices u/s 250 were issued and the appellant did not provide any evidence of having file a revised return before the Ministry of Corporate Affair, excluding such amount from the computation of income as per P&L Account derived as per the books of account maintained. Therefore, the corresponding GoA is dismissed. 6.4 Even otherwise, while the deduction u/s 801B under the normal provisions of the Act is Rs. 17,38,227/-, the adjusted book profit u/s 115JB stands lesser at Rs. 6,00,293/- which proves that the claim of the appellant is already accommodated. 6.5 As per the provisions of section 246A, an appeal lies only when the assessee is aggrieved by the order passed. Since, there is no grievance and there cannot be any grievance against the taxation of book profit, the order passed u/s 154 dated 30.03.2018 is sustained.” Printed from counselvise.com 5 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 8. Now the assessee is before the tribunal on the grounds contained in the memorandum of appeal. 9. Before the Tribunal the Ld AR of the assessee has filed paper book containing copies of ITR, intimation u/s 143(1), rectification application, order u/s 154, copies of VAT – 11 and tax remission claim form, copies of assessment order u/s 143(3) for AY 2014-15, ITAT order dated 26/06/2024 for AY 2014-15 ( as evidence that identical matter was also in dispute before the tribunal for the above year). 10. He submitted that in the year under appeal , amount of Rs.5,69,745/- has been received on account of excise duty refund which is capital in nature (capital subsidy) and the same should not be treated as part of ‘book profits’ for the purpose of calculation of MAT. In other words the assessee has worked out book profits after reducing the excise duty refund but the AO has computed the book profits as per provisions of section 115JB,without the deduction for capital receipts (excise duty refund), credited in the profits and loss account. 11. The Ld AR further submitted that the adjustments of the book profits carried out by the AO in proceedings u/s 154 is a debatable issue and the said adjustments has been done against the provisions of section 154(3),without an opportunity of being heard to the assessee. Printed from counselvise.com 6 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 12. He further submitted , referring to the Tax Remission Claim Form and the incentive letters dated 23.04.2012 as approved by the Directorate of Industries and Commerce (placed in paper book no29), that the capital subsidy received from Central Government is a capital receipt which was wrongly clubbed with the Revenue profit and the amount of Rs.5,26,484/-should be treated as such and further submitted that various courts have consistently held that subsidies are capital in nature and the matter is also a debatable issue and involves interpretation of law and as such it does not fall within the purview of rectification u/s 154 of the Act. 13. He further referred to the copy of the assessment order for the assessment year 2014-15 which is enclosed in page no. 63 of the paper book where the AO has accepted the claim for exclusion of excise duty subsidy from book profit u/s 115JB of the Act, which again was a subject matter of revision u/s 263 of the Act, and ultimately the issue travelled to the tribunal, and in ITA No. 257/Asr/2019 dated 26.06.2024the Hon’ble bench opined against assumption of jurisdiction u/s 263 by the Ld PCIT . 14. It is further argued by the ld. AR of the assessee that only mistakes which are apparent from the record can be rectified u/s 154 and in the instant case, which is something which involves a debatable point of law and involves statutory provisions and there a reasonable scope for more than one interpretation the remedy of Printed from counselvise.com 7 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 rectification is not available . He further referred to the Hon’ble Apex Court Judgment in the case of T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 where the Hon’ble court has held that a mistake apparent form record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there can conceivably be two opinions. A decision on a debatable point of law is not mistake apparent from the record. 15. In support of his above contention he referred to the various other judgments of various Courts as follows: “1. High Court of Delhi, Commissioner of Income Tax v. R.T.C.L. Ltd. [2021] 23 taxmann.com 434 (Delhi) 2. Assistant Commissioner of Income Tax, Central Circle-18, New Delhi v. Uflex Ltd. [2012] 24 taxamann.com 228 (Delhi). 3. Commissioner of Income Tax v. Reliance Industries Ltd. [2014] 48 taxmann.com 362 (Bombay) 4. Principal Commissioner of Income Tax v. Lanshree Products & Services Ltd. [2023] 150 taxmann.com 389 (Calcutta). 5. Gujarat High Court, the Principal Commissioner of Income Tax-1 v. M/s Setco Automotive Ltd [2024] (3) TMI 829. 6. Principal Commissioner of Income Tax v. Steco Automotive Ltd. [2024] 161 taxmann.com 254 (Gujarat) 7. Banswara Syntex Ltd. v. Assistant Commissioner of Income Tax, Circle, Chittorgarh [2017] 108 ITD 48 (Jodh). 8. Maccaferri Environmental Solutions (P.) Ltd. v. Income Tax Officer, Ward-3(2), Mumbai [2019] 103 taxmann.com 154 (Mumbai Trib.) Printed from counselvise.com 8 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 9. ITAT Ahmedabad Setco Automotive Ltd. v. ACIT Panchamahal Circle Godhra [2023] (3) TMI 612. 16. He further submitted that without prejudice, subsidy was inserted in clause xiii of (section 2(24) w.e.f. 01.04.2016 and as per circular no 19 dated 27th November, 2015, containing explanatory notes to the above provisions, of the Finance Act 2015, it is clarified that the said amendment will take effect from 1st April, 2016 , and would accordingly apply from assessment year 2016-17and subsequent years and as such the subsidy will not qualify as an income under the definition as envisaged in section 2(24) of the Act, for the year under appeal and since it does not form a part of the total income as defined, it cannot be subjected to tax neither under normal computation nor under 115JB of the Act . 17. In support of his contention he relied on Hon’ble Calcutta High Court in the case of (i) PCIT v. Krishi Rasayan Exports (P.) Ltd. and (ii) also on Ankit Metal and Power Ltd: “[2022] 145 taxmann.com 191 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income-tax v. Krishi Rasayan Exports (P.) Ltd [Refer Page no. 45-47 of Case Law PB] Section 4, read with section 115JB, of the Income-tax Act, 1961-Income - Capital or revenue receipts (Subsidy and excise refund) - Assessment year 2012-13-Whether interest subsidy and excise refund should be treated as capital receipt for purpose of computation of book profit under provisions of section 115JB-Held, yes. Printed from counselvise.com 9 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 2019 (7) TMI 878-CALCUTTA HIGH COURT Other Citation: [2019] 416 ITR 591 (Cal) PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-2, KOLKATA VERSUS ANKIT METAL AND POWER LTD. MAT computation whether the aforesaid incentive subsidies received from the Government of West Bengal under the schemes in question are to be included for the purpose of computation of book profit u/s 115 JB? HELD THAT:- In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt and does not fall within the definition of 'Income' u/s 2(24) and when a receipt is not on in the character of income it cannot form part of the book profit u/s 115JB.” 18. Lastly before concluding, the Ld. AR submitted that in the instant case, the Act of the AO is legally flawed in absence of any notices of hearing u/s 154(3) of the Act and he submitted that as per the above provisions and also from the aspect of the natural justice, the assessee should have been provided with a notice of hearing which has not been done in this case and he relied on a number of judgments on this issue that any exercise where right or interests of the assessee are being affected , reasonable opportunity to defend should be allowed to the assessee and in the instant case since no opportunity to defend has been allowed (no notice u/s 154(3) has been served )the order is violative of the principles of natural justice and should be quashed . 19. In support of his contention he relied on the following decisions: Printed from counselvise.com 10 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 “Brig. (Retd.) Jitendra Kumar Narang vs. Income-tax Officer [2025] 175 taxmann.com 45 (Pune-Trib.)[28-05-2025] Arun Kumar Bose vs. Income-tax Officer [2025] 173 taxmann.com 853 (Calcutta)[08-04- 2025] ILJIN Automotive (P) Ltd. vs. ACIT [2025] 174 taxmann.com 1114 (Chennai -Trib.)126-05- 2025] Assistant Commissioner of Income-tax v. Sandeep Khanna[1998] 67 ITD 23 (CHD)(TM) Commissioner of Income-tax vs. Shaily Engg. Plastic Ltd. [2003] 126 Taxman 177 (SC)/[2002] 258 ITR 437 (SC)/(2003) 179 CTR 14 (SC)[31-10-2002] 20. As such, the Ld AR prays that the claim of the assessee may please be allowed. 21. The ld. DR relied on the order of the ld. CIT(A) but he has not been able to controvert as to why no opportunity of hearing has been allowed to the assessee u/s 154(3) of the Act and secondly , whether rectification proceedings are at all applicable in issues which are debatable in nature. However, he prays for the appellate order to be sustained. 22. We have heard the rival submissions and considered the materials on record and we observe that the initial dispute revolved around the claim for deduction u/s 80IB of the Act, amounting to Rs. 17.38 lakhs, which was disallowed in proceedings u/s 143(1), against which application for rectification u/s 154, was filed by the assessee and the AO allowed the said claim u/s 80IB vide order dated 30/03/2018. Printed from counselvise.com 11 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 23. In the same order u/s 154, dated 30/03/2018, the AO recalculated the book profits u/s 115JB by considering the excise subsidy received by the assessee amounting to Rs.5,69,745/- as part of total income ( which the assessee has not considered in its computation of book profits as per its revised return considering the same as capital receipt). 24. We are of the opinion that this act of the AO has an effect of enhancing an assessment resulting in increasing in liability of the assessee and the same is not legally justified without a separate SCN as per provisions of section 154(3) of the Act and in this case the assessee has not been allowed the right to defend. We are also of the opinion that the rectification proceeding u/s 154 was initiated at the behest of the assessee for correcting an error u/s 80IB of the Act and the computation of book profits u/s 115JBwas never an issue in the rectification application, and as such the AO could not have proceeded with the same without a fresh notice for that specific purpose, which has not been done in this case, rendering the proceeding legally unacceptable being violative of the principles of natural justice , because both sections operate in different perspective. 25. On this issue we rely on the decision of the Hon’ble Calcutta High court in the case of Arun Kumar Bose Vs ITO (supra) the relevant paragraph reproduced: Printed from counselvise.com 12 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 “25. Upon a conjoint reading of subsection (1), (2), (3) and (4) of Section 154, this Court holds that the authority has the power to make an amendment under Section 154(1) of its own motion but if such amendment has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, the authority concerned is under a statutory obligation to issue a notice upon the assessee and give a reasonable opportunity of hearing before passing an order of amendment for rectification of any mistake apparent from the record. 26. In the case on hand, the assessing officer made the amendment of its own motion. It is not in dispute that notice in terms of Section 154(3) of the Income Tax Act was not served upon the petitioner. No opportunity of hearing was afforded to the petitioner before passing the order dated February 7, 2025. This Court holds that there has been a violation of the provision laid down under Section 154(3) of the 1961 Act and for such reason the order dated February 7, 2025 calls for interference.” 26. Secondly, we are also of the opinion that the entire issue revolves around the nature and character of the excise subsidy received whether capital or revenue and the issue itself is debatable one, and the AO has allowed the deduction in the case of the assessee itself , in the Asst year 2014-15 , and as observed by us ( in paragraph – 16 and 17 above )it is very much debatable, whether or not , the subsidy will form a part of the total income as per provisions of section 2(24) of the Act and as such we are of the opinion that debatable issues which involves interpretation of the statute and facts will not be covered under the provisions of section 154 of the Act , because this section is only restricted to correction of mistakes which are manifest, plain or obvious which can be realized without a debate or dissertation, which is glaring, or Printed from counselvise.com 13 I.T.A. No. 60/Asr/2025 Assessment Year: 2012-13 self evident and on this issue we are guided by the Hon’ble Apex court in the case of T S Balaram ITO vs Volkart Brothers [ 1971] 82 ITR 50 . 27. As such considering the entire factual aspect of the matter we have no hesitation in deleting the addition made by the AO in proceedings u/s 154 of the Act and we are not in agreement with the order of the Ld first appellate authority, and the same is set aside, and the claim of the assessee regarding treatment of excise subsidy as capital receipt for the purpose of computation of book profits u/s 115JB is upheld. 28. In the result, the appeal filed by the assessee is allowed. Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 7th Aug., 2025. Sd/- Sd/- (Manoj Kumar Aggarwal) (Udayan Dasgupta) Accountant Member Judicial Member *GP/Sr.PS* Copy of the order forwarded to: (1)The Appellant: (2) The Respondent: (3) The CIT concerned (4) The Sr. DR, I.T.A.T True Copy By Order Printed from counselvise.com "