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TMI Blog2015 (7) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... set up new unit, then receipt of subsidy is to be considered on “capital account”. In the said case it was found by the Hon’ble Bombay High Court that under the incentive package offered by the State Government was for the purpose of setting up a new industry in the State. The assessee had applied for such special capital incentive from SICOM. We are of the view that considering the scheme of the State Government, the assessee is entitled for the exemption of the sales-tax incentive being a capital receipt in the hands of the assessee and that the claim being lawful in nature ought to have been entertained by the Assessing Officer while completing the assessment under section 153A of I.T. Act. - Decided in favour of the assessee. - 118/Nag/2013, 119/Nag/2013, 120/Nag/2013, 121/Nag/2013, 122/Nag/2013, 123/Nag/2013, 124/Nag/2013 - - - Dated:- 31-7-2015 - SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER For the Appellant : Shri K.P. Dewani. For the Respondent : Shri Narendra Kane. ORDER Per Bench. These seven appeals have been filed by the assessee emanating from a combined order of learned CIT(Appeals)-I, Nagpur dated 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n business of manufacturing and sale of refined oil, Vanaspati ghee and sale of Wind Mill generated electricity. During the year under consideration the profit shown as per Profit and Loss account at ₹ 1,16,60,313/-. The total income under regular provisions of law has been worked out at ₹ 22,30,259/- after claiming deduction u/s 80IB at ₹ 33,01,393/-. The return of income is accompanied with the audit report u/s 80IB in the Form No. 10CCB in support of deduction u/s 80IB. 4. During the course of assessment proceedings the assessee has raised an issue in respect of receipt of sales tax incentive of ₹ 74,15,531/- to consider the same as capital receipt. The Assessing Officer has discussed this issue in para 8 of his order as under: Disallowance of sales incentive Capital receipt. During the course of assessment proceeding the assessee s representative submitted that during the previous year the assessee company was in respect of sales tax incentive amounting to ₹ 74,15,531/-. The assessee s representative claims that this amount has been already credited to Profit Loss Account. However vide the submission assessee s representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case. Learned CIT(Appeals) has also mentioned that in the light of decision of M/s Goetze (India) Ltd. 284 ITR 323 (SC) a deduction can be claimed if it was made in the return filed. Finally the learned CIT(Appeals) has rejected the claim of the assessee in the following manner: 6. After going through the above decisions and facts of the appellant case, I am not inclined to accept that a fresh claim can be made by the appellant during the course of search assessment proceedings, I .e. during 153A proceedings in the present case due to the following reasoning. Going by the facts of the present case, it is only during the 153A assessment proceedings, the appellant made the claim for allowing the purported capital receipt credited to the profit and loss account, thereby converting the 153A proceedings as appeal proceedings. The appellant cannot be permitted, to convert these search assessment proceedings as appeal or revision in disguise and seek relief in respect of items not agitated earlier at the right forum. Reliance is placed on the decision of the jurisdictional High Court decision in the case of K. Sudhakar S. Shanbhag v. ITO (2000) 241 ITR 865 (Bom.). The appellant argue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Mum.)(SB). 6.2 In respect of the merits of the issue that such type of incentive was held as capital receipt in the hands of the assessee, reliance was placed on the following decisions: 1) Indo Rama Synthetics (I) Ltd. v/s. ACIT (2012) 33 CCH (Del)(Trib). 2) DCIT v/s. Reliance Industries Ltd. (2004) 88 ITD 273 (SB) 3) ITAT Order in ITA No. 191/Nag/2001 in the case of M/s Haldiram Food International Ltd., order dated 20-02-2004. 4) CIT v/s. Chaphalkar Brothers (2013) 351 ITR 309 (Bom). 5) CIT v/s. Kirloskar Oil Engines Ltd. (2014) 364 ITR 88 (Bom.). 6) ITAT order in ITA No. 82/PN/2001 in the case of Kirloskar Oil Engines Ltd., order dated 20-02-2004. 7) ITAT order in ITA No. 4238/Mum/2010 in the case of Eversmile Construction Co. Pvt. Ltd., order dated 30-08-2011. 8) ITAT order in ITA Nos. 771 to 774/PN/2010 in the case of Sanjay Nandlal Vyas, Order dated 23-12-2011. 9) CIT v/s. Shelly Products Anr. (2003) 261 ITR 367 (SC). 10) Nirmala L. Mehta v/s. A. Balasubramaniam CIT Ors. (2004) 269 ITR 1 (Bom.) 11) S.R. Koshti v/s. CIT (2005) 276 ITR 165 (Guj.) 12) CIT v/s. V. MR. P. Firm 56 ITR 67 (SC). 13) CIT v/s. Bhaskar Mitter (1994) 73 Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of sales tax incentive was covered by several precedents. 7. On the other hand, from the side of the Revenue, learned D.R., Mr. Narendra Kane has vehemently objected the claim of the assessee by supporting the orders of Assessing Officer and learned CIT(Appeals). He has also raised a technical issue that the assessee was not sure to treat the sales tax incentive as a revenue receipt or a capital receipt. When the original return was filed, the sales tax incentive was credited in the profit loss account by treating the same as revenue receipt. Later on the assessee has changed its stand and now claiming the incentive as a capital receipt. He has also argued that as an alternate, the merits of the case can be decided afresh by the Assessing Officer to examine the nature of receipt in the light of scheme of Government of Maharashtra. 8. In the rejoinder, learned A.R. has strongly objected the proposal of sending the issue back to the stage of Assessing Officer on the ground that all the relevant details as well as the facts of the sales tax incentive were very much before the Assessing Officer which were duly checked by the Assessing Officer as is apparent from the body of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as assessed as per the impugned assessment order now before us. For the year under consideration, the assessment was originally made under section 143(1) dated 7th February, 2004 (A.Y. 2003-04). At this juncture it is also worth to mention that in the case of the assessee for assessment year 2004-05 originally the assessment was made under section 143(3) dated 22-12-2006. The return for the said year was filed declaring an income of ₹ 44,48,790/- and the same was assessed by the Assessing Officer. In the past the assessee was claiming a deduction under section 80IB(3)(ii) of the Act. In the paper book the assessee has also computed yearwise sales-tax incentive availed by the assessee. For assessment year 2003-04 the assessee has received an incentive in respect of oil refinery of ₹ 74,15,531/-. For assessment year 2004-05 the sales tax incentive in respect of oil refinery was at ₹ 33,96,658/- and in respect of wind power it was ₹ 23,00,000/-, total ₹ 56,96,658/-. Likewise in rest of the years, details in respect of the sales tax incentive was furnished. This is also not in dispute that in the respective years the assessee has credited the impugned amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of respective each six assessment years, immediately preceding the assessment year in which search is conducted. Section 153A starts with a non-obstante clause and prescribes that notwithstanding anything contained in section 139, 148 etc., in the case of a person where a search is initiated then the Assessing Officer shall issue a notice requiring him to furnish the return of income in respect of six assessment years setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such returns were a return required to be furnished under section 139 of the Act. The Assessing Officer is also empowered either to assess or reassess the total income separately for six assessment years. This language of section 153A was duly analyzed by respected coordinate bench, Mumbai in the case of M/s Eversmile Construction Co. (supra). We are also of the view that the intention of section 153A is clear that irrespective of the fact that original return could have been filed by the assessee, but if a return is filed in compliance of a notice issued consequence upon the search, then the assessee is expected to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst in which the assessee files return in response to notice u/s 153A disclosing lower income than the one originally assessed u/s 143(3) and the second situation in which the income is disclosed at the increased level, that is, after considering the additions so made in the original assessment and then agitates during the assessment proceedings about the deductibility of the amount(s) which was/were not allowed earlier. Probably the second course is adopted so as to preempt any move on the part of the Revenue to impose concealment penalty, if the addition is sustained in the assessment u/s 153A. In our considered opinion when the Assessing Officer has to compute the total income of the assessee on the basis of return filed after considering the submissions made during the course of hearing before him. There cannot be any scope for arguing that the assessee has been rendered powerless to even lodge a claim in respect of which deduction was not allowed earlier. Here it is important to note that the total income is not reduced simply on the basis of making a claim. The Assessing Officer is fully empowered to consider the question of deductibility as per the provisions of the Act. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law then the Assessing Officer should take initiative in guiding a tax payer. Therefore, the argument before us is that only a correct and just income is required to be assessed in the hands of the assessee by the Assessing Officer. Indeed the true intent of the statute is that an assessee is not to be placed in a dis-advantageous position because of a technical reason. The statute do not prescribe to take away a legal right of tax payer. Even the Law as pronounced by several Hon ble Courts is that acquiescence to illegal tax for long time is not a ground for denying the relief to a tax payer if he is legally entitled for the same. The Hon ble Courts have, therefore, guided the tax authorities that they are under obligation to act in accordance with law and tax is to be collected strictly as provided under the Act. Because of any misconception on the part of an assessee he cannot be over assessed. Rather the AOs are advised not to raise technical pleas if a citizen have a lawful right. A private litigant may adopt such recourse to protect his personal rights but State authorities are not expect to deny a lawful claim merely on technical grounds. We have also come across a decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x has escaped assessment. After forming such belief, the AO is called upon to record reasons for the reopening of the assessment before issuing mandatory notice u/s 148. If the foundation of reassessment, being the reasons about the escapement of some income do not exist, then it is impermissible to go ahead with the assessment u/s 147. It is sine qua non that some escaped income must be brought to charge in order to make a fresh assessment u/s 147. On the contrary, the search action itself mandates on the Assessing Officer to pass orders u/s 153A computing total income for all the relevant six assessment years, irrespective of the fact whether some concealed income has surfaced as a result of search or not. It is thus apparent that the ambit of assessment u/s 147 cannot be imported into the scope of section 153A. 10.6 Even the decision of Goetze India Ltd. 284 ITR 323 (SC) should not be applied in the context of the issue in hand, as reliance placed from the side of the Revenue, because it was made clear by the Hon ble Supreme Court that the issue as settled in that appeal was limited to the power of the Assessing Officer and does not impinge on the power of Income Tax Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in those underdeveloped areas the Government of Maharashtra has pronounced a package of incentives for expansion as well as establishing new units. The implementing agencies for the purpose of implementation of the said scheme were small scale industries, medium scale industries etc. Eligibility Certificate was required to be issued by the implementing agency after commencement of commercial production. Under the scheme, the next step was that the Commissioner of Sales Tax will endorse the Eligibility Certificate issued by the implementing agency and shall specify the date of effect of eligibility for the sales tax incentive. The incentive was in the nature of Special capital incentive for SSI Units . The scheme has also prescribe the quantum of the sales-tax incentive. The scheme has defined fixed capital investment which had few categories such as new fixed assets, shifting of fixed assets or acquisition of second-hand fixed assets. The sales tax incentive is admissible to new/pioneer units and a unit is entitled to exemption from payment of purchase tax on purchase of raw material and sales tax payable by eligibility units to its vendors on its purchase of raw material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ga, Raigad District, which was a notified area. The actual disbursement took place after the assessee commenced production, but according to the Tribunal, it was only a mode of disbursement and had nothing to do with the object for which the subsidy was given. Thus, it was found that the Tribunal did not notice the crucial observations of the Supreme Court in Sahney Steel Press Works Ltd, s case (supra) which gave primacy to the object of the subsidy over the fact that it was given after the commencement of production. 12.3 Finally it was held that the assessee was justified in its claim that the salestax incentives received in terms of the Government scheme constituted the capital receipt and therefore, not to be taken into account in computation of total income. Since a view has been taken in respect of this very scheme by the respected Special Bench then we have no reason to take any other view but to follow the view already expressed in this precedent. 13. Further we have been informed that almost in identical situation, the ITAT, Delhi Bench in the case of Indo Rama Synthetics 33 CCH 526 wherein one of us i.e. learned Accountant Member is the party, has given a verd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or receipts are from the schemes and packages devised by the State, it should note the object and purpose of the same. If that is of the nature specified in the judgments of this Court and equally that of the Honourable Supreme Court, then, the Revenue must act accordingly. We hope that this much is enough so as to dissuade the Revenue from b ringing such matters repeatedly to this Court. Ordinarily and for wasting judicial time and which is precious, we would have imposed heavy costs on the Revenue while dismissing this Appeal, but we refrain from doing so by giving last opportunity to the Revenue. This Appeal does not raise any substantial question of law. It is dismissed. No order as to cost. 15. Thus under the totality of the facts and circumstances of the case, we are of the view that considering the scheme of the State Government, the assessee is entitled for the exemption of the sales-tax incentive being a capital receipt in the hands of the assessee and that the claim being lawful in nature ought to have been entertained by the Assessing Officer while completing the assessment under section 153A of I.T. Act. Therefore, ground Nos. 2 and 3 are hereby decided in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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