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2018 (8) TMI 1947 - AT - Income TaxCharacterization of income - Sales tax incentive received - revenue or capital receipt - HELD THAT - CIT(A) has noticed that the Tribunal had followed its decision rendered in the case of M/s Narendra Vegetable Products P Ltd 2015 (7) TMI 1298 - ITAT NAGPUR in this regard. Before ld CIT(A), the assessee has also placed reliance on the decision rendered by Special Bench of Tribunal in the case of Reliance Industries ltd 2003 (10) TMI 255 - ITAT BOMBAY-J which was also followed in the case of NarendraVegetable Products P Ltd. Accordingly, the Ld CIT(A) has held that the sales tax incentive, being a capital receipt, cannot be assessed to tax. Sales tax incentive, being a capital receipt, should be excluded from Net profit, while computing Book profit u/s 115JB - HELD THAT - We hold that the capital receipts in the form of sales tax incentive should be excluded from net profit for the purposes of computing book profit u/s 115JB M/S. ALOK INDUSTRIES LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-6 (2) , MUMBAI 2019 (4) TMI 1847 - ITAT MUMBAI .
Issues Involved:
1. Timeliness of the Revenue's appeal. 2. Timeliness and admissibility of the Assessee's cross-objection. 3. Taxability of Sales tax incentive as a capital receipt. 4. Exclusion of Sales tax incentive from book profit under Section 115JB of the Income Tax Act. Issue-wise Detailed Analysis: 1. Timeliness of the Revenue's Appeal: The registry noted a 365-day delay in the Revenue's appeal. However, upon review, it was found that the date of receipt of the CIT(A)'s order was incorrectly recorded. The correct dates showed no delay in filing the appeal. Thus, the appeal was filed within the prescribed time. 2. Timeliness and Admissibility of the Assessee's Cross-Objection: The assessee's cross-objection was noted to be delayed by 543 days. The delay was attributed to the previous counsel's inadvertence in not pressing the claim regarding the Sales tax incentive as a capital receipt during assessment proceedings. The new counsel identified this oversight, leading to the belated filing. The assessee relied on Supreme Court decisions emphasizing that the length of delay is immaterial if the explanation is acceptable and that substantial justice should prevail over technicalities. The Tribunal, considering the facts and the reasonable cause for delay, condoned the delay and admitted the cross-objection. 3. Taxability of Sales Tax Incentive as a Capital Receipt: The Revenue contested the CIT(A)'s decision that the Sales tax incentive is a capital receipt and not taxable. The CIT(A) had followed the Tribunal's earlier decisions in the assessee's own case and other similar cases, including the Special Bench decision in Reliance Industries Ltd. The Tribunal consistently held that Sales tax incentives are capital receipts and thus not liable to tax. The Tribunal found no infirmity in the CIT(A)'s order and upheld it. 4. Exclusion of Sales Tax Incentive from Book Profit under Section 115JB: The assessee argued that the Sales tax incentive, being a capital receipt, should be excluded from the net profit while computing book profit under Section 115JB. The assessee cited various case laws supporting this view, including decisions by different benches of the Tribunal. The Revenue contended that Section 115JB is a code by itself and only allows specific deductions from net profit. The Tribunal, however, agreed with the assessee, referencing multiple decisions that capital receipts should be excluded from book profit computation under Section 115JB. The Tribunal directed the AO to exclude the Sales tax incentive from the book profit accordingly. Conclusion: The appeal of the Revenue was dismissed, and the cross-objection of the assessee was allowed. The Tribunal reinforced the position that Sales tax incentives are capital receipts and should be excluded from book profit computation under Section 115JB. The order was pronounced on 8.8.2018.
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