2005 (2) TMI 30 - HC - Income Tax

Deduction - scheme of subsidy through its Fertilizer Industry Co-ordination Committee (FICC) - submitted that the Revenue should not be permitted to deny the legitimate claim of the petitioner by refusing deduction of the amount which the petitioner would be called upon to pay in subsequent years, whereby the petitioner is required to adjust the amount or make payment where no recovery is to be made of outstanding bills, and at the said point of time in the relevant accounting year, when such adjustment/payment takes place, the petitioner must be granted appropriate deduction from its taxable income - It is the case of the petitioner that, some time in 2000-01, FICC discovered an error in the computation of retention price right from 1982 and, therefore, decided to recover the excess subsidy, which according to FICC was paid to the petitioner - petitioner would be entitled to make claim of the amount which it is called upon to refund as and when it actually makes the payment and considering the statement made on behalf of the respondents, the petitioner shall be entitled to claim deduction qua such payment from its taxable income in the year in which such payment is actually made petition allowed

Summary

Issues:
1. Petitioner's plea for condonation of delay in the application under section 264 of the Income-tax Act, 1961.
2. Revision of assessments for the years 1982 to 2001-02 by granting relief due to the withdrawal of subsidy.
3. Challenge to the order of the Commissioner of Income-tax rejecting the revision application.
4. Entitlement to deduction for the excess subsidy paid and later repaid to the Government.
5. Provisional order for downward revision of assessed income pending final disposal of the application.

Analysis:
1. The petitioner sought condonation of delay in the application under section 264 of the Income-tax Act, citing the initiation and effect of subsidy recovery orders over three years. The court held that the petitioner's explanation for the delay was valid, emphasizing the need for a liberal approach to ensure substantive rights are not defeated based on technicalities. The order refusing to condone the delay was quashed and set aside.

2. Regarding the revision of assessments due to the withdrawal of subsidy, the petitioner argued that once it was established that the subsidy was not entitled, the assessments should be revised to grant appropriate relief. The Revenue agreed not to object and to grant deduction when the petitioner repays the excess subsidy in subsequent years. The court directed the Revenue to modify the order rejecting the petitioner's claim and allow deduction when payments are made in the relevant accounting year.

3. The order of the Commissioner of Income-tax rejecting the revision application was challenged. The court found the refusal to condone the delay and the rejection of the petitioner's claim were not in order. The impugned order was quashed and set aside, directing the Commissioner to modify the decision within four weeks.

4. The petitioner's entitlement to deduction for the excess subsidy paid and repaid to the Government was upheld. The court emphasized that the deduction should be granted when the petitioner makes the payment, as per the communication outlining the procedure for making claims and payments.

5. A provisional order for downward revision of assessed income was requested pending final disposal of the application. The court allowed the petition to the extent mentioned, making the rule absolute without ordering costs.