Natun Gaon Nh-37 P.o.- Mohanghat Dibrugarh v. M/S Greenply Industries Ltd. Maggul Lounge, 5Th And 6Th Floor, 23 Chetla Central Road, Kolkata

GAHC010269782022 2025:GAU-AS:2199-DB THE GAUHATI HIGH COURT(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH) Case No. : ITA/3/2023 THE PRINCIPAL COMMISSIONER OF INCOME TAX AND ANR. OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX, AAYAKAR BHAWAN, M.G. ROAD, SHILLONG- 793001. 2: THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE- 1 DIBRUGARH OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE- 1 DIBRUGARH PUSHKARA HOUSE NATUN GAON NH-37 P.O.- MOHANGHAT DIBRUGARH- 786008 VERSUS M/S GREENPLY INDUSTRIES LTD. MAGGUL LOUNGE, 5TH AND 6TH FLOOR, 23 CHETLA CENTRAL ROAD, KOLKATA- 700027. Advocate for the Petitioner : MR. S C KEYAL, Advocate for the Respondent : B SARMA, DR. ASHOK SARAF,MR P BARUAH,MR. N N DUTTA,MR S J SAIKIA,MR P K BORA,MR. G. DUTTATRAY Linked Case : ITA/6/2023 THE PRINCIPAL COMMISSIONER OF INCOME TAX AND ANR.OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX AAYAKAR BHAWAN M.G. ROAD SHILLONG- 793001. 2: THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 DIBRUGARH OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-1 DIBRUGARH G.S. ROAD PUSHKARA HOUSE NATUN GAON NH- 37 P.O.- 786008. VERSUS M/S GREENPLY INDUSTRIES LIMITED MADGUL LOUNGE 5TH AND 6TH FLOOR 23 CHETLA CENTRAL ROAD KOLKATA- 700027. ------------ Advocate for : MR. S C KEYAL Advocate for : MR P BARUAH appearing for M/S GREENPLY INDUSTRIES LIMITED BEFOREHONOURABLE THE CHIEF JUSTICEHONOURABLE MR. JUSTICE N. UNNI KRISHNAN NAIR Date of hearing : 25.02.2025 Date of Judgment & Order : 04.03.2025 JUDGMENT & ORDER (CAV) (N. Unni Krishnan Nair, J.) Heard Mr. Subhash Chandra Keyal, learned Senior Standing counsel, CBDT & Income Tax, NER, appearing on behalf of the appellants in these2(two) income tax appeals. Also heard Dr. Ashok Saraf, learned seniorcounsel, assisted by Mr. B. Sarma, learned counsel, appearing on behalf ofthe sole respondent in both these income tax appeals. 2. The present income tax appeals being ITA No. 03/2023 and ITA No.06/2023 have been preferred by the Revenue Department under Section260A of the Income Tax Act, 1961, challenging the order, dated21.06.2022, passed by the Income Tax Appellate Tribunal, Guwahati Benchat 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 andlegal issues; hence, these appeals were heard together and are disposed ofby this common judgment & order. 4. The brief facts requisite for adjudication of the issue arising in thepresent proceedings, is noticed as under: 4.1. In the above-noted income tax appeals; this Court had admitted theabove-noted appeals, vide order, dated 09.06.2023, on the followingsubstantial 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 hastreated the same as revenue receipt in its book, return of income as well as duringassessment. (2) Whether the Hon'ble ITAT was right in law in allowing the excise duty exemptionadjustment 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 on29.11.2015, for the assessment year 2014-2015, showing total income ofRs. 49,12,19,250/-. The case was selected for scrutiny through CASS undercomplete scrutiny category. The Assessing Officer, thereafter, passed anassessment order, under Section 143(3) of the Income Tax Act, 1961, on29.12.2017, with an assessed income of Rs. 54,42,24,740/-. (2) Whether the Hon'ble ITAT was right in law in allowing the excise duty exemptionadjustment 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 on29.11.2015, for the assessment year 2014-2015, showing total income ofRs. 49,12,19,250/-. The case was selected for scrutiny through CASS undercomplete scrutiny category. The Assessing Officer, thereafter, passed anassessment order, under Section 143(3) of the Income Tax Act, 1961, on29.12.2017, with an assessed income of Rs. 54,42,24,740/-. 4.3. Being aggrieved, the assessee had instituted an appeal before theCommissioner of Income Tax(Appeals), Dibrugarh. The said appeal wasregistered as CIT(A), Dibrugarh/10082/ 2017-18. During the pendency ofthe said appeal, the assessee had raised further additional grounds. Theadditional grounds so raised by the assessee also included the followingground: “1. That on the facts and in the circumstances of the case, Excise Duty Exemptionavailed during the year under consideration be treated as capital receipt and hencebe excluded in computing total income under the provisions of the Act.” 4.4. The said additional ground as raised by the assessee was consideredby the Commissioner of Income Tax(Appeals), Dibrugarh, and the saidground was allowed. The additional ground so considered by theCommissioner of Income Tax (Appeals), Dibrugarh, pertains to the claim ofthe assessee for treating the excise duty exemption availed during the yearunder consideration, as a capital receipt and hence, to be excluded fromcomputation of total income under the provisions of the Income Tax Act,1961. It is to be noted that the assessee in its income tax returns filed forthe year, in question, had treated the said excise duty exemption as arevenue receipt. However, the Commissioner of Income Tax (Appeals),Dibrugarh, while holding the excise duty exemption claimed by theassessee in relation to its 2(two) units viz. Rudrapur Plywood Unit andRudrapur MDF Unit, to be a capital receipt; vide order, dated 25.03.2019,did not proceed to hold that the said income would also not be consideredas a book profit for computing Minimum Alternative Tax as per theprovisions of Section 115-JB of the Income Tax Act, 1961. 4.5. The assessee, thereafter, being aggrieved by the inaction on the partof the Commissioner of Income Tax (Appeals), Dibrugarh, to not excludethe excise duty exemption claimed by it, which was treated as a capitalreceipt, from computation of book profit as per the provisions of Section115-JB of the Income Tax Act, 1961; instituted an appeal before theIncome Tax Appellate Tribunal, Guwahati Bench at Kolkata, which wasregistered as ITA No. 232/GAU/2019. In the said appeal, the assessee hadraised the following grounds: “(1) That on the facts and in the circumstances of the case, the Id. CIT(A) was notjustified and grossly erred in not allowing claim of education cess on Income Tax andDividend Distribution Tax amounting to Rs.66,87,361/-, in computing total incomeunder the normal provisions of the Act. (2) That on the facts and in the circumstances of the case, the ld. CIT(A) was notjustified and grossly erred in not allowing exclusion of Excise Duty Exemption ascapital receipt amounting to Rs.87,98,09,432/- availed during the year underconsideration in computing book profit as per section 115JB of the Act.” “(1) That on the facts and in the circumstances of the case, the Id. CIT(A) was notjustified and grossly erred in not allowing claim of education cess on Income Tax andDividend Distribution Tax amounting to Rs.66,87,361/-, in computing total incomeunder the normal provisions of the Act. (2) That on the facts and in the circumstances of the case, the ld. CIT(A) was notjustified and grossly erred in not allowing exclusion of Excise Duty Exemption ascapital receipt amounting to Rs.87,98,09,432/- availed during the year underconsideration 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 wasnot pressed and accordingly, the said ground was dismissed by the IncomeTax Appellate Tribunal, Guwahati Bench at Kolkata, as not pressed. On theother hand, the Ground No. 2 pertaining to allowing exclusion of exciseduty exemption availed by the assessee during the year underconsideration, in computing book profit, as per the provisions of Section115-JB of the Income Tax Act, 1961, was so considered. 4.7. The Revenue Department, being aggrieved by the order of theCommissioner of Income Tax(Appeals), Dibrugarh, dated 25.03.2019, alsoinstituted an appeal being ITA No. 359/GAU/2019, before the Income TaxAppellate Tribunal, Guwahati Bench at Kolkata. The Tribunal, thereafter,proceeded to consider both the appeals i.e. ITA No. 232/GAU/2019 and ITANo. 359/GAU/2019, analogously, and disposed of the same vide an order,dated 21.06.2022, allowing the appeal of the assessee on Ground No. 2,noticed above, while the appeal as preferred by the Revenue Department,came to be dismissed. 4.8. Being aggrieved, the Revenue has instituted the above-noted incometax appeals being ITA No. 232/GAU/2019, and ITA No. 359/GAU/2019,before this Court. 5. Mr. Keyal, learned Senior Standing counsel, CBDT & Income Tax, NER,has, at the outset, submitted that the assessee, in its return filed for theassessment year 2014-2015, having considered the excise duty exemptionas availed in relation to its Rudrapur Plywood Unit and Rudrapur MDF Unit,as a revenue receipt and during the assessment process; there being noissue raised by the assessee asking for adjustment with regard to the saidexcise duty exemption as a capital receipt; the Commissioner of IncomeTax(Appeals), Dibrugarh, in the appeal so instituted by the assesseeagainst the assessment order of the Assessing Officer, ought not to haveexamined the additional Ground No. 1, raised by the assessee claimingtreatment of the excise duty exemption availed during the year underconsideration as a capital receipt and ought to have remanded the matterback to the Assessing Officer for examining the correctness of the claimmade by the assessee and further, to ascertain as to whether the samewould be in the nature of a capital receipt and/or a revenue receipt. 6. Mr. Keyal, learned Senior Standing counsel, CBDT & Income Tax, NER,has further submitted the Income Tax Appellate Tribunal, Guwahati Bench,Kolkata, erred in drawing a conclusion to the effect that the Commissionerof Income Tax(Appeals), Dibrugarh, having treated the excise dutyexemption as a capital receipt in the hands of the assessee which was sodone without there being a claim so made before the Assessing Officer bythe assessee, ought not to have proceeded to further hold that the saidexcise duty exemption being a purely capital receipt, would also not beincluded as a part of book profit for computing the Minimum Alternative Taxas 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 aninterference. 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 aninterference. 8. Per contra, Dr. Saraf, learned senior counsel appearing for the solerespondent; at the outset, has submitted that excise duty exemptionavailed by the assessee for its 2(two) units viz. Rudrapur Plywood Unit andRudrapur MDF Unit, set-up in the State of Uttaranchal, was so done in viewof the policy as formulated by the Ministry of Commerce and Industry,Government of India, vide Office Memorandum, dated 07.01.2003. Thelearned senior counsel has further submitted that the policy as contained inthe Office Memorandum, dated 07.01.2003, was so formulated forproviding the required incentives as well as an enabling environment forindustrial development in the State of Uttaranchal and to improveavailability of capital and increase market access to provide a fillip to theprivate investment in the State with the view to generate local employmentopportunities and also use of local resources. It was further concluded thatin terms of the provisions of paragraph No. 3.1 of the Office Memorandum,dated 07.01.2003, the new industrial units and existing industrial units ontheir substantial expansion as prescribed were held to be entitled to 100%outright excise duty exemption for a period of 10 years from the date ofcommencement of commercial production and 100% income tax exemptionfor an initial period of 5 years and thereafter, 30% for companies and 25%for other than companies for a further period of 5 years for the entireStates of Uttaranchal and Himachal Pradesh from the date ofcommencement of commercial production. 9. Dr. Saraf, learned senior counsel, has further submitted that althoughbefore the Assessing Officer, the claim for treating the excise dutyexemption availed by the assessee under the policy contained in the OfficeMemorandum, dated 07.01.2003, as capital receipt, was not so raised,however, after the passing of the order by the Assessing Officer and in theappeal being instituted by the assessee being CIT(A), Dibrugarh/10082/2017-18, before Commissioner of Income Tax(Appeals), Dibrugarh; anadditional ground to this effect was so taken by the assessee which wasfavourably considered in view of the decisions of the Hon'ble SupremeCourt as well as various High Courts of the country, holding the field. 10. Dr. Saraf, learned senior counsel, has further submitted that bynoticing the purpose for which the excise duty exemption was so granted tothe assessee in respect of its Rudrapur Plywood Unit and Rudrapur MDFUnit; the Commissioner of Income Tax(Appeals), Dibrugarh, proceeded totreat the same as capital receipt and accordingly, the same was to heldhave an effect of reduction in claim of deduction under Section 80-1(A)(10)of the Income Tax Act, 1961. However, the learned senior counsel hassubmitted that the said excise duty exemption availed by the assessee forthe assessment year 2014-2015 although being held as a capital receipt bythe Commissioner of Income Tax(Appeals), Dibrugarh; no further directionwas issued to exclude the said excise duty exemption from the computationof book profit under Section 115-JB of the Income Tax Act, 1961. Beingaggrieved, 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 decisionsapplicable to the issue, was pleased to allow the claim of the assessee, toalso exclude the excise duty exemption claimed by the assessee in relation to its Rudrapur Plywood Unit and Rudrapur MDF Unit, from computation forpayment of Minimum Alternative Tax under the provisions of Section 115-JBof the Income Tax Act, 1961. to its Rudrapur Plywood Unit and Rudrapur MDF Unit, from computation forpayment of Minimum Alternative Tax under the provisions of Section 115-JBof the Income Tax Act, 1961. 11. Dr. Saraf, learned senior counsel, has submitted that the RevenueDepartment, being aggrieved, had also instituted an appeal being ITA No.359/GAU/2019, before the Income Tax Appellate Tribunal, Guwahati Benchat Kolkata. The learned senior counsel has submitted that a perusal of theorder, dated 21.06.2022, which had disposed of both the appeals viz. ITANo. 232/GAU/2019 and ITA No. 359/GAU/2019; no submission has beenrecorded, therein, by the Income Tax Appellate Tribunal, Guwahati Bench atKolkata, of the Revenue Department that they had, in any manner,questioned the decision of the Commissioner of Income Tax (Appeals),Dibrugarh, towards treating the excise duty exemption claimed by theassessee and involved in the matter, as a capital receipt. 12. Dr. Saraf, learned senior counsel, has further submitted that there isno material to demonstrate that the Revenue Department had alsoquestioned the action on the part of the Commissioner of IncomeTax(Appeals), Dibrugarh, in allowing the claim of the assessee for treatingthe excise duty exemption involved, as a capital receipt without the samebeing so raised before the Assessing Officer. 13. In the above premises, Dr. Saraf, learned senior counsel appearing forthe sole respondent, has submitted that the substantial question of law No.1 so framed by this Court vide order, dated 09.06.2023, would not mandatea consideration, in-as-much as, the said issue was not disputed by the Revenue authorities before the Income Tax Appellate Tribunal, GuwahatiBench at Kolkata, in the appeals so considered by it. 14. We have heard the learned counsels appearing for the parties andalso perused the materials available on record. 15. Substantial questions of law having been framed by this Court videorder, dated 09.06.2023, in the above-noted income tax appeals; we nowproceed to consider the same. 16. At the outset, the substantial question of law No. 1 is beingconsidered. The substantial question of law No. 1, being so framed by thisCourt vide order, dated 09.06.2023, for convenience, is again quotedhereinbelow: “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 hastreated the same as revenue receipt in its book, return of income as well as duringassessment.” 17. As noticed hereinabove, the excise duty exemption claimed by theassessee, is so claimed in terms of the policy decision pertaining to newindustrial policy and other concessions granted by the Ministry ofCommerce and Industry, Government of India, for the States of Uttaranchaland Himachal Pradesh. The said policy was so framed for local employmentgeneration and use of local resources. To facilitate the said purpose, theOffice Memorandum, dated 07.01.2003, was so issued to provide therequired initiative as well as enabling environment for industrialdevelopment, improve availability of capital and increase market access to provide a fillip to the private investment in the State. In terms of the saidpolicy, new industrial units and/or existing industrial units fulfilling theconditions set-out, were entitled to 100% outright excise duty exemptionfor a period of 10 years from the date of commencement of commercialproduction. The assessee before the Assessing Officer in the proceedings soinstituted 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 theprovisions of Section 143(3) of the Income Tax Act, 1961, vide order, dated29.12.2017, with an assessed income of Rs. 54,42,24,740/-. provide a fillip to the private investment in the State. In terms of the saidpolicy, new industrial units and/or existing industrial units fulfilling theconditions set-out, were entitled to 100% outright excise duty exemptionfor a period of 10 years from the date of commencement of commercialproduction. The assessee before the Assessing Officer in the proceedings soinstituted 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 theprovisions of Section 143(3) of the Income Tax Act, 1961, vide order, dated29.12.2017, with an assessed income of Rs. 54,42,24,740/-. 18. The assessee, being aggrieved, had assailed the order, dated29.12.2017, passed by the Assessing Officer under the provisions ofSection 143(3) of the Income Tax Act, 1961, before the Commissioner ofIncome 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 raised by the assessee, was a claim fortreating the excise duty exemption availed during the assessment year2014-2015, as a capital receipt and the same be excluded in computing thetotal income of the assessee under the relevant provisions of the IncomeTax Act, 1961. The Commissioner of Income Tax (Appeals), Dibrugarh,upon considering the said issue as well as noticing the decisions applicableto the issue, was pleased vide its order, dated 25.03.2019, to allow theclaim so made by the assessee. The operative portion of the said order,dated 25.03.2019, pertaining to additional Ground No. 1, raised by theassessee, being relevant, is extracted hereinbelow: “10.3.1. The point to be decided boils down to whether assessee's receipt on account ofCentral Excise Duty Refund is capital receipt or not From the notes to auditedaccounts, it is seen that the assessee was enjoying Central Excise duty exemptionfrom its Units at Rudrapur (Uttarakhand) and Tizit (Nagaland). This is a matter ofrecord. In the case of Shree Balaji Alloy (supra), Hon'ble J & K High Court after dueconsideration of Hon'ble Apex's Court order in the case of Sahney Steel (Supra) &Ponni Sugars & Chemicals Ltd (supra) had taken the view that Central Excise DutyRefund is a capital receipt. The decision of Hon'ble High Court was confirmed byHon'ble Apex Court in the case of CIT Vs. Shree Balaji Alloy Ltd (supra). The matter hasnow reached finality. In view of decision of Hon'ble Apex Court on the matter the AO isdirected to treat assessee's receipt of Excise Duty Refund as capital receipt. This willhave the effect of reduction in claim of deduction u/s 80-IC. Additional ground No.1 is allowed.” 19. The present appeal being instituted by the Revenue Department beingconfined to the issue of treatment of the excise duty exemption claimed bythe assessee as a capital receipt, the other issues considered by theCommissioner of Income Tax(Appeals), Dibrugarh, in the appeal; is notbeing examined by us, in the present order. 20. The Revenue Department although had instituted an appeal being ITANo. 359/GAU/2019 against the order of the Commissioner of Income Tax(Appeals), Dibrugarh, dated 25.03.2019; a perusal of the same, wouldbring to the forefront that no contention with regard to the claim made bythe assessee before the Commissioner of Income Tax (Appeals), Dibrugarh,for treating the excise duty exemption received by it for the assessmentyear 2014-2015, as capital receipt, was taken. However, a question of lawhaving been framed; we would examine as to whether the excise dutyexemption availed by the assessee, in the facts and circumstancesinvolved, would be treated as a capital receipt and/or, revenue receipt, inthe hands of the assessee. 21. The Hon'ble Supreme Court in the case of Sahney Steel & Press 20. The Revenue Department although had instituted an appeal being ITANo. 359/GAU/2019 against the order of the Commissioner of Income Tax(Appeals), Dibrugarh, dated 25.03.2019; a perusal of the same, wouldbring to the forefront that no contention with regard to the claim made bythe assessee before the Commissioner of Income Tax (Appeals), Dibrugarh,for treating the excise duty exemption received by it for the assessmentyear 2014-2015, as capital receipt, was taken. However, a question of lawhaving been framed; we would examine as to whether the excise dutyexemption availed by the assessee, in the facts and circumstancesinvolved, would be treated as a capital receipt and/or, revenue receipt, inthe 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, reportedin (1997) 7 SCC 764, on discussing and analyzing the entire case law, haslaid 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 isgiven. 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 thepoint of time at which the subsidy is paid is not relevant; the source isimmaterial, the form of subsidy is also immaterial. 22. The Hon'ble Supreme Court, thereafter, in its decision in the case ofCommissioner of Income Tax, Madras v. Ponni Sugars & Chemicals Ltd.,reported in (2008) 9 SCC 337, considered its decision in the case ofSahney Steel & Press Works Ltd.(supra), and held, as follows: “14. The importance of the judgment of this Court in Sahney Steel case lies in the factthat it has discussed and analysed the entire case law and it has laid down the basictest to be applied in judging the character of a subsidy. That test is that the characterof the receipt in the hands of the assessee has to be determined with respect to thepurpose for which the subsidy is given. In other words, in such cases, one has to applythe purpose test. The point of time at which the subsidy is paid is not relevant. Thesource is immaterial. The form of subsidy is immaterial. The main eligibility conditionin the Scheme with which we are concerned in this case is that the incentive must beutilised for repayment of loans taken by the assessee to set up new units or forsubstantial expansion of existing units. On this aspect there is no dispute. If theobject of the Subsidy Scheme was to enable the assessee to run the business moreprofitably then the receipt is on revenue account. On the other hand, if the object ofthe assistance under the Subsidy Scheme was to enable the assessee to set up a newunit or to expand the existing unit then the receipt of the subsidy was on capitalaccount. Therefore, it is the object for which the subsidy/assistance is given whichdetermines the nature of the incentive subsidy. The form of the mechanism throughwhich the subsidy is given is irrelevant. 15. In the decision of the House of Lords in Seaham Harbour Dock Co. v. CrookHarbour Dock Co. had applied for grants from the Unemployment Grants Committeefrom funds appropriated by Parliament. The said grants were paid as the workprogressed; the payments were made several times for some years. Dock Co. hadundertaken the work of extension of its docks. The extended dock was for relievingthe unemployment. The main purpose was relief from unemployment. Therefore, theHouse of Lords held that the financial assistance given to the Company for dockextension cannot be regarded as a trade receipt. It was found by the House of Lords 15. In the decision of the House of Lords in Seaham Harbour Dock Co. v. CrookHarbour Dock Co. had applied for grants from the Unemployment Grants Committeefrom funds appropriated by Parliament. The said grants were paid as the workprogressed; the payments were made several times for some years. Dock Co. hadundertaken the work of extension of its docks. The extended dock was for relievingthe unemployment. The main purpose was relief from unemployment. Therefore, theHouse of Lords held that the financial assistance given to the Company for dockextension cannot be regarded as a trade receipt. It was found by the House of Lords that the assistance had nothing to do with the trading of the Company because thework undertaken was dock extension. According to the House of Lords, the assistancein the form of a grant was made by the Government with the object that by its use menmight be kept in employment and, therefore, its receipt was capital in nature. Theimportance of the judgment lies in the fact that the Company had applied forfinancial assistance to the Unemployment Grants Committee. The Committee gavefinancial assistance from time to time as the work progressed and the payments wereequivalent 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 theloan (interest subsidy) still the House of Lords held that money received by theCompany was not in the course of trade but was of capital nature. The judgment ofthe House of Lords shows that the source of payment or the form in which the subsidyis paid or the mechanism through which it is paid is immaterial and that what isrelevant is the purpose for payment of assistance. Ordinarily such payments wouldhave been on revenue account but since the purpose of the payment was tocurtail/obliterate unemployment and since the purpose was dock extension, the Houseof Lords held that the payment made was of capital nature. 16. One more aspect needs to be mentioned. In Sahney Steel and Press Works Ltd. thisCourt found that the assessee was free to use the money in its business entirely as itliked. It was not obliged to spend the money for a particular purpose. In SeahamHarbour Dock Co.² the assessee was obliged to spend the money for extension of itsdocks. This aspect is very important. In the present case also, receipt of the subsidywas capital in nature as the assessee was obliged to utilise the subsidy only forrepayment of term loans undertaken by the assessee for setting up newunits/expansion of existing business. 17. Applying the above tests to the facts of the present case and keeping in mind theobject behind the payment of the incentive subsidy we are satisfied that such paymentreceived by the assessee under the Scheme was not in the course of a trade but was ofcapital nature. Accordingly, the first question is answered in favour of the assesseeand against the Department.” 23. The High Court of Jammu & Kashmir, in the case of Shree BalajiAlloys v. Commissioner of Income Tax, Jammu & anr., reported in 2011SCC Online J&K 269, considering a policy adopted for refund of excise dutysimilar to the one involved in the present proceedings; applying thedecisions of the Hon'ble Supreme Court in the case of Sahney Steel &Press Works Ltd.(supra) and Ponni Sugars & Chemicals Ltd. (supra),proceeded to hold that considering the policy so involved, it was amplyclear that the same was so formulated for the acceleration of thedevelopment of industry in the State with the objective of generation ofemployment and the generation of employment so contemplated therein, 23. The High Court of Jammu & Kashmir, in the case of Shree BalajiAlloys v. Commissioner of Income Tax, Jammu & anr., reported in 2011SCC Online J&K 269, considering a policy adopted for refund of excise dutysimilar to the one involved in the present proceedings; applying thedecisions of the Hon'ble Supreme Court in the case of Sahney Steel &Press Works Ltd.(supra) and Ponni Sugars & Chemicals Ltd. (supra),proceeded to hold that considering the policy so involved, it was amplyclear that the same was so formulated for the acceleration of thedevelopment of industry in the State with the objective of generation ofemployment and the generation of employment so contemplated therein, was not only casual and/or temporary, but, was, on the other hand, ofpermanent nature. Thereafter, the High Court of Jammu & Kashmirproceeded to interfere with the decision of the Income Tax AppellateTribunal, Amritsar Bench, Amritsar, holding the excise duty exemptionavailed by the assessee, therein, to be a revenue receipt and it was heldthat the said incentive so availed by the assessee, therein, to be a capitalreceipt in the hands of the assessee. 24. The said decision of the High Court of Jammu & Kashmir in the caseof Shree Balaji Alloys(supra), was assailed by the Revenue Departmentbefore the Hon'ble Supreme Court in the case of reported in Commissionerof Income Tax, Jammu & Anr. v. Shree Balaji Alloys, reported in (2018)13 SCC 373. The Hon'ble Supreme Court upheld the decision of the HighCourt of Jammu & Kashmir in the case of Shree Balaji Alloys(supra) byholding that the appeal was covered against the Revenue by the decisionsof the Hon'ble Supreme Court in the case of Ponni Sugars & ChemicalsLtd.(supra) and in the case of Commissioner of Income Tax v. MeghalayaSteels Ltd., reported in (2016) 6 SCC 747. 25. The Hon'ble Supreme Court, thereafter, in its decision in the case ofCommissioner of Income Tax-I, Kolhapur v. Chaphalkar Brothers, Pune,reported in (2018) 13 SCC 358; had an occasion to again consider itsearlier decision in the case of Sahney Steel & Press Works Ltd.(supra) andPonni Sugars & Chemicals Ltd. (supra); and had concluded, as under: “17. What is important from the ratio of this judgment in Ponini Sugars case is thefact that Sahney Steer was followed and the test laid down was the "purpose test". Itwas specifically held that the point of time at which the subsidy is paid is notrelevant; the source of the subsidy is immaterial; the form of subsidy is equallyimmaterial. 25. The Hon'ble Supreme Court, thereafter, in its decision in the case ofCommissioner of Income Tax-I, Kolhapur v. Chaphalkar Brothers, Pune,reported in (2018) 13 SCC 358; had an occasion to again consider itsearlier decision in the case of Sahney Steel & Press Works Ltd.(supra) andPonni Sugars & Chemicals Ltd. (supra); and had concluded, as under: “17. What is important from the ratio of this judgment in Ponini Sugars case is thefact that Sahney Steer was followed and the test laid down was the "purpose test". Itwas specifically held that the point of time at which the subsidy is paid is notrelevant; the source of the subsidy is immaterial; the form of subsidy is equallyimmaterial. 18. Applying the aforesaid test contained in both Sahney Steef as well as PonniSugars, we are of the view that the object, as stated in the Statement of Objects andReasons, of the amendment ordinance was that since the average occupancy incinema theatres has fallen considerably and hardly any new theatres have beenstarted in the recent past, the concept of a complete family entertainment centre,more popularly known as multiplex theatre complex, has emerged. These complexesoffer various entertainment facilities for the entire family as a whole. It was noticedthat these complexes are highly capital intensive and their gestation period is quitelong and therefore, they need government support in the form of incentives quaentertainment duty. It was also added that the Government with a view tocommemorate the birth centenary of late Shri V. Shantaram decided to grantconcession in entertainment duty to multiplex theatre complexes to promoteconstruction of new cinema houses in the State. The aforesaid object is clear andunequivocal. The object of the grant of the subsidy was in order that persons comeforward to construct multiplex theatre complexes, the idea being that exemption fromentertainment duty for a period of three years and partial remission for a period oftwo years should go towards helping the industry to set up such highly capitalintensive entertainment centres. This being the case, it is difficult to accept Mr.Narasimha's argument that it is only the immediate object and not the larger objectwhich must be kept in mind in that the subsidy scheme kicks in only postconstruction, that is when cinema tickets are actually sold. We hasten to add that theobject of the scheme is only one-there is no larger or immediate object. That the objectis carried out in a particular manner is irrelevant, as has been held in both PonniSugars and Sahney Steel.” 26. The decision of the Jammu & Kashmir High Court in the case of ShreeBalaji Alloys(supra), was also considered by the Hon'ble Supreme Court inits decision in the case of Chaphalkar Brothers(supra) and it was upheld.The conclusions so drawn by the Hon'ble Supreme Court, in thisconnection, being relevant, is extracted hereinbelow: “19. Mr Ganesh, learned Senior Counsel, also sought to rely upon a judgment of theJammu and Kashmir High Court in Shree Balaji Alloys v. CIT. While considering thescheme of refund of excise duty and interest subsidy in that case, it was held that thescheme was capital in nature, despite the fact that the incentives were not availableunless and until commercial production had started, and that the incentives in theform of excise duty or interest subsidy were not given to the assessee expressly for thepurpose of purchasing capital assets or for the purpose of purchasing machine “19. Mr Ganesh, learned Senior Counsel, also sought to rely upon a judgment of theJammu and Kashmir High Court in Shree Balaji Alloys v. CIT. While considering thescheme of refund of excise duty and interest subsidy in that case, it was held that thescheme was capital in nature, despite the fact that the incentives were not availableunless and until commercial production had started, and that the incentives in theform of excise duty or interest subsidy were not given to the assessee expressly for thepurpose of purchasing capital assets or for the purpose of purchasing machine 20. After setting out both the Seme Court judgments referred to hereinabove, the HighCourt found that the concessions were issued in order to achieve the twin objects ofacceleration of industrial development in the State of Jammu and Kashmir andgeneration of employment in the said State. Thus considered, it was obvious that theincentives would have to be held capital and not revenue. Mr Ganesh, learned SeniorCounsel, pointed out that by an order dated 19-4-201611, this Court stated that theissue raised in those appeals was covered, inter alia, by the judgment in PonniSugars, and the appeals were, therefore, dismissed. 21. We have no hesitation in holding that the finding of the Jammu and Kashmir HighCourt on the facts of the incentive subsidy contained in that case is absolutelycorrect. In that once the object of the subsidy was to industrialise the State and togenerate employment in the State, the fact that the subsidy took a particular formand the fact that it was granted only after commencement of production would makeno difference.” 27. Applying the decisions of the Hon'ble Supreme Court to the factsinvolved in the present income tax appeals, more particularly, the purposetest as formulated by the Hon'ble Supreme Court in the case of SahneySteel & Press Works Ltd.(supra); it is seen that the excise duty exemptionwas so granted for the purpose of industrializing the States of Uttaranchaland Himachal Pradesh and for generation of employment in the States.Therefore, the said excise duty exemption granted to the assessee for itsRudrapur Plywood Unit and Rudrapur MDF Unit, would necessarily be acapital receipt in the hands of the assessee. Having concluded as above;the substantial question of law No. 1 is answered in negative against theRevenue authorities and in affirmative, in favour of the assessee, herein. 28. Having concluded as above with regard to the substantial question oflaw No. 1; the substantial question of law No. 2, so framed by this Court,vide order, dated 09.06.2023, is now being considered. 29. The substantial question of law No. 2, for convenience, is againquoted hereinbelow: “Whether the Hon'ble ITAT was right in law in allowing the excise duty exemptionadjustment in computation of MAT under section 115-JB.” 30. The Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, onconsidering the said issue, had, in paragraph No. 10, after noticing the facts involved, formulated the question arising for its consideration in theappeal preferred by the assessee being ITA No. 232/GAU/2019, as under: 28. Having concluded as above with regard to the substantial question oflaw No. 1; the substantial question of law No. 2, so framed by this Court,vide order, dated 09.06.2023, is now being considered. 29. The substantial question of law No. 2, for convenience, is againquoted hereinbelow: “Whether the Hon'ble ITAT was right in law in allowing the excise duty exemptionadjustment in computation of MAT under section 115-JB.” 30. The Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, onconsidering the said issue, had, in paragraph No. 10, after noticing the facts involved, formulated the question arising for its consideration in theappeal preferred by the assessee being ITA No. 232/GAU/2019, as under: “10. We have heard the rival contentions and perused the relevant material availableon record. We note that the assessee runs two manufacturing units in the name ofRudrapur Plywood Unit and Rudrapur MDF Unit and both are covered by the ExciseNotification No.50/2003 dated 10.06.2003. Both the units are located in backwardareas and are eligible for 100% excise duty exemption in respect of goodsmanufactured and cleared from such units for a period of 10 years from the date ofcommencement of commercial production. The assessee has claimed the excise dutyexemption from these two units at Rs.87,98,09,432/- which is in the nature of capitalreceipt not liable to be taxed. We also find that though the said amount is reflected inthe Profit & Loss Account of the assessee and the amount being capital receipt hasnot been objected by the ld. CIT(Appeals) also, who has allowed deduction of the saidamount 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 bookprofit 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 totax under the normal provisions of the Act, is to be considered as a part of book profitfor computing the book profit under section 115JB of the Act". 31. The Income Tax Appellate Tribunal, Guwahati Bench at Kolkata, afterconsidering the decisions applicable to the matter, relied upon by theassessee, as well as noticing the order passed by the Commissioner ofIncome Tax (Appeals), Dibrugarh, and the provisions of the OfficeMemorandum, dated 07.01.2003, issued by the Ministry of Commerce andIndustry, Government of India, concluded as follows: “21. After going through the above referred judgments and decisions and onexamining the facts of the instant case, we find that the excise duty exemption hasbeen admittedly the capital receipt and the finding of the Id. CIT(Appeals) that theexcise duty exemption is not liable to be taxed under the normal provisions of theIncome Tax Act being not in dispute for us, the alleged capital receipt cannot becategorised as part of the book profit. In the case of assessee being covered by theexcise duty notification, such sum collected on the goods manufactured and sold is inthe nature of incentive subsidy given for establishing the units in backward areas andto generate employment opportunities. The said fact is evident from the officememorandum dated 07.01.2003 of Ministry of Commerce and Industry, which readsas under:- 3.4 On perusal of the above, it can be seen that incentive in the form of ExciseDuty Exemption has been given with an objective to achieve industrialization inthe backward areas of Himachal Pradesh and Uttaranchal and to generateemployment opportunities. The object of the assistance was not to enable thebusinessman to run the business more profitably but encourage a businessmanto set up a new unit or expand the existing unit for overall economicdevelopment of the state. Hence, the incentives granted by the Government ofIndia vide Office Memorandum No. 1(10)/2001-NER issued by DIPP, Ministry ofDuty Exemption has been given with an objective to achieve industrialization inthe backward areas of Himachal Pradesh and Uttaranchal and to generateemployment opportunities. The object of the assistance was not to enable thebusinessman to run the business more profitably but encourage a businessmanto set up a new unit or expand the existing unit for overall economicdevelopment of the state. Hence, the incentives granted by the Government ofIndia vide Office Memorandum No. 1(10)/2001-NER issued by DIPP, Ministry of Commerce and Industry, GOI dated 07-01-2003 read with Notification No.No.50/2003- CE dated 10-06-2003, will be treated as capital receipt and notliable to tax. In this regard, statement showing computation of excise dutyexemption received during the year aggregating to Rs. 87,98,09,432/-alongwith copy of Excise Returns (in case of Rudrapur Unit 1) and copy of FormA (in case of Rudrapur Unit 2) has been enclosed (Refer Page No. 599-683 ofPaper Book). 22. In the light of above decision as well as the Memorandum issued by the Ministry ofCommerce & Industry, we find that the excise duty exemption is purely capital receiptand is neither chargeable to tax under the normal provisions of the Income Tax Actnor is to be included as part of the book profit for computing the minimum alternativetax as per the provisions of section 115JB of the Act. Thus Ground No. 2 raised by theassessee is allowed.” 32. Dr. Saraf, learned senior counsel for the sole respondent, in thisconnection, has relied upon the decision of the High Court of Judicature ofBombay in the case of Commissioner of Income Tax-IV v. HarinagarSugar Mills Ltd.[order, dated 04.01.2017, in Income Tax Ap