2021 (6) TMI 620 - AT - Income Tax

Admissibility or otherwise of assessee s subsequent claim for treatment of Excise Duty Refund as capital in nature without filing any revised return - HELD THAT - Allowability of cess u/s 37 has been examined by the Co-ordinate Bench of ITAT in ITA No. 685/Cal./2014 2018 (11) TMI 1611 - ITAT KOLKATA wherein the amount of the cess paid has been held to be an allowable deduction. We find that the Hon ble High Court of Judicature for Rajasthan at Jaipur in the case of Chambal Fertilizers and Chemicals Ltd. 2018 (10) TMI 589 - RAJASTHAN HIGH COURT held that in view of the Circular of CBDT where the word cess is deleted, the claim of the assessee for deduction is acceptable. In that case, the Hon ble High Court held that there is difference between the cess and tax and cess cannot be equated with the cess. Hence, keeping in view the provisions of the Act, Circular of the CBDT and judicial pronouncements, we hereby hold that the assessee is eligible to claim the deduction of the cess as per the provisions of Section 37 of the Income Tax Act. We find nothing on record on behalf of the Department to take a different view. Therefore, to preserve the consistency in view, as approved by the Hon ble Supreme Court in the case of Radhasoami Satsang 1991 (11) TMI 2 - SUPREME COURT and respectfully following the view taken by coordinate Bench, we allow the claims of assessee.

Issues Involved:
1. Treatment of Excise Subsidy as Capital Receipt
2. Admission of Additional Ground for Deduction of Education Cess

Detailed Analysis:

1. Treatment of Excise Subsidy as Capital Receipt

Facts:
The assessee, engaged in the business of Agro Chemicals, set up a manufacturing unit in Jammu & Kashmir, a notified area, and received an excise subsidy amounting to ?14,55,88,357/- during the financial year 2012-13. The assessee initially offered this subsidy as taxable income in their return filed for the assessment year 2013-14.

Contentions:
The assessee later claimed that the excise subsidy should be treated as a capital receipt and thus non-taxable, referencing the Supreme Court decisions in Poni Sugars & Chemicals Ltd. and Shree Balaji Alloys vs. CIT. This claim was made via a letter during the assessment proceedings.

Assessing Officer's Decision:
The Assessing Officer (AO) rejected the claim, citing the absence of a revised return as required under Section 139(5) of the Income-tax Act, and relied on the Supreme Court decision in Goetze (India) Ltd. vs. CIT.

CIT(A) Decision:
The CIT(A) upheld the AO's decision, stating that both the AO and CIT(A) lacked jurisdiction to consider the claim without a revised return, as per the Goetze (India) Ltd. case.

Tribunal's Findings:
The Tribunal noted that while the AO and CIT(A) were bound by the technical requirement of a revised return, the Income-tax Appellate Tribunal (ITAT) was not restricted by this technicality under Section 254 of the Act. The Tribunal highlighted that its duty was to determine the just tax liability of the assessee. The Tribunal relied on its own decision in the case of M/s. Crystal Crop Protection (P) Ltd. vs. DCIT, where similar claims were allowed.

Legal Precedents:
The Tribunal referenced the Supreme Court decisions in Jute Corporation of India Ltd. vs. CIT and National Thermal Power Co. Ltd. vs. CIT, which support the admission of additional grounds if they do not require additional material and can be adjudicated based on the existing record.

Conclusion:
The Tribunal held that the excise subsidy should be treated as a capital receipt, relying on the Jammu & Kashmir High Court decision in Shri Balaji Alloys vs. CIT, which was affirmed by the Supreme Court. The appeal on this ground was allowed.

2. Admission of Additional Ground for Deduction of Education Cess

Facts:
The assessee filed an additional ground for the deduction of education cess in computing tax liability.

Tribunal's Findings:
The Tribunal admitted the additional ground, citing the Supreme Court decisions in Jute Corporation of India Ltd. vs. CIT and National Thermal Power Co. Ltd. vs. CIT, which allow for the consideration of additional grounds if they do not require new evidence.

Legal Precedents:
The Tribunal referenced the CBDT Circular No. 91/58/66, which clarified that the word "cess" was omitted from Section 40(a)(ii) of the Income-tax Act, implying that only taxes paid are to be disallowed, not cess. The Tribunal also cited the ITAT decision in ITA No. 685/Cal./2014 and the Rajasthan High Court decision in Chambal Fertilizers and Chemicals Ltd., which support the deduction of cess as an allowable expenditure.

Conclusion:
The Tribunal held that the assessee is eligible to claim the deduction of education cess under Section 37 of the Income-tax Act. The appeal on this ground was also allowed.

Final Judgment:
The Tribunal allowed the appeal, treating the excise subsidy as a capital receipt and permitting the deduction of education cess. The order was pronounced in the open court on 18/06/2021.

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