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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 ..... count of technical knowhow fees amounting to Rs. 1,64,53,858/- on the basis the decision of the Hon'ble ITAT dated 26.09.2013 for AY 2009-10. iii) Whether on the facts and in the circumstances of the case, the CIT(A) has erred in following the decision of the Hon'ble ITAT dated 21.10.2015 for A Y 2008-09 in the case of the assessee itself and deleting the addition of Rs. 1,29,43,909/- holding the sales tax subsidy as capital receipts in nature. iv) Whether on the facts and circumstances of the case, the Ld.CIT(A) has erred in treating the sales tax subsidy as capital receipts in nature despite the decision of Hon'ble Delhi High Court in the case of CIT vs. Vardhman Industries Ltd. vide consolidated order dated 13.07.2017 in ITA No.681/2004, 708/2004, 755/2004 & 725/2004, 398 ITR 216 wherein sales tax subsidy has been held to be a revenue receipt. v) Whether on the facts and in the circumstances of the case the decision of the Hon'ble Supreme Court in the case Ponni Sugars and Chemicals Ltd. (2008) 306 ITR 392 (SC) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to Rs. 39,35,029/- on the basis the decision of the Hon'ble ITAT dated 26.09.2013 for AY 2009-10." 8. Brief facts relating to the issue are that the assessee had claimed expenses on technical know-how, of Rs. 39,35,029/- as revenue expenditure in its Profit & Loss Account. The same had been paid to M/s Ring Tech. Co., Japan under a technical collaboration agreement entered into in 1997 and extended from time to time. The A.O. asked the assessee to justify as to how the expenditure was revenue expenditure and why it should not be treated as capital expenditure. In response to the same, the assessee submitted that the main objective of the agreement was to increase the productivity and to reduce the rejections from the current levels. Thus it was pointed out that the objective was to effect the economy and efficiency in manufacturing and, therefore, had been rightly claimed as revenue expenditure. It was contended that the company had not acquired any capital asset in the nature of exclusive user of technology information. The assessee further submitted that identical issue had been decided in favour of the assessee by the I.T.A.T. in earlier years. The A.O. did not acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is also covered in favour of the assessee vide aforesaid referred to order dt. 27/05/2019 in assessee's own case in ITA No. 756/Chd/2018, the reference was made to para 2 to 6 of the said order. 9. In his rival submissions the Ld. CIT DR although supported the orders of the authorities below but could not controvert the aforesaid contention of the Ld. Counsel for the Assessee. 10. We have considered the submissions of both the parties and perused the material available on the record. It is noticed that an identical issue having similar facts was a subject matter of the Departmental Appeal for the A.Y. 2011- 12 in ITA No. 756/Chd/2018 wherein the relevant findings have been given by the ITAT vide order dt. 27/05/2019 in para 2 to 6 which read as under: 2. Ground Nos. i) to iv), it was contended, related to the same issue of treatment of sales tax subsidy received by the assessee, whether capital or revenue in nature and the same read as under: "i) Whether on the facts and in the circumstances of the case, the CIT(A) has 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , holding the subsidy to be revenue in nature. Following the said decision and noting the fact that it was a post production subsidy, the A.O. treated the subsidy as revenue in nature and added the same in the income of the assessee. 4. Before the Ld.CIT(A), the assessee contended that identical issue had arisen in the case of the assessee in the preceding year also, wherein the matter had travelled up to the Hon'ble High Court who had remanded the issue back to the I.T.A.T. and who in turn had decided the issue in favour of the assessee in remand. The Ld.CIT(A) after going through the order of the I.T.A.T. in the case of the assessee in ITA No.897/Chd/2006, ITA No.341/Chd/2007 and ITA No 756/Chd/2011 for assessment years 2003-04, 2004-05 and 2008-09, found that the issue of sales tax subsidy had been decided by the I.T.A.T. in favour of the assessee holding the same to be capital in nature. Accordingly, the addition made 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies below but could not controvert the aforesaid contention of the Ld. Counsel for the Assessee. 15. We have considered the submissions of both the parties and perused the material available on the record. It is noticed that an identical issue having similar facts was a subject matter of the Assessee's Appeal for the A.Y. 2012-13 in ITA No. 730/Chd/2018 wherein the relevant findings has been given by the ITAT vide order dt. 27/05/2019 in para 27 to 33 which reads as under: 27. The sole ground raised in this appeal reads as under: "1.That the Ld. CIT(Appeals) has grossly erred in not allowing the claim of the assesse for deduction of Rs. 8,89,51,004/- from the Book Profits u/s 115JB on account of sales tax subsidy being in the nature of capital receipt. The deduction of Rs. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Tyres Ltd. ((Supra) and thereafter, it was noted by the Tribunal in this case that as per the decision of Special Bench of the Tribunal rendered in the case of Rain Commodities Ltd. Vs. DCIT, 41 DTR 449, if profit and loss account is not in accordance with Part II & Part III of Schedule VI to the Companies Act, 1956 because it is prerequisite for Section 115JB of the Act. The Tribunal in this case also considered two another Tribunal's orders rendered in the case of DCIT Vs. Bombay Diamond Company Ltd. 33 DTR 59 and Syndicate Bank Vs. ACIT, 7 SOT 51 Bangalore where it was held by the Tribunal after considering the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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