Itat/47/2024 Ia No: Ga/1/2024, Ga/2/2024 Principal Commissioner Of Income Tax Central 2 Kolkata v. Ritum Jain

OD–7 IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE ITAT/47/2024IA NO: GA/1/2024, GA/2/2024PRINCIPAL COMMISSIONER OF INCOMETAX CENTRAL 2 KOLKATA VSRITUM JAIN BEFORE :THE HON’BLE THE CHIEF JUSTICE T.S. SIVAGNANAMAndTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate : 19[th] February, 2024. Appearance :Mr. Om Narayan Rai, Adv.Mr. Soumen Bhattacharjee, Adv.…for appellant The Court :- We have heard Mr. Om Narayan Rai, and Mr. SoumenBhattacharjee, learned standing Counsel for the department. The respondenthas been served and an affidavit of service has been filed. There is delay of 286days in filing the appeal. WE are satisfied with the explanation offered, the delayin filing the appeal is condoned.The application is allowed. This appeal by the revenue filed under Section 260A of the Income TaxAct, 1961 is directed against the order dated 24.11.2022 passed by the IncomeTax Appellate Tribunal, “A” Bench, Kolkata (the Tribunal) in IT (SS)A No.37/Kol/2019 for the assessment year 2015-16. The revenue has raised thefollowing substantial questions of law for consideration:- A)Whether the Learned Tribunal has committed substantial error in lawby dismissing the appeal of the Revenue and in allowing the assessee’sclaim of the Sales tax incentive received from the State Governmentunder West Bengal Industrial Promotion (Assistance to IndustrialUnits) Scheme in short (IPS) 2010 as capital receipt in place of RevenueReceipt?by dismissing the appeal of the Revenue and in allowing the assessee’sclaim of the Sales tax incentive received from the State Governmentunder West Bengal Industrial Promotion (Assistance to IndustrialUnits) Scheme in short (IPS) 2010 as capital receipt in place of RevenueReceipt? B)Whether the Learned Tribunal has committed substantial error in lawby not appreciating that the assessee has neither filed revised returnunder Section 139(5) of the Income Tax Act claiming the Sales Taxincentive to be capital receipt nor given any notice to the AssessingOfficer alleging non-taxability of the capital receipt on the ground of thesame being under Industrial Promotion Scheme of Government of WestBengal before completion of assessment ?by not appreciating that the assessee has neither filed revised returnunder Section 139(5) of the Income Tax Act claiming the Sales Taxincentive to be capital receipt nor given any notice to the AssessingOfficer alleging non-taxability of the capital receipt on the ground of thesame being under Industrial Promotion Scheme of Government of WestBengal before completion of assessment ? It is not in dispute that substantial questions of law which have beenraised in appeal are covered against the appellant/assessee in the light of thejudgement of this Court in ITAT/44/2023 dated 27.3.2023 in the case ofPrincipal Commissioner of Income Tax, Central Kolkata –2 Vs. Shanti NathDetergents Pvt. Ltd. The operative portion of the judgement reads as follows :- “So far as the substantial question no.[a] is concerned, the same is squarelycovered by the decision of this Court in the case of Principal Commissioner ofIncome 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 squarelycovered in favour of the assessee and against the revenue in the light ofthe decision of the Hon’ble Supreme Court in CIT vs. M/s. Chaphalkar Brothers [2017] 88 taxmann.com 178/[2018] 252 Taxman 360/400 ITR279. The operative portion of the judgment reads as follows :- “So far as the substantial question no.[a] is concerned, the same is squarelycovered by the decision of this Court in the case of Principal Commissioner ofIncome 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 squarelycovered in favour of the assessee and against the revenue in the light ofthe decision of the Hon’ble Supreme Court in CIT vs. M/s. Chaphalkar Brothers [2017] 88 taxmann.com 178/[2018] 252 Taxman 360/400 ITR279. The operative portion of the judgment reads as follows :- “After setting out both the Supreme court judgements referred tohereinabove, the High Court found that the concessions were issuedin order to achieve the twin objects of acceleration of industrialdevelopment in the State of Jammu and Kashmir and generation ofemployment in the said State. Thus considered, it was obvious thatthe incentives would have to be held capital and not revenue. Mr.Ganesh, learned Senior Counsel, pointed out that by an order dated19.04.2016, this Court stated that the issue raised in those appealswas covered, inter alia, by the judgment in Ponni Sugars, and theappeals were, therefore, dismissed. We have no hesitation in holding that the finding of the Jammu andKashmir High Court on the facts of the incentive subsidy containedin that case is absolutely correct. In that once the object of thesubsidy was to industrialize the State and to generate employmentin the State, the fact that the subsidy took a particular form and thefact that it was granted only after commencement of productionwould make no difference.” 5.Identical issue was also considered by this Court in the case ofPr.CIT vs. Ankit Metal And Power Ltd., [2019] 109 taxmann.com93/266 Taxman 237/416 ITR 591 (Cal)wherein apart fromconsidering the effect of the subsidy, the Court also considered as towhether when a receipt is not in the character of income as definedunder Section 2(24) of the Act, whether it can be said to form part ofthe book profit under Section 115 JB. The said question wasanswered in favour of the revenue in the following terms :- “31. In this case since we have already held that in the relevantassessment 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 areceipt is not in the character of income it cannot form part of the bookprofit under section 115JB of the Act, 1961. In the case of Apollo TyresLtd. (supra) the income in question was taxable but was exempt under aspecific Provision of the Act as such it was to be included as a part of thebook profit. But where a receipt is not in the nature of income at all, itcannot be included in the book profit for the purpose of computationunder section 115JB of the Income-tax Act, 1961. For the aforesaidreason, we hold that the interest and power subsidy under the schemes inquestion would have to be excluded while computing book profit undersection 115JB of the Income-tax Act, 1961. The third issue involved in theinstant appeal which requires adjudication is whether the action of theTribunal entertaining/allowing the claim which was made by the assesseebefore the Assessing Officer by filing a revised computation instead offiling a revised return since the time to file the revised return had lapsed,for claiming to treat the incentive subsidies in question as capital receiptsinstead of revenue receipts as claimed in original return. The AssessingOfficer had denied this claim. The Revenue has attacked the order of theTribunal by relying on the decision in the case of Goetze (India) Ltd. v. CITreported in [2006] 284 ITR 323 (SC). This case does not help the Revenue/appellant. In this case, theSupreme Court has made it clear that its decision was restricted to thepower of the assessing authority to entertain a claim for deductionotherwise than by a revised return, and did not impinge on the power ofthe Appellate Tribunal under section 254 of the Income-tax Act, 1961.The Hon’ble Supreme Court in the said decision held as follows (page 324of 284 ITR): “In the circumstances of the case, we dismiss the civil appeal. However, wemake it clear that the issue in this case is limited to the power of theassessing authority and does not impinge on the power of the Income-taxAppellate 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 thatthe Tribunal has the power to entertain the claim of deduction not claimedbefore the Assessing Officer by filing a revised return. Respectfullyfollowing the aforesaid decision as well as the view already taken by us inthis case that the aforesaid subsidies are capital receipt and not an“income” and not liable to tax, the Tribunal in exercise of its power undersection 254 of the Income-tax Act justified this claim though no revisedreturn 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 ofthe assessee. Accordingly, the appeal of the Revenue is dismissed with no order asto cost.” Following the above decision the appeal filed by the revenue is dismissedand the substantial questions of law are answered against the revenue. (T.S. SIVAGNANAM) CHIEF JUSTICE (HIRANMAY BHATTACHARYYA, J.) pkd/GH.