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2019 (7) TMI 227

ITAT CHANDIGARH] in view of the findings of the CIT(A) that identical issue stands decided in favour of the assessee in assessment year 2009-10 [2013 (10) TMI 924 - ITAT CHANDIGARH] by the I.T.A.T., which has been admitted to by the Revenue also and no distinguishing facts having been brought to our notice by the Ld. DR, the Ld.CIT(A), we hold, has rightly allowed the assessee’s appeal following the order of the I.T.A.T. in assessee’s own case for assessment year 2009-10. We therefore find no reason to interfere in the order of the Ld.CIT(A) holding the technical knowhow expenses as revenue in nature. Addition on account of sales tax subsidy - HELD THAT:- As decided in assessee's own case [2019 (6) TMI 655 - ITAT CHANDIGARH] since the issue of sales tax subsidy received by the assessee by virtue of scheme of Punjab Government has already been decided by the I.T.A.T. in the case of the assessee itself in the preceding years, holding the same to be capital in nature and with no distinguishing facts having been brought to our notice by the DR, we see no reason to interfere in the order of the Ld.CIT(A) allowing the assessee’s appeal following with order of the I. .....

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7 in ITA No.681/2004, 708/2004, 755/2004 & 725/2004, 398 ITR 216 wherein sales tax subsidy has been held to be a revenue receipt. v) Whether on the facts and in the circumstances of the case the decision of the Hon'ble Supreme Court in the case Ponni Sugars and Chemicals Ltd. (2008) 306 ITR 392 (SC) and treating the sales tax subsidy as capital receipts in nature was wrongly followed despite the observation of the AO in the assessment order that the facts of the present case are distinguishable from that of Ponni Sugar and Chemicals Ltd. vi) Whether on the facts and in the circumstances of the case the fact that sale tax subsidy which is a post-production subsidy, is held to be a revenue receipt as it is an incentive given to the assessee when its business is running. vii) The appellant craves to add, amend, alter or modify any grounds of appeal at the time of hearing. 2.1 Assessee has raised the following grounds in ITA No. 1288/Chd/2018 for A.Y. 2015-16: 1. That the Ld. CIT(A) has grossly erred in law as well as on facts in confirming the disallowance of claim of the assessee for ₹ 129.44 Lacs on account of sales tax subsidy as deduction from the Book Profits u/s 11 .....

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the current levels. Thus it was pointed out that the objective was to effect the economy and efficiency in manufacturing and, therefore, had been rightly claimed as revenue expenditure. It was contended that the company had not acquired any capital asset in the nature of exclusive user of technology information. The assessee further submitted that identical issue had been decided in favour of the assessee by the I.T.A.T. in earlier years. The A.O. did not accept the contention of the assessee. Referring to the collaboration agreement, the A.O. held that the assessee had purchased/acquired technical know-how to completely overhaul its design, plant and manufacturing systems thus getting enduring benefit of permanence and durability. The A.O. held that technical know-how obtained by the assessee was linked to substantial modernization and expansion of existing unit/technique and procedure of production and, therefore, was in the nature of intangible asset and of enduring nature. He further stated that the Department had challenged the order of the I.T.A.T. before the Hon'ble High Court in earlier years. Accordingly, the A.O. treated the technical know-how expenses incurred and c .....

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to 6 which read as under: 2. Ground Nos. i) to iv), it was contended, related to the same issue of treatment of sales tax subsidy received by the assessee, whether capital or revenue in nature and the same read as under: i) Whether on the facts and in the circumstances of the case, the CIT(A) has erred in following the decision of the Hon'ble ITAT dated 21.10.2015 for AYs 2003- 04, 2004-05 & 2008-09 in the case of the assessee itself and deleting the addition of ₹ 1,84,45,151/- holding the sales tax subsidy as capital receipt in nature. ii) Whether on the facts and in the circumstances of the case the decision of the Hon'ble Supreme Court in the case Ponni Sugar and Chemicals Ltd. and treating the sales tax subsidy as capital receipts in nature was wrongly followed despite the observation of the AO in the assessment order that the facts of the present case are distinguishable from that of Ponni Sugar and Chemicals Ltd. iii) Whether on the facts and in the circumstances of the case the fact that sale tax subsidy was given to existing unit and not for setting up new unit or expansion of the same was not considered. iv) Whether on the facts and in the circumstances o .....

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2003-04, 2004-05 and 2008-09, found that the issue of sales tax subsidy had been decided by the I.T.A.T. in favour of the assessee holding the same to be capital in nature. Accordingly, the addition made by the A.O. was deleted by the Ld.CIT(A). Relevant findings of the CIT(A) at page 12 of the order are as under: I have gone through the Hon'ble ITAT's order in the case of the appellant in ITA No. 897/Chd/2006, ITA No. 341/Chd/2007 & ITA No. 756/Chd/2011 for A.Y 2003-04, A.Y 2004-05 and 2008-09 wherein the matter has been adjudicated as under: "In these cases, the assessee have received Sales Tax Subsidy from Punjab Govt. under the scheme named 'Industrial Policy & Investment Code, 1996'. We have gone through the said policy and found that the scheme though not verbatim as that of West Bengal or Gujarat Scheme, but the sum and substance of all these schemes are the same, therefore, relying on our finding gives in ITA no. 773/Chd/2012, we hold that the Sales Tax Subsidy received by the assessee is Capital in nature." As the addition made by the AO is covered by the order of the Hon'ble ITAT in favour of the appellant, the addition made on this .....

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ture of capital receipt. The deduction of ₹ 8,89,51,004/- may kindly be allowed from the Book Profits u/s 115JB. 28. Briefly stated, the assessee had submitted that the sales tax subsidy received by it during the year was not chargeable to tax being in the nature of capital receipt and would also therefore not be liable to tax u/s 115JB of the Act for the same reason, despite the fact that it was credited to its Profit & Loss Account. The Ld.CIT(A) held that for the purpose of section 115JB of the Act the assessee could not go beyond the net profits shown in its books of account. He relied upon the decision of the Hon'ble Allahabad High Court in the case of PCIT Vs. J.K. Synthetics (2017) 390 ITR 129 and the decision of the Hon'ble Karnataka High Court in the case of B&B Infratech. Ltd. (2016) 76 Taxmann.com 188. Accordingly, he dismissed this contention of the assessee and included the sales tax subsidy in the Book Profits of the assessee for the purpose of payment of Minimum Alternate Tax (MAT) u/s 115JB of the Act. 29. Before us, the Ld. counsel for assessee pointed out that identical issue had been dealt with by the ITAT Chandigarh Bench in group of cases .....

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aining the same that adjustment to profit and loss account is possible to make it compliant with Schedule VI Part II and Part III of the Companies Act, 1956 which is prerequisite of Section 115JB of the Act. On this basis, the Tribunal in the case of Shree Cement Ltd. (Supra) decided this issue in favour of the assessee and it was held that capital receipt in the form of sales tax subsidy needs to be excluded from profit as per P&L account for the purpose of computing book profit u/s 115JB of the Act. By respectfully following these Tribunal s orders, we hold that in the present case also, the receipt on account of transfer of carbon credit which is held to be a capital receipt needs to be excluded from profit as per P&L account for the present year while computing the book profit u/s 115JB of the Act. This issue is decided in favour of the assessee and accordingly Ground Nos.1 to 5 are allowed. The assessee gets relief of ₹ 27,70,880/- and consequent interest being 10% of amount received by the assessee on sale of carbon credit of ₹ 277,08,800/-. 19. Since in the light of the various decisions of the Hon'ble Supreme Court it has already been held that the s .....

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