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TMI Blog2023 (6) TMI 1438X X X X Extracts X X X X X X X X Extracts X X X X ..... see himself claimed entire amount of Rs.5,15,25,900/- as refundable from Excise Department. 2. The assessee is following mercantile system of accounting and income is to be taxed on accrual basis and the assessee has passed this entry in the books of accounts maintained during the year under consideration. 3. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) was in error in not appreciating (that as per) the amended section 2(24)(xviii) of the IT Act, 1961 any assistance in the form of subsidy, grant, etc. provided by the Government or any other authority is to be considered as income/revenue receipt taxed accordingly. Grounds of ITA No. 587/Asr/2019 1. In the facts and circumstances of the case and in law, Ld. CIT(A) has erred in, confirming the action of the Ld. Assessing Officer, in making addition of Rs. 1,85,49,324/- under section 2(24)(xviii) of the Income Tax Act, 1961, being 36% of Excise Duty Exemption availed by the assessee firm. The action of the Ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting entire such addition, made by Ld. AO and, confirmed by the Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the first appellate authority ought to consider the issue on merits. Hon'ble Madras High Court, in the case of CIT Vs Indian Express (Madurai) Pvt. Ltd. [1983)140 ITR 705 (Madras), observed that unlike a law suit in civil appeals, in tax litigation, it cannot be treated as a "lis" between two rival parties but the job of the Assessing Officer is to arrive at the correct taxable income. In view of the aforementioned discussion, the income becomes taxable on the footing of accrual only when the right to receive the income becomes vested in the assessee. As mentioned in para above, Hon'ble Supreme Court in E.D.Sassoon & Co. Ltd.(Supra) held that if the assessee acquires a right to receive the income, the income is said to have accrued to him, though, it may be received later on. The basic concept is that he must have acquired a right to receive the income. In other words, there must be a debt owed to him by somebody. Unless and until a debt is created in favour of the assessee by somebody, it cannot be said that the assessee has acquired a right to receive the income or the income has accrued to him. Similarly, Hon'ble Supreme Court in the case of Excel Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority is to be considered as income/revenue receipt taxed accordingly. 5. Per contra, the Ld. Counsel for the assessee has reiterated the submission made before the Ld. CIT(A) and contended that even excise duty refundable to the extent of 36% as per amended notification is also not taxable in view of the decision of jurisdictional High Court in case of Shree Balaji Alloys & Ors. Further even after amendment the excise duty refund cannot be taxed as revenue receipt as 'exemption' is not specified in the definition given in section 2(24) (xviii) of the Act. Exemption cannot in any way be equated with waiver & concession and thus exemption from excise duty will not fall within the ambit of section 2(24) (xviii) of the Act and cannot be treated as an income. 5.1 The counsel further submitted that the Ld. CIT(A), however, himself held that when specific provision has been brought to the statute and no exemption to any specified trade or area has been provided, it is not open for the taxing authority or the tax payers to interpret the same as per their convenience. As per section 2(24)(xviii) only two exemptions are available w.e.f. 01.04.2016 as mentioned in clause (a) & (b). There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. No tax can be imposed on an amount which is not earned. In this connection, reliance is placed on the following cases:- CIT Vs. Shoorji Vallabhdas & Co. (1962) 46 ITR 144 (SC) Income-tax is a levy on income. No doubt, the IT Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book- keeping, an entry is made about a "hypothetical income", which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account. A mere book-keeping entry cannot be income, unless income has actually resulted. Kedarnath Jute Mfg. Co. Ltd. Vs. CIT (1971) 82 ITR 363 (SC) Whether the assessee is entitled to a particular deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l accrual of income to the assessee-company in respect of the enhanced charges for supply of electricity has to be considered by taking the probability or improbability of realisation in a realistic manner. If the matter is considered in this light, it is not possible to hold that there was real accrual of income to the assessee-company in respect of the enhanced charges for supply of electricity which were added by the ITO while passing the assessment orders in respect of the assessment years under consideration. The Appellate Assistant Commissioner was right in deleting the said addition made by the ITO and the Tribunal had rightly held that the claim at the increased rates as made by the assessee-company on the basis of which necessary entries were made represented only hypothetical income and the impugned amounts as brought to tax by the ITO did not represent the income which had really accrued to the assessee-company during the relevant previous years. The High Court, in our opinion, was in error in upsetting the said view of the Tribunal. E.D. Sassoon & Co. Ltd. Vs. CIT (1954) 26 ITR 27 (SC) Income may accrue to an assessee without the actual receipt of the same. If the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendent words. These words are not defined. Therefore, the general meaning of these words are required to be considered. As per Black's Law Dictionary (Sixth Edition) these two words are defined as under:- 'Exemption: Freedom from a general duty or service; immunity from a general burden, tax, or charge. Immunity from service of process or from certain legal obligations, as jury duty, military service, or the payment of taxes.' 'Subsidy: A grant of money made by government in aid of the promoters of any enterprise, work, or improvement in which the government desires to participate, or which is considered a proper subject for government aid, because such purpose is likely to be of benefit to the public' 5. From the above definition it can be noted that exemption is when assessee is given freedom from following any rules or regulations whereas subsidy is something which is given to the assessee to meet the cost of its project. In the present case, assessee is exempted from making payment of excise duty to the extent of 36% of the total excise duty collected. It is not subsidy given to meet cost of project. Hence, exemption from excise duty do not fall in the definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed 100% exemption on refund of excise duty on the goods manufactured by it, as the capital receipt. The DR argued that since, the assessee is following mercantile system of accounting and hence, income is to be taxed on accrual basis and further, the assessee has passed this entry in the books of accounts maintained during the year under consideration. He contended that the Ld. CIT(A) was in error by not appreciating that as per the amended section 2(24)(xviii) of the IT Act, 1961 any assistance in the form of subsidy, grant, etc. provided by the Government or any other authority is to be considered as income/revenue receipt taxed accordingly. 7. However, the Ld. DR could not rebut the contention of the Ld. Counsel that applying the settled principal of law, from Notification No.56/2002 dt. 14.11.2002 as amended by Notification No.19/2008 dt. 27.03.2008, that the assessee was entitle for exemption for payment of excise duty to the extent of 36% of total excise duty collected. Thus, in view of Notification No.19/2008 dt. 27.03.2008, the assessee is entitled to only 36% of the excise duty exemption and not of 100% exemption as sustained by the Ld. CIT(A). The SLP filed before Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presents only hypothetical/notional income although it is following mercantile system of accounting and hence, the impugned amounts as brought to tax by the ITO did not represent the income of the appellant company. Therefore, the ground No. 2 of the department is rejected. 12. From the above, it is evident that Government of India vide amended notification has made its intention clear that the assessee would be entitled to excise duty exemption only to the extent of 36%. The excess exemption from excise duty to the extent of 64% recognized by the assessee in its books of accounts is nothing but hypothetical income which has not accrued. This is also confirmed by Hon'ble Supreme Court by dismissing the SLP filed by the assessee. In view of that matter, the Ld. CIT(A) has rightly deleted the addition of Rs.3,29,76,575/-. Thus, ground no. 1 and ground no. 3 of revenue are rejected 13. Considering the factual matrix and the legal intricacies, we upheld the decision of the Ld. CIT(A) to the extent of deleting the addition of Rs.3,29,76,575/-. and accordingly, the appeal filed by the department is dismissed. 14. Now, we are taking up the assessee appeal in ITA No. 587/Asr/2019 wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d exemption is used in the conditions when assessee is given freedom from following any rules or regulations whereas subsidy is something which is given to the assessee to meet the cost of its project. In the present case, assessee is exempted from making payment of excise duty to the extent of 36% of the total excise duty collected. It is not subsidy given to meet cost of project. In our view, the exemption from excise duty do not fall in the definition of income as envisaged u/s 2(24)(xviii) of the Act. Meaning thereby, the amount of Rs.1,85,49,324/- is not an income but a capital receipt not taxable under the provisions of the Act. 18. The Hon'ble Supreme Court in "Commissioner of Custom Vs. Dilip Kumar & Co.", (Supra) by considering the decision of judgment of State of West Bengal Vs. Kesoram Industries Ltd. 10 SCC 201 decided by the bench of 5 judges, has laid down the principles applicable for interpretation of taxing statute that in interpreting a taxing statute, equitable considerations are entirely out of place. A taxing statute cannot be interpreted on any presumption or assumption. A taxing statute has to be interpreted in the light of what is clearly expressed; it cann ..... X X X X Extracts X X X X X X X X Extracts X X X X
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