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2020 (12) TMI 439 - AT - Income TaxBook profit computation u/s. 115JB for capital receipt inform of interest subsidy - additional ground of appeal - HELD THAT - Additional ground of appeal on the issue to reduce the book profit computed u/s. 115JB by capital receipt inform of interest subsidy is admitted. After considering the finding of the judicial pronouncement on this issue, the assessing officer is directed to treat the aforesaid amount of subsidy as capital receipt under Technology Upgradation Fund Scheme for Textile and Jute Industries. Since the additional ground of appeal of the assessee is allowed therefore, there is no need to consider the other grounds of appeal filed by the assessee on merit. Therefore such ground of appeal 1 to 1.3 can dismiss. Deduction for education cess as allowable expenditure u/s. 40(a)(ii) - HELD THAT - As noticed that the claim of the assessee regarding deduction for education cess and her education cess as allowable expenditure u/s. 40(a)(i) of the Act 1961 has not been discussed in the order of assessing officer and Ld. CIT(A). After considering the judicial pronouncement referred by the Ld. Counsel in the case of Hon'ble Bombay High Court in the case of Sesa Goa Ltd. 2020 (3) TMI 347 - BOMBAY HIGH COURT . And Circular of the CBDT Circular No. 91/58/66-ITJ(19) DT. 18th May, 1967. This issue is restored to the file of the Assessing Officer for deciding afresh after considering the direction laid down in the above referred judicial pronouncement and Circular of the CBDT. Therefore, this ground of appeal of the assessee is allowed for statistical purposes.
Issues Involved:
1. Admission of additional grounds of appeal. 2. Treatment of interest subsidy under Technology Upgradation Fund Scheme (TUFS) as capital receipt. 3. Deduction for education cess and higher education cess as allowable expenditure under Section 40(a)(ii) of the Income Tax Act, 1961. 4. Reduction of book profit under Section 115JB by capital receipt in the form of interest subsidy. Issue-wise Detailed Analysis: 1. Admission of Additional Grounds of Appeal: The Assessee raised additional grounds during the appellate proceedings, which the CIT(A) did not admit. The CIT(A) referenced the Supreme Court's decision in Goetze (India) Ltd. [284 ITR 323] stating that the Assessing Officer does not have the power to entertain a claim for deduction without a revised return. However, the Tribunal noted that the Supreme Court's decision in NTPC [229 ITR 383] allows raising points of law before the Tribunal. The Tribunal also cited the Gujarat High Court's decision in Mitesh Impex [46 taxmann.com 30] and other cases, confirming that appellate authorities can entertain new grounds or claims if the relevant facts are already on record. Thus, the Tribunal admitted the additional grounds raised by the Assessee. 2. Treatment of Interest Subsidy under TUFS as Capital Receipt: The Assessee contended that the interest subsidy received under TUFS should be treated as a capital receipt, referencing the Supreme Court's decision in Shree Balaji Alloys [80 taxmann.com 239]. The Tribunal noted that the interest subsidy was intended to catalyze investments in the textile industry, thus qualifying as a capital receipt. The Tribunal referred to multiple judicial pronouncements, including CIT vs. Chaphalkar Brothers Pune [88 taxmann.com 178] and Meghalaya Steels Ltd. [67 taxmann.com 158], which supported the view that subsidies aimed at industrial development are capital receipts. Consequently, the Tribunal directed the Assessing Officer to treat the interest subsidy as a capital receipt. 3. Deduction for Education Cess and Higher Education Cess as Allowable Expenditure: The Assessee argued that education cess and higher education cess should be allowed as deductible expenditure under Section 40(a)(ii) of the Income Tax Act, referencing the CBDT Circular No. 91/58/66-ITJ(19) dated 18th May 1967, and the Bombay High Court's decision in Sesa Goa Ltd. vs. JCIT [117 Taxmann.com 96]. The Tribunal noted that this issue was not discussed by the lower authorities. Thus, the Tribunal restored the issue to the Assessing Officer for fresh consideration in light of the cited judicial pronouncements and the CBDT Circular. 4. Reduction of Book Profit under Section 115JB by Capital Receipt in the Form of Interest Subsidy: The Assessee sought to reduce the book profit computed under Section 115JB by the capital receipt of interest subsidy. The Tribunal referred to the Calcutta High Court's decision in PCIT vs. Ankit Metal & Power Ltd. [109 Taxmann.com 93], which held that capital receipts should be excluded from book profit computation under Section 115JB. The Tribunal agreed with this view and directed the Assessing Officer to reduce the book profit by the amount of interest subsidy received under TUFS. Conclusion: The Tribunal allowed the appeal partly, admitting the additional grounds and directing the Assessing Officer to treat the interest subsidy as a capital receipt and reconsider the deduction for education cess. The book profit under Section 115JB was also directed to be reduced by the amount of the capital receipt in the form of interest subsidy.
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