Calcutta High Court
The Principal Commissioner Of ... vs M/S. Krishi Rasayan Exports Pvt. ... on 14 September, 2022
O 133
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (INCOME TAX)
ORIGINAL SIDE
ITA/120/2018
THE PRINCIPAL COMMISSIONER OF INCOME TAX-4, KOLKATA
VS.
M/S. KRISHI RASAYAN EXPORTS PVT. LTD.
BEFORE :
THE HON'BLE JUSTICE T.S. SIVAGNANAM
And
THE HON'BLE JUSTICE SUPRATIM BHATTACHARYA
Date : SEPTEMBER 14, 2022.
Appearance:
Mr. Tilak Mitra, Adv.
... for appellant
Mr. R.K. Murarka, Sr. Adv.
Mr. S.D. Verma, Adv.
...for respondent
The Court :- This appeal filed by the revenue under Section 260A of the
Income Tax Act, 1961 (the `Act') is directed against the order dated 8th March,
2017 passed by the Income Tax Appellate Tribunal "A" Bench, Kolkata (Tribunal)
in I.T.A. No. 883 & 1018/Kol/2014 for the assessment year 2010-2011.
The appeal was admitted to decide the following substantial question of
law:-
"Whether the interest subsidy and excise refund would be treated as
capital receipt or revenue receipt for the purpose of computation of book
profit under the provision of Section 115JB of the Income-Tax Act, 1961 ?"
We have heard Mr. Tilak Mitra, learned standing Counsel appearing for the
appellant/revenue and Mr. R.K. Murarka, learned senior Counsel appearing for
the respondent/assessee.
The substantial question of law involved in this appeal is squarely covered
in favour of the assessee and against the revenue in the light of the decision of
the Hon'ble Supreme Court in Commissioner of Income-Tax-I, Kolhapur vs. M/s.
Chaphalkar Brothers Pune, (2018) 400 ITR 279 (SC). The operative portion of the
judgment reads as follows :-
"After setting out both the Supreme court judgements 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 19.04.2016, 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.
We have no hesitation in holding that the finding of the Jammu and
Kashmir High Court on the facts of the incentive subsidy contained in that
case is absolutely correct. In that once the object of the subsidy was to
industrialize the State and to generate employment in the State, the fact
that the subsidy took a particular form and the fact that it was granted
only after commencement of production would make no difference."
Identical issue was also considered by this Court in the case of Principal
Commissioner of Income-Tax vs. Ankit Metal And Power Ltd., (2019) 416 ITR 591
(Cal) wherein apart from considering the effect of the subsidy the Court also
considered as to whether when a receipt is not in the character of income as
defined under Section 2(24) of the Act, whether it can be said to form part of the
book profit under Section 115 JB. The said question was answered in favour of
the revenue in the following terms :-
"31. In this case since we have already held that in the relevant
assessment year 2010-11 the incentives "interest subsidy" and "power
subsidy" is a "capital receipt" and does not fall within the definition of
"income" under section 2(24) of the Income-tax Act, 1961 and when a
receipt is not on in the character of income it cannot form part of the book
profit under section 115JB of the Act, 1961. In the case of Apollo Tyres
Ltd. (supra) the income in question was taxable but was exempt under a
specific Provision of the Act as such it was to be included as a part of the
book profit. But where a receipt is not in the nature of income at all it
cannot be included in the book profit for the purpose of computation under
section 115JB of the Income-tax Act, 1961. For the aforesaid reason, we
hold that the interest and power subsidy under the schemes in question
would have to be excluded while computing book profit under section
115JB of the Income-tax Act, 1961. The third issue involved in the instant
appeal which requires adjudication is whether the action of the Tribunal
entertaining/allowing the claim which was made by the assessee before the
Assessing Officer by filing a revised computation instead of filing a revised
return since the time to file the revised return had lapsed, for claiming to
treat the incentive subsidies in question as capital receipts instead of
revenue receipts as claimed in original return. The Assessing Officer had
denied this claim. The Revenue has attacked the order of the Tribunal by
relying on the decision in the case of Goetze (India) Ltd. v. CIT reported in
[2006] 284 ITR 323 (SC).
This case does not help the Revenue/appellant. In this case the
Supreme Court has made it clear that its decision was restricted to the
power of the assessing authority to entertain a claim for deduction
otherwise than by a revised return, and did not impinge on the power of
the Appellate Tribunal under section 254 of the Income-tax Act, 1961. The
Hon'ble Supreme Court in the said decision held as follows (page 324 of
284 ITR):
"In the circumstances of the case, we dismiss the civil appeal.
However, we make it clear that the issue in this case is limited to the
power of the assessing authority and does not impinge on the power
of the Income-tax Appellate Tribunal under section 254 of the
Income-tax Act, 1961."
This judgment was followed by our court in the case of CIT v.
Britannia Industries Ltd. reported in [2017] 396 ITR 677 (Cal) holding that
the Tribunal has the power to entertain the claim of deduction not claimed
before the Assessing Officer by filing a revised return. Respectfully
following the aforesaid decision as well as the view already taken by us in
this case that the aforesaid subsidies are capital receipt and not an
"income" and not liable to tax, the Tribunal in exercise of its power under
section 254 of the Income-tax Act justified this claim though no revised
return under section 39(5) of the Act was filed before the Assessing Officer.
We answer both the question Nos. 1 and 2 in the negative and in favour of
the assessee.
Accordingly, the appeal of the Revenue is dismissed with no order as
to cost.
In the light of the above decisions, the substantial question of law framed
for consideration has to be answered against the revenue.
Accordingly, the appeal is dismissed on the substantial question of law.
(T.S. SIVAGNANAM, J.)
(SUPRATIM BHATTACHARYA, J.)
GH/Pkd/S.Pal/SN
