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2018 (4) TMI 1757 - AT - Income TaxDisallowance on account of provision for leave encashment - HELD THAT - Both parties inform us during the course of hearing that hon'ble jurisdictional high court s decision in Exide Industries Ltd. vs. Union of India 2007 (6) TMI 175 - CALCUTTA HIGH COURT quashing the statutory provision itself to be ultra vires. Hon'ble apex court 2009 (5) TMI 894 - SC ORDER has stayed operation thereof vide order dated 08.05.2009. The assessee s instant former substantive ground is restored back to the Assessing Officer to be decided afresh after the final outcome in Revenue s appeal in Exide Industries Ltd. Disallowance of sales tax incentive and state capital investment subsidy respectively while computing the book profit u/s 115JB - HELD THAT - From the foregoing discussion, we note that subsidy was given by the Govt. of West Bengal for the purpose of enabling the entrepreneurs to establish new industry and also expand the existing industries. Under normal computation of income the subsidy given to promote the industries are not subject to tax, therefore, an item which is not taxable cannot be brought to tax under the provision of MAT. In holding so, we rely on the order of this co-ordinate Bench of this Tribunal in the case of Sicpa India (P) Ltd. 2017 (3) TMI 1383 - ITAT KOLKATA The undisputed fact is that the incentive received by assessee is not in the nature of income earned during the course of business. Therefore, in our considered view, same cannot be regarded as income for the purpose of MAT u/s 115JB of the Act. Thus, the amount of incentive received by assessee should be excluded from the determination of book profit under the provision of Section 115JB - we reverse the order of Ld. CIT(A). and direct the AO to delete the same Disallowing the credit for tax paid by assessee by way of adjustment of refund for AY 2011-12 - HELD THAT - We direct AO to allow the credit of refund pertaining to AY 2011-12 adjusted against the demand for the year under consideration as per the provision of law. In terms of above direction, this ground of assessee is allowed for statistical purpose. Charging interest u/s. 234C on the assessed income rather than on returned income - AR before us brought to our notice that AO has charged interest u/s 234C of the Act on assessed income whereas the provision of section 234C of the Act require to charge the interest on the income declared by assessee in its returned income - HELD THAT - We set aside the order of Ld. CIT(A) and remit the issue back to the file of AO to pass speaking order after providing reasonable opportunity of being heard to assessee and charge the interest under section 234C of the Act as per the provisions of law. This ground of assessee is allowed for statistical purpose.
Issues Involved:
1. Disallowance of provision for leave encashment. 2. Exclusion of sales tax incentive and state capital investment subsidy in computing book profit u/s 115JB. 3. Exclusion of prior period interest on income tax refund in computing book profit u/s 115JB. 4. Exclusion of profit on sale of fixed assets in computing book profit u/s 115JB. 5. Credit for tax paid by way of adjustment of refund for AY 2011-12. 6. Computation of interest u/s 234C on assessed income rather than on returned income. 7. Deletion of addition of sales tax subsidy under normal computation of income. Detailed Analysis: 1. Disallowance of Provision for Leave Encashment: The assessee created a provision for leave encashment amounting to ?1,37,80,734, which was not paid within the due date of filing the return of income as specified u/s 139(1). The AO disallowed the deduction citing Section 43B(f), which mandates that such deductions are allowable only on a payment basis. The CIT(A) upheld the AO's decision, referencing the Supreme Court's interim order in the Exide Industries case, which stayed the Calcutta High Court's decision that struck down Section 43B(f). The Tribunal restored the matter to the AO, directing to await the Supreme Court's final decision. 2. Exclusion of Sales Tax Incentive and State Capital Investment Subsidy in Computing Book Profit u/s 115JB: The assessee claimed exclusion of sales tax remission (?3,98,70,574) and state capital investment subsidy (?59,75,000) from book profit u/s 115JB, arguing they were capital receipts. The AO disallowed this, stating there is no provision under the Act for such exclusions. The CIT(A) upheld the AO's decision, emphasizing that book profit adjustments are strictly governed by the Explanation to Section 115JB. However, the Tribunal reversed the CIT(A)'s decision, relying on the co-ordinate Bench's ruling in Sicpa India (P) Ltd. and the Supreme Court's judgment in Chaphal Kar Brothers, which held that subsidies not in the nature of income should not be included in book profits. 3. Exclusion of Prior Period Interest on Income Tax Refund in Computing Book Profit u/s 115JB: This ground was dismissed as not pressed by the assessee during the hearing. 4. Exclusion of Profit on Sale of Fixed Assets in Computing Book Profit u/s 115JB: The assessee argued that profit on the sale of fixed assets (?61,063) should not be included in book profit u/s 115JB. The AO included this profit, supported by the Supreme Court's judgment in Apollo Tyres Ltd. The CIT(A) upheld the AO's decision, stating that the profit was part of the audited profit and loss account. The Tribunal, following its earlier reasoning on similar issues, allowed the assessee's claim. 5. Credit for Tax Paid by Way of Adjustment of Refund for AY 2011-12: The assessee claimed that the AO did not give credit for tax of ?8.48 lakh paid by adjusting the refund for AY 2011-12. The CIT(A) rejected this claim. The Tribunal directed the AO to allow the credit for the adjustment of the refund as per the law. 6. Computation of Interest u/s 234C on Assessed Income Rather Than on Returned Income: The AO charged interest u/s 234C on assessed income. The Tribunal directed the AO to levy interest on the income declared in the return as per the provisions of law, after providing the assessee an opportunity to be heard. 7. Deletion of Addition of Sales Tax Subsidy Under Normal Computation of Income: The AO added the sales tax subsidy (?3,98,574) to the total income. The CIT(A) deleted this addition, following the jurisdictional High Court's judgment in CIT vs. Rasoj Ltd., which held such subsidies as capital in nature. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. Conclusion: - Assessee's appeal (ITA No. 439/Kol/2016) is partly allowed for statistical purposes. - Revenue's appeal (ITA No. 478/Kol/2016) is dismissed.
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