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2023 (2) TMI 197 - AT - Income TaxCharacterization of receipt - Claim of sales tax incentive - revenue or capital receipt - CIT(A) in deleting an amount which was claimed by the assessee as capital receipt but held the Assessing Officer as revenue receipt - HELD THAT - CIT(A) after comparing the Maharashtra Incentive Scheme, 1979 with Maharashtra Incentive Scheme, 1993, followed the decision of the Tribunal for AY 2003-04 2009 (12) TMI 945 - ITAT MUMBAI and his predecessor and held that the sale tax incentive received by the assessee under the new package scheme 1993 is capital in nature. Since, the Tribunal (supra) has allowed the sales tax incentive received under the same scheme under which the assessee has received sales tax incentive in the year under consideration and therefore, issue-in-dispute being squarely covered by the order of the Tribunal (supra), the grounds raised by the Revenue are dismissed. Revision u/s 263 - Revenue seeks to agitate the dismissal of assessment order u/s. 143 consequent to order u/s. 263, of the Act as the order u/s. 263 has been quashed by the ITAT - HELD THAT - In our opinion, the foundation u/s. 143(3) r.w.s. 263 was order u/s. 263 of the Act, which has already been demolished, then the consequent order passed cannot survive. No infirmity in the finding of the Ld. CIT(A) on the issue-in-dispute. Accordingly, the grounds raised by the Revenue are dismissed.
Issues Involved:
1. Deletion of disallowance of sales tax incentive claim. 2. Classification of sales tax as capital receipt versus revenue receipt. 3. Reliance on previous tribunal and high court decisions. 4. Validity of the assessment order passed under section 143(3) read with section 263 of the Income Tax Act. Detailed Analysis: Issue 1: Deletion of Disallowance of Sales Tax Incentive Claim The Revenue challenged the deletion of an amount of Rs. 5,37,44,724/- claimed as a sales tax incentive by the assessee, which was disallowed by the Assessing Officer (AO) as revenue receipt. The CIT(A) had deleted this disallowance, treating the sales tax incentive as a capital receipt. The Tribunal noted that the AO did not follow the directions of the ITAT to compare the 1979 Scheme of the Government of Maharashtra with the New Package Scheme of Incentives, 1993, and proceeded to make the addition based on the pending status of a similar issue in the case of Reliance Industries Ltd. before the Bombay High Court. Issue 2: Classification of Sales Tax as Capital Receipt Versus Revenue Receipt The Tribunal observed that the CIT(A) had consistently treated the sales tax incentive as a capital receipt in the assessee's own case for previous years, following the ITAT's order for AY 2003-04 and subsequent years. The Tribunal reiterated that the sales tax incentive received under the New Package Scheme of Incentives, 1993, was intended for industrial development in backward areas and had a direct nexus with investment in fixed capital assets, thus qualifying as a capital receipt. This view was supported by the Special Bench decision in the case of DCIT vs. Reliance Industries Ltd., which held that such incentives are capital receipts. Issue 3: Reliance on Previous Tribunal and High Court Decisions The Tribunal upheld the CIT(A)'s decision by relying on its own previous orders and the Special Bench decision in the case of Reliance Industries Ltd. The Tribunal emphasized that the pending appeal before the Bombay High Court did not invalidate the current standing of the Special Bench decision, as per the Supreme Court's ruling in Union of India vs. Kamlakshi Finance Corporation Ltd., which mandates following appellate authority decisions unless stayed by a competent court. Issue 4: Validity of the Assessment Order Passed Under Section 143(3) Read with Section 263 The Revenue also contested the CIT(A)'s decision to hold the assessment order passed under section 143(3) read with section 263 as void ab initio. The Tribunal noted that the ITAT had already quashed the order passed under section 263, which formed the basis for the subsequent assessment order under section 143(3). Since the foundational order under section 263 was invalidated, the consequent assessment order could not survive. The Tribunal cited the ITAT's reasoning that the Commissioner had no power to re-examine the issue already analyzed by the AO and pending before the CIT(A). Conclusion The Tribunal dismissed both appeals filed by the Revenue, upholding the CIT(A)'s decisions to treat the sales tax incentive as a capital receipt and to invalidate the assessment order passed under section 143(3) read with section 263. The Tribunal's decision was pronounced in the open court on 20/01/2023.
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