TMI Blog2011 (4) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... the Scheme ). The assessee has raised common grounds in all the five assessment years i.e. from Assessment Year 2001-02 to 2005-06 except the quantum. For the sake of brevity, we are reproducing the grounds as raised in Assessment Year 2001-02, which read as under: 1. For that the CIT(A) erred in upholding the notice and proceedings under sections 147/148 of the Act and should have quashed the same as being without jurisdiction and illegal. 2. For that the CIT(A) erred in holding that the Industrial Promotion Assistance of ₹ 23,16,824/- received under the West Bengal Industrial Promotion (Assistance to Industrial Units) Scheme, 1994 was a revenue receipt chargeable to tax. 3. For that the purported findings of the CIT(A) denying relief to the appellant are arbitrary, unreasonable and perverse. Since both the issues are inter-connected and inter-dependent on the facts, we will decide these issues at one go. 3. The brief facts leading to the above issues are that in all the five assessment years, the original returns filed by the assessee firm were processed u/s. 143(1) of the Act. Subsequently, Assessing Officer initiated action u/s. 148 for framing as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on identical issue mentioned above the contention of the assesee firm that the amount of ₹ 23,16,824/- received from the Govt. of West Bengal was capital receipt is found to be absolutely unjustified, has no legal force and hence not tenable. So, the amount of ₹ 23,16,824/- being the sales tax refund received from the Govt. of West Bengal is taken into account by invoking the provisions of section 28(iiib) of the Act in computing the total income of the assessee for the relevant Assessment Year. Aggrieved, assessee preferred appeal before CIT(A) and he upheld the action of the Assessing Officer in all five assessment years, holding that Industrial Promotion Assistance received or receivable by assessee as revenue receipt assessable in the hands of the assessee by giving following finding: When we consider the facts of the case of the assessee in the light of these ratios we find that though the scheme stated that the assistance is given for the purpose of expansion, modernization etc. but the assessee was free to use the money in its business entirely as it liked and was not required to given any account of the expenditure; In case of the assesee the assistanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee. He narrated the facts of assessment year 1995-96 that the AO while framing assessment u/s. 143(3) of the Act originally allowed the claim of Industrial Promotion Assistance received by assessee at ₹ 8,35,765/- as capital receipt as claimed by the assessee the subsidy of sales tax refund. He further narrated that subsequently the AO issued notice u/s. 154 of the Act stating that mistake occurred in computation of business income in respect of allowance of the deduction regarding Industrial Promotion Assistance being a capital receipt and after getting reply from the assessee he dropped the proceedings initiated u/s. 154/155 of the Act. Ld. Counsel for the assessee stated that the AO s original order passed u/s. 143(3) of the Act dated 26.2.1997 is enclosed in assessee s paper book at page 132. Further, he referred that notice u/s. 154 of the Act dated 30.12.1998 is also enclosed at assessee s paper book page 136 and the reply of the assessee dated 2.2.1999 is enclosed at page 139 of the assessee s paper book. Ld. Counsel for the assessee stated that while adjudicating the proceedings u/s. 154 of the Act and dropped the proceedings after considerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. in respect of assessment years under consideration on the basis of the following case decisions. (i) Sahney Steel and Press WorkLtd. vs. CIT (1997) 228 ITR 253 S.C. (ii) Keshoram Industries Cotton Mills Ltd. vs. CIT (1991) 191 ITR 518 CAL. Ld. Counsel further argued that A.O. had opined that due considerations had not been given by ITAT, Calcutta to the judgments mentioned as above while passing the orders in Rosoi Ltd. s case (supra) or for that matter Pharma Impex s case (supra) and because of this a purely personal opinion of A.O, who happens to be a quasi judicial lower level authority, decided not to consider the judgment of ITAT, Calcutta in ITA No. 1648 (K) 03 dated 06.06.2005. Therefore, it is a case where A.O. had formed his own opinion by rejecting the wisdom of three different Benches of ITAT, Calcutta on exactly the similar issues. 7. On merits also Ld. Counsel argued, whether Industrial Promotional Assistance was capital or revenue in nature. He referred to scheme framed by the Govt. of West Bengal (copies of which have already been filed in assessee s paper book) for granting of Industrial Promotion Assistance to certain industries. Ld. Counsel sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness cannot function without Working Capital . Therefore, it is not necessary that an assistance/incentive should always bring in tangible fixed assets . This is also true as the purpose of the Industrial Promotion Assistance was to help a unit in strengthening its Viability by supplementing its Working Capital . Nature of the receipt, whether revenue or capital, will have to be determined, having regard to those purpose or intention behind which the receipt was granted. In the instant case the Government had never expressed its desire to give subsidy on Sales-Tax and it was designed to grant Industrial Promotion Assistance in general for the promotion of business. We further find that in the case of SAHNEY STEEL S (supra) Hon ble Apex Court observed that the payments were made to assist the new industries at its commencement of business to carry on their business. The payments were held to be supplementary trade receipts. The payments were in the nature of incentives in the following forms: (i) Refund of Sales tax on raw materials, machineries and finished goods. (ii) Subsidy 1on power consumed. (iii) Exemption from payment of water tax. (iv) Refund of wat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Govt. of West Bengal for the previous year relevant to the assessment years under consideration and is Capital Receipt exempt from income tax. Hon ble Apex Court in the case of P. J. Chemicals Ltd. (supra) has considered this aspect of subsidy and nature of subsidy in this case and held as under: The question in the present context is not whether if a portion of the cost is met directly or indirectly by any other person or authority, it should be deducted or not. Quite obviously, the plain meaning of the section is that it shall be. But the real question is as to the character and nature of a subsidy whether it was really intended to subsidise the cost of the capital or was intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost which is the basis for determining the subsidy being only a measure adopted under the scheme to quantify the financial aid. The contention is that it is not a payment, directly or indirectly, to meet any portion of the actual cost but intended as an incentive to entrepreneurs, its quantification determined at a percentage of the fixed capital cost. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO was justified in refusing to continue the relief of tax holiday granted to the assessee-company for the assessment year 1968-69, in the assessment year under reference, that is, 1969-70, without disturbing the relief granted for the initial year. Hon ble Court held that it should be stated that there is no provision in the scheme of s. 80J similar to the one which we find in the case of development rebate which could be withdrawn in subsequent years for breach of certain conditions and no doubt, the relief of tax holiday under s. 80J can be withheld or discontinued provided the relief granted in the initial year of assessment is disturbed or changed on valid grounds. Further, Hon ble Court held that without disturbing the relief granted in the initial year, the ITO cannot examine the question again and decide to withhold or withdraw the relief which has been already once granted. According to Court learned advocate for the revenue, invited attention to certain observations made by this court in CIT v. Satellite Engineering Ltd. [1978] 113 ITR 208 (Guj), where the court was concerned with the question, whether an industrial undertaking which did not satisfy the prescribed conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent assessment year. This is on the principle that there should be finality and certainty in all litigations including litigations arising out of the I.T. Act (see Burmah-Shell Refineries Ltd. v. G. B. Chand [1976] 61 ITR 493 (Bom) and CIT v. Dalmia Dadri Cement Ltd. [1970] 77 ITR 410 (P H). In the instant case, no fresh material was brought in, in the assessment proceedings for the years 1974-75 and 1975-76, to show that the finding reached by the ITO in the assessment proceedings for the year 1973-74, that the assessee had installed new plant and machinery and had constructed a new building, was in any way erroneous. As earlier pointed out by us, the ITO, in granting the relief for the year 1973-74, had relied upon the decision of the Calcutta High Court in Indian Aluminium Co.'s case [1973] 88 ITR 257. That decision was confirmed in appeal by the Supreme Court in CIT v. Indian Aluminium Co. Ltd. [1977] 108 ITR 367. The Supreme Court in Textile Machinery Corpn. Ltd. v. CIT [1977] 107 ITR 195, held that the relief under s. 80J could be obtained also when new plant and machinery were erected for producing the same commodity which the assessee was producing earlier. It cannot, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
