Calcutta High Court
Kolkata vs Shantinath Detergents Pvt. Ltd on 27 March, 2023
OD-2
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (INCOME TAX)
ORIGINAL SIDE
ITAT/44/2023
IA NO:GA/1/2023, GA/2/2023
PRINCIPAL COMMISSIONER OF INCOME TAX [CENTRAL] KOLKATA-2,
KOLKATA
VS.
SHANTINATH DETERGENTS PVT. LTD.
BEFORE :
THE HON'BLE JUSTICE T.S. SIVAGNANAM
And
THE HON'BLE JUSTICE HIRANMAY BHATTACHARYYA
Date : 27th March, 2023
Appearance :
Mr. Smarajit Roy Cowdhury, Adv.
Mr. Soumen Bhattacharyya, Adv.
...for appellant
Mr. Abhrotosh Mazumder, Sr. Adv.,
Ms. Swapna Das, Adv.
Mr. Siddharth Das, Adv.
...for respondent
The Court : - There is a delay of 803 days in filing the appeal. Though the
explanation given in the affidavit in support of the petition is not fully satisfactory since
this appeal has been filed under section 260A of the Income Tax Act, 1961, we are
required to see as to whether any substantial question of law arises for consideration.
For such reason, we exercise discretion and condone the delay in filing the
appeal. The application, GA/1/2023 is allowed.
This appeal filed by the revenue under section 260A of the Income Tax Act, 1961
[the Act] is directed against the order dated 20.3.2020 passed by the Income Tax
Appellate Tribunal, Kolkata "C" Bench, Kolkata in IT[SS]A No.27 to 32/Kol/2019 for the
assessment year 2009-10 to 2013-14 and 2015-16. The revenue has raised the
following substantial questions of law for consideration: -
a) Whether the Learned Tribunal has committed substantial error in law in
upholding the decision of the Learned CIT(A) of admitting the grounds of
appeal for the first time relating to taxability of sales tax subsidy which had
been already offered for taxation by the assessee in its return of income, when
the facts relating to the same were not available on records and thus denying
the Assessing Officer any scope to examine the issue which involves a mixed
question of law and fact and the order of the Learned Tribunal suffers by
perversity ?
b) Whether the Learned Tribunal has committed substantial error in law in
holding that the employees contributions to PF and ESI are governed by the
provisions of Section 43B of the Income Tax Act, 1961 while the same is
separately dealt in section 36(va) of the Income Tax Act, and the declaratory
explanation introduced in the Finance Bill, 2021 at clauses 8 and 9 of the
Bill?
We have heard learned Advocates for the parties.
So far as the substantial question no.[a] is concerned, the same is squarely
covered by the decision of this Court in the case of Principal Commissioner of Income
Tax vs. Krishi Rasayan Exports [P] Ltd.; [2022] 145 taxmann.com 191 [Cal]. The
operative portion of the decision reads as follows :-
"4. 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 CIT vs. M/s. Chaphalkar
Brothers [2017] 88 taxmann.com 178/[2018] 252 Taxman 360/400 ITR
279. 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."
5. Identical issue was also considered by this Court in the case of
Pr.CIT vs. Ankit Metal And Power Ltd., [2019] 109 taxmann.com
93/266 Taxman 237/416 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 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."
6. In the light of the above decisions, the substantial question of law
framed for consideration has to be answered against the revenue."
Thus, following the above decision, the substantial question of law [a] is
answered against the revenue.
So far as the substantial question of law no.[b] is concerned, we have examined
the facts and we find that for all the assessment years the tax effect is far below the
threshold limit fixed by the CBDT. Therefore, the revenue cannot pursue this appeal.
Consequently, the substantial question of law no.[b] stands dismissed on the ground of
law tax effect.
On the above mentioned grounds, the substantial question of law no.[a] is
answered against the revenue and the substantial question of law [b] is left open.
(T.S. SIVAGNANAM, J.)
(HIRANMAY BHATTACHARYYA, J.)
pkd/GH
