TMI Blog2016 (6) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... is entitled for reimbursement of commercial taxes(VAT) paid on purchase of molasses for production of alcohol and the said benefit will be available for five years from the date of establishment of distillery unit. We do not find any reason to interfere with the order of the learned CIT(A) with respect to this issue also as this scheme of reimbursement of commercial taxes(VAT) on purchase of Molasses under Bihar Incentive Package 2006 is similar to scheme of reimbursement of excise duty under Bihar Incentive Package 2006 and we hold that this is a capital receipt which is not chargeable to tax MAT computation - Held that:- Non entitlement to AO to add the capital subsidy and excise duty reimbursements received by the assessee company under Bihar Incentive Package 2006 to the book profit computed u/s. 115JB - I .T.A. No. 5675/Mum/2014 - - - Dated:- 22-6-2016 - Shri Sanjay Garg, Judicial Member And Shri Ramit Kochar, Accountant Member For the Revenue : Shri Amit Kumar Singh, DR For the Assessee : Shri Jayesh Desai ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the Revenue, being ITA No. 5675/Mum/2014, is directed against the appellate or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant and Machinery and proportionate depreciation was disallowed , and also subsidy of ₹ 2,26,70,311/- by way of reimbursement of Excise duty was treated as revenue in nature and added to the income of the assessee company by the AO vide assessment orders u/s 143(3) of the Act for the assessment year 2008-09. Similarly, the A.O. observed that the assessee company had received capital subsidy of ₹ 3 crores under Bihar Incentive Package 2006 for setting up of the distillery unit being 10% of investment in machineries and equipments for establishment of distillery plant and subsidy of ₹ 4,13,51,468/- by way of reimbursement of Excise duty under Bihar Incentive Package 2006 for undertaking expansion of its capacity from 8500 CTD to 10000 TCD in the previous year 2008-09 (assessment year 2009-10). Again, the AO held that capital subsidy of ₹ 3 crores being 10% of investment in machineries and equipments is to be reduced from the cost of plant machinery and proportionate depreciation was disallowed and subsidy of ₹ 4,13,51,468/- by way of reimbursement of Excise duty was treated as revenue in nature and was added by the AO to the total income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reneurs to establish sugar industry/expand the capacity in the state of Bihar and thus the said subsidy is given for setting up of industry or expansion of industry in the state of Bihar. We concur with the said observation of the Ld.CIT(A) that the said subsidy is given for setting up of industry or expansion of industry in the state of Bihar which is the object of the scheme. In this connection, it is relevant to state that in the case of Sasisri Extractions Ltd. (supra), the Tribunal has held that where subsidy is granted as percentage of fixed capital cost taken as basis for determining the subsidy that would only be a measure adopted under the scheme to quantify subsidy, the same could not be considered as a payment directly or indirectly to meet any portion of the actual cost. The same view has been followed by the Tribunal in a subsequent case, namely M/s. Godrej Agrovet Ltd. (supra), the order to which the present Accountant Member is also a party. It is pertinent to mention that in the appeal preferred before the High Court against the said decision of the Tribunal, the Revenue has not disputed the decision of the Tribunal in the appeal before the Hon ble High Court. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronouncements which have been relied by the Ld.CIT(A) in his order and also the decisions relied on by the Ld.Counsel for the assessee as aforementioned. In view of that matter we do not find infirmity in the decision of the Ld.CIT(A) in deleting the impugned addition made by the AO and thus the order of the Ld.CIT(A) on this count is upheld. Ground No. 2 is dismissed. ***** ***** 4.1 Having heard both the sides and perused the material on record, it is noted that the issue raised in this ground is squarely covered in favour of the assessee by the decision of the Hon ble Apex Court in the case of Apollo Tyres Ltd. Vs. CIT 250 ITR 273, wherein it has been held that the AO while computing the income under section 115J has only the power to examine whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the said Act. The AO, thereafter, has the limited power of making increases and reductions as provided for in the explanation to the said section. To put it differently the AO does not have the jurisdiction to go behind the net profit shows in the P L Account except to the extent pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of new units and for expansion of capacity of existing units. As per this scheme, the distillery is entitled for reimbursement of commercial taxes (VAT) paid on purchase of molasses for production of alcohol and the said benefit will be available for five years from the date of establishment of distillery unit. The assessee company had expanded its capacity in the financial year 2006-07 under this scheme and the sugar mills are entitled for reimbursement of excise duty on additional sugar produced due to expansion of the capacity. This benefit is available for five years from the date of expansion of the capacity of the plant and the assessee company had received subsidy of reimbursement of excise duty in assessment years 2008-09 and 2009-10 and subsidy by way of reimbursement of commercial tax paid on molasses in the assessment year 2010-11 and the same was not offered for tax in assessment years 2008-09, 2009-10 and 2010-11 which were considered as revenue receipts by the AO. The Tribunal has already held that reimbursement of subsidy by way of excise duty is a capital receipt vide Tribunals orders in assessee company s own case in ITA no. 772/Mum/2012 dated 31.01.2014 for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann.com 515 (Gujarat) and the decision of the J K High Court in the case of Shree Balaji Alloys Vs. CIT 333 ITR 335 (J K). 3.3 We have heard both the sides and perused the material on record. It is not disputed that the subsidy scheme formulated by the Government of Bihar is for the purpose of attracting capital investment and to encourage setting up the industry/expand the existing unit. It is pertinent to mention that the character of a subsidy in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. The point of time at which the subsidy is paid and the source or the forms of subsidy are immaterial. If the object of the the subsidy scheme is to enable the assessee in setting up the new unit or to expand the existing unit, then the receipt of the subsidy is to be treated on capital account. This established position of law has been recognised by various judicial pronouncements which have been relied by the Ld.CIT(A) in his order and also the decisions relied on by the Ld.Counsel for the assessee as aforementioned. In view of that matter we do not find infirmity in the decision of the Ld.CIT(A) in deleting the impugned ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken consistent view in the preceding assessment years in the decisions of the Tribunal in assessee company s own case in ITA no. 772/Mum/2012 dated 31.01.2014 for the assessment year 2008-09, ITA no. 4474/Mum/2012 vide orders dated 28-02-2014 for the assessment year 2009-10 and ITA no. 2221/Mum/2014 vide orders dated 12-04-2016 for the assessment year 2010-11 , that AO is not entitled to add the capital subsidy and excise duty reimbursements received by the assessee company under Bihar Incentive Package 2006 to the book profit computed u/s. 115JB of the Act. The decision of the Tribunal in ITA no. 772/Mum/2012 for the assessment year 2008-09 is reproduced hereunder: 4.1 Having heard both the sides and perused the material on record, it is noted that the issue raised in this ground is squarely covered in favour of the assessee by the decision of the Hon ble Apex Court in the case of Apollo Tyres Ltd. Vs. CIT 250 ITR 273, wherein it has been held that the AO while computing the income under section 115J has only the power to examine whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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