2019 (7) TMI 878 - CALCUTTA HIGH COURT

Characterization of receipt - subsidy receipt under West Bengal Incentive Scheme, 2000 and ‘West Bengal Incentive to Power Intensive Industries Scheme, 2005’ - capital v/s revenue receipts - HELD THAT:- The mode of computation/form of subsidy is irrelevant. The mode of giving incentive is re-imbursement of energy charges. The nature of subsidy depends on the purpose for which it is given. Hence the assessee draws support from the decisions already discussed earlier as the same principle will apply here. Thus, the entire reason behind receiving the subsidy is setting up of plant in the backward region of West Bengal, namely, Bankura.

Accordingly we hold the aforesaid incentive subsidies are ‘capital receipts’ and is not an ‘income’ liable to be taxed in relevant assessment year 2010-11 on the basis of discussion made above and further taking into consideration the definition of Income u/s 2(24) where subclause (xviii) has been inserted including ‘subsidy’ for the first time by Finance Act, 2015 w.e.f. April, 2016 i.e assessment year 2016-17. The amendment has prospective effect and had no effect on the law on the subject discussed above applicable to the subject assessment years.

MAT computation - whether the aforesaid incentive subsidies received from the Government of West Bengal under the schemes in question are to be included for the purpose of computation of book profit u/s 115 JB? - HELD THAT:- In this case since we have already held that in 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’ u/s 2(24 and when a receipt is not on in the character of income it cannot form part of the book profit u/s 115JB

In the case of Appollo Tyres Ltd. [2002 (5) TMI 5 - SUPREME COURT] 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 book profit for the purpose of computation u/s 115JB - 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 u/s 115JB.

Power of the Appellate Tribunal u/s 254 - Tribunal entertaining / allowing the claim which was made by the assessee before the AO by filing a revised computation instead of filing a revised return - HELD THAT:- As in the case of CIT Vs. Britannia Industries Ltd. [2017 (7) TMI 502 - CALCUTTA HIGH COURT] held that Tribunal has the power to entertain the claim of deduction not claimed before the AO by filing 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 Tribunal in exercise of its power u/s 254 justified this claim though no revised return u/s 139 (5) was filed before the AO. We answer both the question Nos. 1 and 2 in negative and in favour of assessee .