9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (11) TMI 635 - AT - Income TaxRevision u/s 263 - directions to the AO for examining the twin issues of interest income and export incentive income for their eligibility u/s. 80IB deduction - Held that - The revenue authorities have to adopt only netting formula whilst excluding assessee s income to be not derived from eligible business. Such a netting exercise admittedly leaves behind negative interest income of ₹4,21,71,315.15 (supra). This sufficiently indicates that even if the P.CIT s directions under challenge are upheld at this stage in principle, net result thereof would be assessment of a negative figure only. All this leads us to the conclusion that the AO s action assessing assessee s positive interest income of ₹3,48,13,006/- has been wrongly taken as an instance of an assessment both erroneous as well as the one causing prejudice to the interest of the revenue in absence of any revenue loss. P.CIT has erred in law as well on facts in exercising his revision jurisdiction vested u/s 263 of the Act in a revenue neural instance qua the former interest income issue. Accept assessee s and reject those raised at the Revenue instance on the former issue of non eligibility of interest income amounting ₹3,48,13,006/- for the purpose of computing u/s 80-IB deduction. Revision jurisdiction qua the assessee s assistance from Government of India under the Foreign Trade Policy SHIS Scheme (State Holder Incentive Scrip) - Held that - Case records suggest that the assessee has availed Government of India s assistance / incentive for import of capital goods relating to manufacturing activity in plastic sector. It is thus an instance involving reimbursement of cost of running eligible business forming profits qualifying for sec 80-IB deduction. The assessee s paper book all the relevant details of the impugned sum of ₹1,16,89,000/- regarding purchase made out Buss Kneader Plant, Varex Coex 7 Layer Blown Film, Flexographic Press Machine, Super Combi Laminating Machine; all purchased in the relevant previous year. Corresponding specimen copies of bills of entry / utilization form part of records between pages 24 and 50 in paper book. The same are not disputed at the Revenue s behest very fairly. All this sufficiently indicates that the impugned assistance availed under SHIS Scheme has been wrongly treated to be at par with an export incentive. Thus assessee s assistance received of ₹1,16,89,000/- under SHIS Scheme is towards cost incurred for import of capital goods in polymer manufacturing. It is in the nature of a revenue receipt eligible for sec. 80-IB deduction since the scheme provides for the purpose of importing capital goods utilized in polymer manufacturing thereby reimbursing running cost of business as against that in the nature of DEPB / Duty drawbacks credited in profit and loss account forming subject-matter of adjudication in Liberty India 2009 (8) TMI 63 - SUPREME COURT . CIT-DR fails to rebut the basic fact that this SHIS Scheme states its purpose to be for providing investment its upgradation of technology only. It also imposes actual user conditions. Thus P.CIT has erred in directing the Assessing Officer to frame afresh assessment qua the twin issues of interest as well as incentive subsidy thereby holding the regular assessment in issue to be erroneous causing prejudice to interest of the revenue. - Decided in favour of assessee.
Issues Involved:
1. Legality of the Principal Commissioner of Income Tax (P.CIT) exercising revision jurisdiction under Section 263 of the Income Tax Act, 1961. 2. Eligibility of interest income for deduction under Section 80-IB. 3. Eligibility of export incentive income for deduction under Section 80-IB. Detailed Analysis: 1. Legality of the Principal Commissioner of Income Tax (P.CIT) exercising revision jurisdiction under Section 263 of the Income Tax Act, 1961: The P.CIT issued a show cause notice under Section 263, proposing to revise the regular assessment on the grounds that it was erroneous and prejudicial to the interest of the Revenue. The P.CIT argued that the assessee’s interest income and export incentive income were not derived from eligible business activities and thus should not qualify for Section 80-IB deduction. The Tribunal examined the scope of the P.CIT's revision jurisdiction, referencing the Supreme Court's decision in Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC), which clarified that an assessment could only be revised if it was both erroneous and prejudicial to the interest of the Revenue. The Tribunal found that the P.CIT did not establish that the Assessing Officer had failed to conduct proper inquiries or that the assessment order was unsustainable in law. 2. Eligibility of interest income for deduction under Section 80-IB: The P.CIT contended that the interest income of ?3,48,13,006/- was not derived from the eligible business and thus should not qualify for Section 80-IB deduction. The assessee argued that the interest income should be netted against interest expenditure, resulting in a negative figure, thus nullifying any taxable interest income. The Tribunal referenced judicial precedents, including ACG Associated Capsules P. Ltd. v. CIT (2012) 343 ITR 89 (SC) and CIT vs. Shri Ram Honda Power Equip (2007) ITR 475 (Del), which supported the netting principle. The Tribunal concluded that only the net interest income (interest income minus interest expenditure) should be excluded from Section 80-IB deduction. Since the net result was a negative interest income, the P.CIT's direction was deemed erroneous and not prejudicial to the Revenue. 3. Eligibility of export incentive income for deduction under Section 80-IB: The P.CIT also questioned the eligibility of the export incentive income of ?1,16,89,000/- received under the Foreign Trade Policy's SHIS Scheme for Section 80-IB deduction. The assessee argued that this assistance was a subsidy for importing capital goods used in manufacturing, thus qualifying as a revenue receipt eligible for deduction. The Tribunal examined the nature of the subsidy, referencing the Supreme Court's decision in CIT vs. Meghalaya Steels Ltd. (2016) 383 ITR (SC), which differentiated between revenue and capital receipts. The Tribunal found that the SHIS Scheme subsidy was intended to reduce the cost of production, making it a revenue receipt eligible for Section 80-IB deduction. The Tribunal also noted that even if the subsidy was considered a capital receipt, it would still result in a revenue-neutral situation, thus not meeting the criteria for revision under Section 263. Conclusion: The Tribunal concluded that the P.CIT had erred in exercising revision jurisdiction under Section 263. The directions to re-examine the interest income and export incentive income were found to be unjustified. The Tribunal reversed the P.CIT's order and restored the original assessment order dated 22.03.2016, allowing the assessee's appeal.
|
