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2023 (6) TMI 165 - AT - Income TaxDisallowance of claim of sales tax incentive - HELD THAT - When the issue in question has already been decided in favour of the assessee even in earlier years A.Y. 2003-04 2009 (12) TMI 945 - ITAT MUMBAI as well as this issue has also been decided in case of DCIT vs. Reliance Industries Ltd 2003 (10) TMI 255 - ITAT BOMBAY-J wherein it is held that sales tax subsidy received under the package scheme incentives 1997 is for the purpose of industrial development of the backward districts as well as generation of employment, thus, establishing a direct nexus with the investment in fixed capital assets and as such a capital asset. Revenue has failed to bring on record any distinguishable facts qua the year under assessment vis- -vis earlier years i.e. A.Y. 2010-11. Decided against revenue. Nature of receipt - Excise duty collected by the assessee was capital in nature - HELD THAT - When the issue has already been decided in favour of the assessee by examining the objective of grant of excise duty incentive vide memorandum issued by Ministry of Garments Industry, decision rendered in case of Shree Balaji Alloys 2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT which has been affirmed in case of Ponni Sugars Chemicals Ltd. 2008 (9) TMI 14 - SUPREME COURT holding that excise duty refund granted with the object of social problem of unemployment in the state by accelerating the industrial development was a capital receipt, we find no illegality or perversity in the impugned findings returned by the CIT(A) holding receipt of excise duty by the assessee as capital in nature. Decided against the Revenue. Allowance of foreign exchange fluctuation loss on reinstatement of loan - claim disallowed by the AO on the ground that the assessee company has capitalized it in the books of account - HELD THAT - CIT(A) by following the order passed u/s 143(3) for A.Y. 2009-10 in which year foreign exchange fluctuation loss amortised in the books was allowed. Assessee company has claimed the foreign exchange fluctuation loss to in the revised return. When the Revenue has itself allowed the claim of the assessee of foreign exchange fluctuation loss amortised in the books in A.Y. 2009-10 and 2011-12 no extraneous reasons have been brought on record by Revenue as to why it should not be allowed for the year under consideration. For earlier two years Revenue has accepted the decision of AO allowing the foreign exchange fluctuation loss amortised in the books .No illegality or perversity in the impugned findings returned by the Ld. CIT(A) - Decided against the Revenue. Weighted deduction on R D expenses u/s 35(2AB) - claim disallowed by the AO on failure of the assessee to bring on record certificate issued by the prescribed authority Secretary of Department of Scientific and Industrial Research, Government of India(DSIR) - CIT(A) allowed the same by thrashing the facts in the light of case of Zeus Numerix Private Ltd 2015 (4) TMI 1247 - ITAT MUMBAI - HELD THAT - CIT(A) has discussed the law laid down in case of Sandan Vikas (India) Ltd. 2011 (2) TMI 66 - DELHI HIGH COURT and Claris Lifesciences Ltd 2008 (8) TMI 579 - GUJARAT HIGH COURT on the issue in question where it is held that for the purpose of section 35(2AB) existence of recognition is relevant and not the date of recognition or not of date mentioned in the certificate of DSIR or even the date of approval. In the instant case it is undisputed fact that R D centre to be run by the assessee company has been recognized. When it is so the Ld. CIT(A) has rightly allowed the benefit of deduction claimed by the assessee under section 35(2AB) of the Act. So finding no illegality or perversity in the impugned order passed by the Ld. CIT(A) - Decided against the Revenue. MAT computation - AO disallowed the exclusion of sales tax incentives, excise duty exemption and exclusion of profits on sale of assets while computing the book profit u/s 115JB - HELD THAT - When a receipt is not in the nature of income it is not to be formed part of the taxable profit and as such sales tax incentive and excise duty exemption and profit on sale of fixed assets are not chargeable to tax, hence rightly ordered to be excluded from computing the book profit under section 115JB by the Ld. CIT(A). No illegality or perversity in the impugned order passed by the Ld. CIT(A). Decided against the Revenue. Disallowance of education cess on income tax and dividend distribution tax u/s 40(a)(ii) - HELD THAT - As in view of the amendment made vide Finance Act, 2022 with retrospective effect from 01.04.2005 to section 40(a)(ii) for the purpose of section 40, the term Tax shall include and shall be deemed to have always included any sur-charge or cess by whatever name called, on such tax - education cess on income tax and dividend distribution tax is integral part of income tax under the Income Tax Act payable by the assessee covered by provision of section 40(a)(ii). Assessee has fairly conceded that as per amendment vide Finance Act, 2022 disallowance made by the Ld. CIT(A) on account of education cess on income tax and dividend distribution tax is not sustainable in the eyes of law. So the deletion of education cess on income tax and dividend distribution tax made by the Ld. CIT(A) is not sustainable in the eyes of law and disallowance made by the AO is ordered to be restored. Hence, ground raised by the Revenue is allowed.
Issues Involved:
1. Deletion of disallowance of sales tax incentives. 2. Deletion of disallowance of excise duty incentives. 3. Allowance of foreign exchange fluctuation loss on reinstatement of loan. 4. Allowance of weighted deduction for R&D expenses under section 35(2AB). 5. Exclusion of sales tax incentives, excise duty exemption, and profits on sale of assets while computing book profits under section 115JB. 6. Disallowance of education cess on income tax and dividend distribution tax. Detailed Analysis: 1. Deletion of Disallowance of Sales Tax Incentives: The Revenue challenged the deletion of Rs.7,01,07,115/- being disallowance of sales tax incentives. The Tribunal noted that this issue was already decided in favor of the assessee in earlier years (A.Y. 2010-11) and by the Special Bench in the case of DCIT vs. Reliance Industries Ltd., holding that sales tax subsidy received under the Package Scheme of Incentives, 1979, was for industrial development and employment generation, thus a capital receipt. The Revenue failed to bring new facts for the current year, leading to the dismissal of grounds No.1(i) to 1(iv). 2. Deletion of Disallowance of Excise Duty Incentives: The Revenue contested the findings that excise duty of Rs.25,39,40,496/- collected by the assessee was capital in nature. The Tribunal referenced earlier decisions, including the case of Shree Balaji Alloys vs. CIT, affirmed by the Supreme Court, which held that excise duty refund for creating employment and industrial development was a capital receipt. The Tribunal found no change in facts for the current year, leading to the dismissal of grounds No.2(i) to 2(v). 3. Allowance of Foreign Exchange Fluctuation Loss on Reinstatement of Loan: The CIT(A) allowed the foreign exchange fluctuation loss on reinstatement of loan, disallowed by the AO, citing consistency with earlier years (A.Y. 2009-10 and 2011-12) where such losses were allowed. The Tribunal found no new reasons from the Revenue to disallow the claim for the current year, leading to the dismissal of ground No.3. 4. Allowance of Weighted Deduction for R&D Expenses under Section 35(2AB): The AO disallowed the weighted deduction of Rs.1,51,87,471/- for R&D expenses due to lack of a certificate from the prescribed authority. The CIT(A), referencing the Tribunal's decision in Zeus Numerix Private Ltd. and other cases, allowed the deduction, noting that the DSIR had renewed the recognition for the relevant period. The Tribunal upheld this decision, finding no illegality or perversity, leading to the dismissal of ground No.4. 5. Exclusion of Sales Tax Incentives, Excise Duty Exemption, and Profits on Sale of Assets while Computing Book Profits under Section 115JB: The AO disallowed the exclusion of sales tax incentives, excise duty exemption, and profits on sale of assets from book profits. The CIT(A) allowed the exclusions, referencing earlier Tribunal decisions and the Supreme Court's stance on MAT provisions aiming to reflect real profits. The Tribunal found no illegality in the CIT(A)'s decision, leading to the dismissal of grounds No.5(i) & 5(ii). 6. Disallowance of Education Cess on Income Tax and Dividend Distribution Tax: The CIT(A) deleted the addition of Rs.44,18,315/- made by the AO for education cess on income tax and dividend distribution tax. However, due to the retrospective amendment by the Finance Act, 2022, which included cess in the definition of 'tax' under section 40(a)(ii), the Tribunal restored the AO's disallowance, leading to the allowance of ground No.6. Conclusion: The appeal by the assessee was dismissed as withdrawn, and the appeal by the Revenue was partly allowed, specifically restoring the disallowance of education cess on income tax and dividend distribution tax. The Tribunal upheld the CIT(A)'s decisions on other issues, finding them consistent with earlier rulings and legal precedents.
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