9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (3) TMI 1051 - AT - Income TaxAddition on account on account of interest subsidy and excise refund - treated as capital receipt - Held that - As decided in Shree Balaji Alloys Vs. Commissioner of Income Tax 2011 (1) TMI 394 - Jammu and Kashmir High Court held that a close reading of the Office Memorandum and the amendments introduced thereto with para 3 of Central Excise Notification Nos. 56 and 57, dt. 11th Nov., 2002, makes it amply clear that the generation of employment so contemplated was not casual or temporary but of permanent nature and the paramount consideration of the Central Government in providing the incentives to new industrial units and substantial expansion of the existing units was generation of employment through acceleration of industrial development in public interest. Such incentives, designed to achieve a public purpose, cannot be construed as production or operational incentives for the benefit of assessees alone. It was further held that making of additional provision in the scheme that the incentives would be available to the eligible industrial units from the date of commencement of commercial production and that these are not to be allowed for creation of new assets cannot be viewed in isolation to treat the incentives as production incentives. Such provisions are intended to ensure that the incentives are made available only to the bona fide industrial units so that the larger public interest of eradicating unemployment is achieved. The Court finally concluded that the incentives received by way of excise duty refund and interest subsidy are capital receipts in the hands of the assessee and therefore not chargeable to tax. The ratio laid down in the aforesaid decision is squarely applicable to the very same subsidy received under the very same scheme of State of Jammu & Kashmir by the Assessee in the present case. We therefore find no grounds to interfere with the conclusions of the CIT(A). The grievance of the revenue in ground No.2 regarding the revised return of income is not valid and has rightly held by the CIT(A) the said revised return of income was valid u/s.139(5) of the Act and was acted upon by the AO. - Decided in favour of assessee Excluding the subsidies in question from computation of book profit u/s 115JB - Held that - 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 allow Gr.raised by the Assessee. Deduction under section 80IB - amount of Lab Subsidy credited to the Profit & Loss Account - Held that - As can be seen from the grounds of appeal of the Assessee, the only grievance projected by the Assessee is that there should not be double exclusion of the sum of ₹ 1,50,036/- as the Assessee while computing eligible deduction u/s.80IB of the Act has already reduced this sum. We are of the view that it would be just and appropriate to direct the AO to consider the claim of the Assessee in this regard and if the contention of the Assessee is found correct, the AO shall give the required relief. Addition made u/s 14A - Held that - Hon ble ITAT Kolkata in the case of REI Agro Ltd. Vs. DCIT (2013 (9) TMI 156 - ITAT KOLKATA) has held that it is only the investments which yields dividend during the previous year that has to be considered while adopting the average value of investments for the purpose of Rule 8D(2)(ii) & (iii) of the Rules. In the light of the admitted factual position that the assessee had earned dividend income of only ₹ 8,440/- during the previous year, we are of the view that there can be no disallowance u/s 14A of the Act of any sum beyond ₹ 8,440/-. Accordingly the addition made u/s 14A of the Act is directed to be restricted to the extent of dividend income of ₹ 8,440/-.
Issues Involved:
1. Whether the interest subsidy and excise duty refund received by the Assessee are capital receipts not chargeable to tax. 2. Whether the revised return of income filed by the Assessee was valid. 3. Whether the interest subsidy and excise duty refund should be included in the computation of book profits under section 115JB of the Income Tax Act. 4. Whether the addition of Lab Subsidy was justified in computing deduction under section 80IB. 5. Whether the addition under section 14A read with Rule 8D was justified. Issue-Wise Detailed Analysis: 1. Interest Subsidy and Excise Duty Refund as Capital Receipts: The Assessee received interest subsidy and excise duty refund from the Government of Jammu & Kashmir. The Assessee claimed these as capital receipts not chargeable to tax based on the judgment of the Jammu & Kashmir High Court in the case of Shree Balaji Alloys. The Assessing Officer (AO) considered these subsidies as revenue receipts chargeable to tax. The CIT(A) held that the subsidies were capital receipts not chargeable to tax, as they were given to accelerate industrial development and generate employment in Jammu & Kashmir. The Tribunal upheld the CIT(A)’s decision, relying on the Jammu & Kashmir High Court’s ruling, which emphasized that the subsidies were intended to achieve public purposes like industrial development and employment generation, making them capital receipts. 2. Validity of Revised Return: The Assessee filed a revised return declaring lower income, claiming the subsidies as capital receipts. The AO acted on this revised return. The CIT(A) held that the revised return was valid under section 139(5) of the Income Tax Act, as the AO did not treat it as invalid. The Tribunal found no merit in the Revenue's grievance regarding the revised return, affirming that it was valid and acted upon correctly. 3. Inclusion of Subsidies in Book Profits under Section 115JB: The Assessee argued that the interest subsidy and excise duty refund, being capital receipts, should not be included in the computation of book profits under section 115JB, even though credited in the profit and loss account. The CIT(A) rejected this claim, stating that these sums were credited in the profit and loss account and their exclusion was not specifically provided under the explanation below section 115JB(2). The Tribunal referred to various judgments, including the ITAT Kolkata Bench in Binani Industries Ltd. and the Special Bench in Rain Commodities Ltd., concluding that receipts not in the nature of income should not form part of book profits under section 115JB. The Tribunal held that the subsidies, being capital receipts, should be excluded for determining book profits under section 115JB. 4. Addition of Lab Subsidy in Deduction under Section 80IB: The Assessee claimed that the proportionate amount of Lab Subsidy credited to the profit and loss account should be included while allowing deduction under section 80IB. The CIT(A) dismissed this claim, following the Jammu & Kashmir High Court’s decision in Shree Balaji Alloys. The Tribunal directed the AO to consider the Assessee’s claim and provide relief if the contention that the sum was already reduced while computing eligible deduction under section 80IB was found correct. 5. Addition under Section 14A read with Rule 8D: The AO made an addition under section 14A read with Rule 8D, disallowing expenses related to exempt income (dividend). The CIT(A) upheld this addition. The Tribunal referred to the ITAT Kolkata’s decision in REI Agro Ltd., which held that only investments yielding dividend during the previous year should be considered for disallowance under Rule 8D. The Tribunal restricted the disallowance to the extent of the dividend income earned (?8,440), partly allowing the Assessee’s appeal. Conclusion: The Tribunal dismissed the Revenue’s appeal and partly allowed the Assessee’s appeal, affirming that the subsidies were capital receipts not chargeable to tax, the revised return was valid, the subsidies should be excluded from book profits under section 115JB, directed reconsideration of the Lab Subsidy addition, and restricted the section 14A disallowance to the extent of the dividend income.
|
