2022 (5) TMI 120 - SCH - Income Tax

Nature of receipt - subsidy as capital or revenue in nature - HELD THAT - High Court by the impugned judgment and order has remanded the matter to the A.O. to pass a fresh order based on the independent analysis as to whether the amount raised by way of subsidy is capital or revenue in nature, we see no reason to interfere with the impugned judgment and order passed by the High Court. Validity of revision u/s 263 - as observed by the High Court, the A.O. accepted the case on behalf of the assessee that the amounts received was capital in nature without any discussion and also noted that the order passed by the A.O. was unreasoned order - HELD THAT - Considering the above, when the Commissioner was of the opinion that the assessment order passed by the A.O. was prejudicial to the interest of the Revenue, it cannot not be said that the CIT committed any error and/or passed any order without jurisdiction. In view of the above, we see no reason to interfere with the impugned judgment and order passed by the High Court. The Special Leave Petition stands dismissed. However, it is observed and in fact it is specifically observed by the High Court in the impugned order that the A.O. will pass a fresh order based upon his independent analysis as to whether the amount received by way of subsidy was capital or Revenue in nature, we direct accordingly. The A.O. to pass a fresh order in accordance with law and on merits without, in any way, influenced by any of the observations made by the CIT passed in exercise of powers under Section 263 of the IT Act and the observations made by the CIT shall be treated only for the purpose of exercise of powers under Section 263 only. The A.O. to pass appropriate order in accordance with law and on its own merits independently.

Summary

Issues Involved:
1. Remand of the matter by High Court for fresh order based on subsidy nature.
2. Exercise of powers under Section 263 of the I.T. Act by the Commissioner.
3. Validity of the assessment order passed by the A.O.
4. Dismissal of the Special Leave Petition and directions for a fresh order by the A.O.

Analysis:

1. The High Court remanded the matter to the A.O. for a fresh order to determine whether the subsidy amount is capital or revenue in nature. The Supreme Court upheld this decision, stating that there was no reason to interfere with the High Court's judgment and order.

2. Regarding the exercise of powers under Section 263 of the I.T. Act by the Commissioner, the Court noted that the A.O. had accepted, without discussion, that the amounts received were capital in nature. The High Court observed that the A.O.'s order was unreasoned. Consequently, the Commissioner's decision to intervene was deemed valid as it was in the interest of Revenue, and it was concluded that the Commissioner did not commit any error or exceed jurisdiction.

3. The Court found no grounds to interfere with the High Court's judgment, emphasizing that the A.O. should pass a fresh order independently to determine the nature of the subsidy received, without being influenced by the Commissioner's observations under Section 263 of the IT Act. The A.O. was directed to issue an appropriate order based on its own merits and in accordance with the law.

4. Ultimately, the Special Leave Petition was dismissed. The Court reiterated the need for the A.O. to conduct an independent analysis to ascertain whether the subsidy was capital or revenue in nature, emphasizing that the A.O.'s new order should be based solely on its own assessment and not influenced by previous observations made under Section 263 of the IT Act. The A.O. was instructed to issue an order in compliance with the law and on its own merits.