2019 (10) TMI 353 - AT - Income Tax

Addition made on account of leave encashment u/s 43B - Delayed payment -HELD THAT - As 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 in computing the book profit u/s 115JB relating to Industrial Promotion Assistance and Sales Tax Incentive - HELD 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 - Decided in favour of assessee Disallowance made on account of Industrial Promotion Assistance and Deferred Sales Tax Liability - HELD THAT - It is noted that this Tribunal in assessee s own case for Assessment Year 2010-11 held that subsidies given to promote industries are not subjected to tax Disallowance made u/s 14A - CIT-A deleted the addition - HELD THAT - This Court in Cheminvest Limited vs. Commissioner of Income Tax-VI, 2015 (9) TMI 238 - DELHI HIGH COURT which ruled in the absence of any exempt income, disallowance under Section 14A of the Act of any amount was not permissible. Since the decision in Cheminvest Limited (supra) was followed, there is no substantial question of law that requires consideration Addition made by Assessing Officer on account of 14A u/s 115JB - HELD THAT - Issue raised is decided by the decision of the Coordinate Bench of this Tribunal in the case of Goetze India Limited 2009 (5) TMI 615 - ITAT DELHI wherein the similar addition made to the book profit of the assessee-company computed under section 115JB on account of disallowance of expenses made under section 14A was held to be unsustainable by the Tribunal holding that the provisions of section 14A could not be imported into Clause (f) of Explanation (1) to section 115JA.

Summary

Issues Involved:
1. Addition on account of leave encashment.
2. Disallowance in computing book profit under Section 115JB relating to Industrial Promotion Assistance and Sales Tax Incentive.
3. Deletion of disallowance made on account of Industrial Promotion Assistance and Deferred Sales Tax Liability.
4. Deletion of disallowance made under Section 14A of the Income Tax Act.
5. Addition under Section 14A for the purpose of book profit under Section 115JB.

Detailed Analysis:

1. Addition on Account of Leave Encashment:
The assessee challenged the addition made by the CIT(A) on account of leave encashment. The Tribunal found that the issue was covered by its own orders from previous assessment years (2005-06 to 2011-12). The Supreme Court in the case of Exide Industries Ltd. vs. Union of India had granted a stay against the decision of the Calcutta High Court. The Tribunal remanded the matter to the Assessing Officer (AO) for fresh consideration, pending the final order of the Supreme Court. Consequently, the ground raised by the assessee was allowed for statistical purposes.

2. Disallowance in Computing Book Profit under Section 115JB:
The assessee challenged the disallowance related to Industrial Promotion Assistance and Sales Tax Incentive. The Tribunal noted that the issue was covered by its previous orders for the assessment years 2010-11 and 2011-12. The Tribunal cited its earlier decision where it was held that sales tax incentives and state capital investment subsidies, being capital in nature, should not be included in the book profits under Section 115JB. The Tribunal allowed the assessee's ground, reversing the CIT(A)'s decision.

3. Deletion of Disallowance Made on Account of Industrial Promotion Assistance and Deferred Sales Tax Liability:
The Revenue's appeal challenged the deletion of disallowance made on account of Industrial Promotion Assistance and Deferred Sales Tax Liability. The Tribunal found that this issue was also covered by its previous orders in the assessee's own case. It was noted that subsidies given to promote industries are not subject to tax. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.

4. Deletion of Disallowance Made under Section 14A:
The Revenue's appeal also challenged the deletion of disallowance made under Section 14A. The Tribunal noted that no dividend income was earned by the assessee in the year under consideration, and hence, the disallowance under Section 14A was not maintainable. The Tribunal referred to the Supreme Court's decision in the case of Oil Industries Development Board, which upheld the principle that no disallowance should be made when no exempt income is earned. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.

5. Addition under Section 14A for the Purpose of Book Profit under Section 115JB:
The Revenue's appeal also challenged the addition made by the AO on account of Section 14A while computing book profit under Section 115JB. The Tribunal found that this issue was covered by its earlier decision in the assessee's own case for the assessment year 2007-08. It was held that the provisions of Section 14A could not be imported into Clause (f) of Explanation (1) to Section 115JB. The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's ground.

Conclusion:
The Tribunal allowed the assessee's appeal on the issues of leave encashment and disallowance under Section 115JB, while dismissing the Revenue's appeal on the issues of Industrial Promotion Assistance, Deferred Sales Tax Liability, and disallowance under Section 14A. The Tribunal's decisions were based on consistency with its previous orders and relevant judicial precedents.