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2019 (1) TMI 1195 - AT - Income TaxNature of receipt - Addition being Grant/Financial Assistance received from the Government of Chhattisgarh - Revenue Receipt OR Capital Receipt - Held that - Each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasoning in the absence of any material change justifying the Revenue to take a different view of the matter and if there was not change it was in support of the assessee. As undisputed that all throughout the years, assessment was completed u/s.143(3) of the Act and the subsidy has been accepted as Capital Receipt . If in this assessment year i.e. 2014-15,the assessment was something erroneous and prejudicial to the interest of the Revenue then the Ld. CIT(Appeals) could have resorted to revisionary jurisdiction u/s.263. This is not done in the case of the assessee which means that Revenue has all throughout accepted that assessment was completed in the case of the assessee u/s.143(3) and the facts that the subsidy received are capital in nature. Then in similar facts and circumstances in the present assessment year i.e. 2014-15, in absence of any new material and evidence, taxing subsidy as Revenue Receipt by the Revenue Authority is the exercise which can be termed as arbitrary, unjudicious, unwarranted and bad in law and therefore, liable to be deleted. - decided in favour of assessee.
Issues Involved:
1. Classification of the grant/financial assistance received by the assessee from the Government of Chhattisgarh as either a capital receipt or a revenue receipt. 2. Application of the rule of consistency in tax assessments. Issue-wise Detailed Analysis: 1. Classification of the Grant/Financial Assistance: The primary issue revolves around whether the grant of ?82,30,00,000 received by the assessee from the Government of Chhattisgarh should be classified as a capital receipt or a revenue receipt. The assessee argued that the grant was for the specific purpose of developing the Tara Coal Block, which should be considered a capital receipt not chargeable to tax. The assessee cited the Chhattisgarh Mineral Development Fund Act, 2003 (CMDFA) and related rules, which stipulate that the funds received could only be used for the development of the coal block and not for any other purposes. The Department, however, classified the grant as a revenue receipt for the assessment year 2014-15, despite having accepted it as a capital receipt in previous years (2006-07 to 2013-14). The CIT(A) supported the Department's stance, reasoning that the funds were intended to assist the assessee in carrying on its trade or business, thereby making the grant a revenue receipt. The Tribunal, however, found that the grants given for specific purposes, as per the Supreme Court decisions in CIT Vs. Ponni Sugars & Chemicals Ltd. and CIT Vs. Chaphalkar Brothers Pune, should be treated as capital receipts not chargeable to tax. The Tribunal also noted that the assessee is a wholly-owned government company and referred to the Calcutta High Court's decision in PCIT Vs. State Fisheries Development Corporation Ltd., which held that financial assistance to ensure the survival of a government company should be regarded as a capital receipt. 2. Application of the Rule of Consistency: The assessee argued that the principle of consistency should apply, as the Department had consistently accepted the grant as a capital receipt in previous years. The Tribunal highlighted the Supreme Court's stance in Radhasoami Satsang Vs. CIT, which emphasized maintaining consistency in tax assessments unless there is a material change in facts. The Tribunal also referred to the Delhi High Court's decision in CIT Vs. Neo Poly Pack (P.) Ltd., which supported the view that consistent treatment should prevail in subsequent years unless there is a significant change in circumstances. The Tribunal concluded that since the facts and circumstances for the assessment year 2014-15 were identical to those in previous years, and the Department had accepted the grant as a capital receipt in those years, the same treatment should apply for the assessment year 2014-15. The Tribunal found the Department's decision to classify the grant as a revenue receipt for the assessment year 2014-15 as arbitrary and unjudicious. Conclusion: The Tribunal set aside the order of the CIT(A) and allowed the appeal of the assessee, holding that the grant received from the Government of Chhattisgarh for the development of the Tara Coal Block should be classified as a capital receipt not chargeable to tax. The Tribunal emphasized the importance of maintaining consistency in tax assessments in the absence of any material change in facts.
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