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TMI Blog2025 (3) TMI 466X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, in ITA No. GAU 232/GAU/2019 and ITA No. 359/GAU/2019. 3. As the above-noted income tax appeals involve identical factual and legal issues; hence, these appeals were heard together and are disposed of by this common judgment & order. 4. The brief facts requisite for adjudication of the issue arising in the present proceedings, is noticed as under: 4.1. In the above-noted income tax appeals; this Court had admitted the above-noted appeals, vide order, dated 09.06.2023, on the following substantial questions of law: "(1) Whether the Hon'ble ITAT was right in law in upholding the order of learned CIT (Appeals) in allowing excise duty exemption as capital receipt while the assessee has treated the same as revenue receipt in its book, return of income as well as during assessment. (2) Whether the Hon'ble ITAT was right in law in allowing the excise duty exemption adjustment in computation of MAT under section 115-JB." 4.2. The assessee, herein, in the above-noted income tax appeals viz. M/s. Greenply Industries Ltd., had filed its return of income tax electronically on 29.11.2015, for the assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, which was registered as ITA No. 232/GAU/2019. In the said appeal, the assessee had raised the following grounds: "(1) That on the facts and in the circumstances of the case, the Id. CIT(A) was not justified and grossly erred in not allowing claim of education cess on Income Tax and Dividend Distribution Tax amounting to Rs. 66,87,361/-, in computing total income under the normal provisions of the Act. (2) That on the facts and in the circumstances of the case, the ld. CIT(A) was not justified and grossly erred in not allowing exclusion of Excise Duty Exemption as capital receipt amounting to Rs. 87,98,09,432/- availed during the year under consideration in computing book profit as per section 115JB of the Act." 4.6. However, during the consideration of the appeal i.e. ITA No. 232/GAU/2019, the Ground No. 1 relating to allowing Education Cess was not pressed and accordingly, the said ground was dismissed by the Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, as not pressed. On the other hand, the Ground No. 2 pertaining to allowing exclusion of excise duty exemption availed by the assessee during the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee, ought not to have proceeded to further hold that the said excise duty exemption being a purely capital receipt, would also not be included as a part of book profit for computing the Minimum Alternative Tax as per the provisions of Section 115-JB of the Income Tax Act, 1961. 7. In the above premises, Mr. Keyal, learned Senior Standing counsel, CBDT & Income Tax, NER, has prayed that the order, dated 21.06.2022, passed by the Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, in ITA No. 232/GAU/2019 and ITA No. 359/GAU/2019, would call for an interference. 8. Per contra, Dr. Saraf, learned senior counsel appearing for the sole respondent; at the outset, has submitted that excise duty exemption availed by the assessee for its 2(two) units viz. Rudrapur Plywood Unit and Rudrapur MDF Unit, set-up in the State of Uttaranchal, was so done in view of the policy as formulated by the Ministry of Commerce and Industry, Government of India, vide Office Memorandum, dated 07.01.2003. The learned senior counsel has further submitted that the policy as contained in the Office Memorandum, dated 07.01.2003, was so formulated for providing the required incentives as well as an en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said excise duty exemption from the computation of book profit under Section 115-JB of the Income Tax Act, 1961. Being aggrieved, the assessee had approached the Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, by way of instituting an appeal being ITA No. 232/GAU/2019. The Tribunal, on consideration of the various decisions applicable to the issue, was pleased to allow the claim of the assessee, to also exclude the excise duty exemption claimed by the assessee in relation to its Rudrapur Plywood Unit and Rudrapur MDF Unit, from computation for payment of Minimum Alternative Tax under the provisions of Section 115-JB of the Income Tax Act, 1961. 11. Dr. Saraf, learned senior counsel, has submitted that the Revenue Department, being aggrieved, had also instituted an appeal being ITA No. 359/GAU/2019, before the Income Tax Appellate Tribunal, Guwahati Bench at Kolkata. The learned senior counsel has submitted that a perusal of the order, dated 21.06.2022, which had disposed of both the appeals viz. ITA No. 232/GAU/2019 and ITA No. 359/GAU/2019; no submission has been recorded, therein, by the Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, of the Revenue Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial development, improve availability of capital and increase market access to provide a fillip to the private investment in the State. In terms of the said policy, new industrial units and/or existing industrial units fulfilling the conditions set-out, were entitled to 100% outright excise duty exemption for a period of 10 years from the date of commencement of commercial production. The assessee before the Assessing Officer in the proceedings so instituted by it under the provisions of Section 143 of the Income Tax Act, 1961; the said excise duty exemption was not claimed as a capital receipt. Accordingly, the Assessing Officer proceeded to pass its order under the provisions of Section 143 (3) of the Income Tax Act, 1961, vide order, dated 29.12.2017, with an assessed income of Rs. 54,42,24,740/-. 18. The assessee, being aggrieved, had assailed the order, dated 29.12.2017, passed by the Assessing Officer under the provisions of Section 143 (3) of the Income Tax Act, 1961, before the Commissioner of Income Tax (Appeals), Dibrugarh. During the pendency of the said appeal, as noticed hereinabove, the assessee had raised certain additional grounds. The additional Ground No. 1 so r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals), Dibrugarh, for treating the excise duty exemption received by it for the assessment year 2014-2015, as capital receipt, was taken. However, a question of law having been framed; we would examine as to whether the excise duty exemption availed by the assessee, in the facts and circumstances involved, would be treated as a capital receipt and/or, revenue receipt, in the hands of the assessee. 21. The Hon'ble Supreme Court in the case of Sahney Steel & Press Works Ltd. v. Commissioner of Income Tax, A.P.-I, Hyderabad, reported in (1997) 7 SCC 764, on discussing and analyzing the entire case law, has laid down the basic test to be applied in judging the character of a subsidy. The test is that the character of the receipt in the hands of an assessee, has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The Hon'ble Supreme Court in the said decision had further held that the point of time at which the subsidy is paid is not relevant; the source is immaterial, the form of subsidy is also immaterial. 22. The Hon'ble Supreme Court, thereafter, in its decision in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assistance in the form of a grant was made by the Government with the object that by its use men might be kept in employment and, therefore, its receipt was capital in nature. The importance of the judgment lies in the fact that the Company had applied for financial assistance to the Unemployment Grants Committee. The Committee gave financial assistance from time to time as the work progressed and the payments were equivalent to half the interest for two years on approved expenditure met out of loans. Even though the payment was equivalent to half the interest amount payable on the loan (interest subsidy) still the House of Lords held that money received by the Company was not in the course of trade but was of capital nature. The judgment of the House of Lords shows that the source of payment or the form in which the subsidy is paid or the mechanism through which it is paid is immaterial and that what is relevant is the purpose for payment of assistance. Ordinarily such payments would have been on revenue account but since the purpose of the payment was to curtail/obliterate unemployment and since the purpose was dock extension, the House of Lords held that the payment made was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax, Jammu & Anr. v. Shree Balaji Alloys, reported in (2018) 13 SCC 373. The Hon'ble Supreme Court upheld the decision of the High Court of Jammu & Kashmir in the case of Shree Balaji Alloys (supra) by holding that the appeal was covered against the Revenue by the decisions of the Hon'ble Supreme Court in the case of Ponni Sugars & Chemicals Ltd.(supra) and in the case of Commissioner of Income Tax v. Meghalaya Steels Ltd., reported in (2016) 6 SCC 747. 25. The Hon'ble Supreme Court, thereafter, in its decision in the case of Commissioner of Income Tax-I, Kolhapur v. Chaphalkar Brothers, Pune, reported in (2018) 13 SCC 358; had an occasion to again consider its earlier decision in the case of Sahney Steel & Press Works Ltd.(supra) and Ponni Sugars & Chemicals Ltd. (supra); and had concluded, as under: "17. What is important from the ratio of this judgment in Ponini Sugars case is the fact that Sahney Steer was followed and the test laid down was the "purpose test". It was specifically held that the point of time at which the subsidy is paid is not relevant; the source of the subsidy is immaterial; the form of subsidy is equally immaterial. 18. Applying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the scheme of refund of excise duty and interest subsidy in that case, it was held that the scheme was capital in nature, despite the fact that the incentives were not available unless and until commercial production had started, and that the incentives in the form of excise duty or interest subsidy were not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machine 20. After setting out both the Seme Court judgments referred to hereinabove, the High Court found that the concessions were issued in order to achieve the twin objects of acceleration of industrial development in the State of Jammu and Kashmir and generation of employment in the said State. Thus considered, it was obvious that the incentives would have to be held capital and not revenue. Mr Ganesh, learned Senior Counsel, pointed out that by an order dated 19-4-201611, this Court stated that the issue raised in those appeals was covered, inter alia, by the judgment in Ponni Sugars, and the appeals were, therefore, dismissed. 21. We have no hesitation in holding that the finding of the Jammu and Kashmir High Court on the facts of the incentive subsidy con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty exemption from these two units at Rs. 87,98,09,432/- which is in the nature of capital receipt not liable to be taxed. We also find that though the said amount is reflected in the Profit & Loss Account of the assessee and the amount being capital receipt has not been objected by the ld. CIT(Appeals) also, who has allowed deduction of the said amount vide his order dated 25.03.2019 under normal provisions of the Act, however, the order is silent on the exclusion of the said amount while computing the book profit under section 115JB of the Act, therefore, the issue is for our examination that "whether the excise duty exemption which is a capital receipt and not chargeable to tax under the normal provisions of the Act, is to be considered as a part of book profit for computing the book profit under section 115JB of the Act". 31. The Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, after considering the decisions applicable to the matter, relied upon by the assessee, as well as noticing the order passed by the Commissioner of Income Tax (Appeals), Dibrugarh, and the provisions of the Office Memorandum, dated 07.01.2003, issued by the Ministry of Commerce and Industry, Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 32. Dr. Saraf, learned senior counsel for the sole respondent, in this connection, has relied upon the decision of the High Court of Judicature of Bombay in the case of Commissioner of Income Tax-IV v. Harinagar Sugar Mills Ltd.[order, dated 04.01.2017, in Income Tax Appeal No. 1132/2014]. The High Court of Bombay, in the said decision, on consideration of a similar issue, proceeded to draw the following conclusions: "(a) The issue raised in this question is consequential to question no.(i). We have already held that the subsidy received by the respondent-assessee from the State of Bihar was in the nature of capital receipt. Hence the same cannot be added to arrive at book profits of the respondent-assessee under Section 115J of the Act. (b) However, it is pertinent to note that the question as proposed also seeks addition to book profits on account of excess depreciation along with subsidy received by the respondent-assessee. It is settled position in law as held by the Apex Court in Apollo Tyres Ltd. v/s. CIT 255 ITR 273 that the Assessing Officer while computing the book profit under Section 115J of the Act has only a power to examine whether the books of account have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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