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TMI Blog2019 (7) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... been decided by the I.T.A.T. in the case of the assessee itself in the preceding years, holding the same to be capital in nature and with no distinguishing facts having been brought to our notice by the DR, we see no reason to interfere in the order of the Ld.CIT(A) allowing the assessee s appeal following with order of the I.T.A.T. MAT computation - disallowance of claim of the assessee for deduction of the sales tax subsidy from the book profit under section 115JB - HELD THAT:- As decided in assessee's own case [ 2019 (6) TMI 655 - ITAT CHANDIGARH] we find is identical to that in H.M Steels [ 2018 (11) TMI 1628 - ITAT CHANDIGARH] ,with the Sales tax subsidy having been held to be capital in nature. In view of the same ,the issue we hold is squarely covered by the decision of the ITAT in the case of H.M Steels, following which we hold that the sales tax subsidy is to be reduced from the Book Profits for the purposes of paying tax u/s 115JB. - Assessee's appeal allowed. - ITA No. 1234/Chd/2018, ITA No. 1288/Chd/2018 - - - Dated:- 1-7-2019 - Shri. N.K. Saini, VP And Shri, Sanjay Garg, JM For the Assessee : Shri Ashwani Kumar, CA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is a post-production subsidy, is held to be a revenue receipt as it is an incentive given to the assessee when its business is running. vii) The appellant craves to add, amend, alter or modify any grounds of appeal at the time of hearing. 2.1 Assessee has raised the following grounds in ITA No. 1288/Chd/2018 for A.Y. 2015-16: 1. That the Ld. CIT(A) has grossly erred in law as well as on facts in confirming the disallowance of claim of the assessee for ₹ 129.44 Lacs on account of sales tax subsidy as deduction from the Book Profits u/s 115 JB being in the nature of capital receipt. The deduction of ₹ 129.44 Lacs may kindly be allowed from the Book Profits u/s 115JB. The assessee craves leave to add, alter and amend the above ground of appeal before the same are heard or disposed of. 3. Firstly we shall deal with the Departmental Appeal in ITA No. 1234/Chd/2018 for the Assessment Year 2015-16 wherein vide Ground No. (i) (ii), the grievance of the assessee relates to the deletion of addition of ₹ 1,64,53,858/- made by the A.O. on account of technical knowhow fees. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontention of the assessee. Referring to the collaboration agreement, the A.O. held that the assessee had purchased/acquired technical know-how to completely overhaul its design, plant and manufacturing systems thus getting enduring benefit of permanence and durability. The A.O. held that technical know-how obtained by the assessee was linked to substantial modernization and expansion of existing unit/technique and procedure of production and, therefore, was in the nature of intangible asset and of enduring nature. He further stated that the Department had challenged the order of the I.T.A.T. before the Hon'ble High Court in earlier years. Accordingly, the A.O. treated the technical know-how expenses incurred and claimed by the assessee as capital in nature and disallowed the same. 9. The Ld.CIT(A) allowed the assessee s appeal on finding that identical issue had been adjudicated by the CIT(A) in earlier years in favour of the assessee and appeal of the Revenue against the order of the CIT(A) had been dismissed by the I.T.A.T. vide its order dated 26.9.2013 for assessment year 2009-10. 10. Before us, the Ld. DR heavily relied upon the order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as erred in following the decision of the Hon'ble ITAT dated 21.10.2015 for AYs 2003- 04, 2004-05 2008-09 in the case of the assessee itself and deleting the addition of ₹ 1,84,45,151/- holding the sales tax subsidy as capital receipt in nature. ii) Whether on the facts and in the circumstances of the case the decision of the Hon'ble Supreme Court in the case Ponni Sugar and Chemicals Ltd. and treating the sales tax subsidy as capital receipts in nature was wrongly followed despite the observation of the AO in the assessment order that the facts of the present case are distinguishable from that of Ponni Sugar and Chemicals Ltd. iii) Whether on the facts and in the circumstances of the case the fact that sale tax subsidy was given to existing unit and not for setting up new unit or expansion of the same was not considered. iv) Whether on the facts and in the circumstances of the case, the fact that the subsidy receipt after the commencement of production by the unit was not required to be treated as capital in nature was not considered. 3. The facts relating to the case are that from the Notes on Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the A.O. was deleted by the Ld.CIT(A). Relevant findings of the CIT(A) at page 12 of the order are as under: I have gone through the Hon'ble ITAT's order in the case of the appellant in ITA No. 897/Chd/2006, ITA No. 341/Chd/2007 ITA No. 756/Chd/2011 for A.Y 2003-04, A.Y 2004-05 and 2008-09 wherein the matter has been adjudicated as under: In these cases, the assessee have received Sales Tax Subsidy from Punjab Govt. under the scheme named 'Industrial Policy Investment Code, 1996'. We have gone through the said policy and found that the scheme though not verbatim as that of West Bengal or Gujarat Scheme, but the sum and substance of all these schemes are the same, therefore, relying on our finding gives in ITA no. 773/Chd/2012, we hold that the Sales Tax Subsidy received by the assessee is Capital in nature. As the addition made by the AO is covered by the order of the Hon'ble ITAT in favour of the appellant, the addition made on this account is deleted. 5. Before us, the Ld. DR vehemently supported the order of the A.O. though he fairly conceded that this issue had been decided in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the nature of capital receipt. The deduction of ₹ 8,89,51,004/- may kindly be allowed from the Book Profits u/s 115JB. 28. Briefly stated, the assessee had submitted that the sales tax subsidy received by it during the year was not chargeable to tax being in the nature of capital receipt and would also therefore not be liable to tax u/s 115JB of the Act for the same reason, despite the fact that it was credited to its Profit Loss Account. The Ld.CIT(A) held that for the purpose of section 115JB of the Act the assessee could not go beyond the net profits shown in its books of account. He relied upon the decision of the Hon'ble Allahabad High Court in the case of PCIT Vs. J.K. Synthetics (2017) 390 ITR 129 and the decision of the Hon'ble Karnataka High Court in the case of B B Infratech. Ltd. (2016) 76 Taxmann.com 188. Accordingly, he dismissed this contention of the assessee and included the sales tax subsidy in the Book Profits of the assessee for the purpose of payment of Minimum Alternate Tax (MAT) u/s 115JB of the Act. 29. Before us, the Ld. counsel for assessee pointed out that identical issue had been dealt with by the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of Hon ble Apex Court rendered in the case of Apollo Tyres Ltd. (Supra), and after 28 explaining the same that adjustment to profit and loss account is possible to make it compliant with Schedule VI Part II and Part III of the Companies Act, 1956 which is prerequisite of Section 115JB of the Act. On this basis, the Tribunal in the case of Shree Cement Ltd. (Supra) decided this issue in favour of the assessee and it was held that capital receipt in the form of sales tax subsidy needs to be excluded from profit as per P L account for the purpose of computing book profit u/s 115JB of the Act. By respectfully following these Tribunal s orders, we hold that in the present case also, the receipt on account of transfer of carbon credit which is held to be a capital receipt needs to be excluded from profit as per P L account for the present year while computing the book profit u/s 115JB of the Act. This issue is decided in favour of the assessee and accordingly Ground Nos.1 to 5 are allowed. The assessee gets relief of ₹ 27,70,880/- and consequent interest being 10% of amount received by the assessee on sale of carbon credit of ₹ 277,08,800/-. 19. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X
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