TMI Blog2019 (7) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evised return before the assessing officer for exclusion of the aforesaid receipts from the book profit under Section 115 JB on the ground that the said subsidies do not constitute income under Section 2(24) of the Income Tax Act, 1961 ?. The relevant facts as emerge on perusal of record, in brief for, the purpose of adjudication on the issues involved in the instant appeal are hereunder. The assessee company is a Public Limited Company registered under the Companies Act, 1956. It is engaged in the manufacturing of Sponge Iron; Ingots Billets, Steel Items and Ferro Alloys. It also has a captive power generating plant. For the Asst Year 2010-11, the assessee company filed its Return of Income on 12.10.2010 disclosing NIL income as per the normal computation and ₹ 17,69,51,366/- as Book Profit under MAT i.e. under Section 115JB of the Act. Subsequently, during the course of assessment proceedings, the assessee company filed Revised Computation of its income under normal provisions as well as under Section 115JB of the Act, on 22.11.2012. The same computation was filed again on 10.12.2012. The assessee company had revised the computation of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved approval for Interest Subsidy. The object of the West Bengal Incentive Scheme, 2000 would be apparent from the following extracts:- West Bengal Incentive Scheme 1999 Scheme had an attractive provision of Sales Tax related by way of remission of deferment . But in pursuance of the National Policy, the State Govt. had to discontinue the Sales Tax related Incentives from 1st January, 2000. However, as there is a strong need for fiscal support for the promotion of industry in the State, the State Government decided to introduce the West Bengal incentive Scheme, 2000, with different and new features, quite attractive for industries in large medium, small scale and tourism sectors. 4. APPLICABILITY OF THE 2000- SCHEME: The 2000 Scheme shall generally be applicable to all large, medium, cottage and small scale projects and to large/medium sector tourism units to be set up and also to expansion projects of existing units on or after the 1st January, 2000. The units may be in the private sector, co-operative sector, joint sector as also companies/undertakings owned or managed by the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st Bengal Government are revenue receipts these receipts should be included while computing Book Profit under Section 115JB of the Income Tax Act, 1961 and he supported the order and reasoning of the Assessing Officer and in support of his contention he relied upon the decision in the case of Appollo Tyres Ltd. Vs. C.I.T- 255 ITR 273 (SC). Thirdly, Mr. Bhowmik contended that the learned Tribunal should not have allowed the aforesaid claim of deduction on account of incentive subsidies in question by way of revised computation instead of filing a revised return under Section 139(5) of the Income Tax Act, 1961 and in support of his contention he has relied upon the decision in the case of Goetze (India) Ltd. Vs. CIT- 284 ITR 323 (SC). Mr. Khaitan learned Senior Advocate, appearing for the respondent assessee supported the order of the learned Tribunal on the aforesaid issues and in reply to the submission of Mr. Bhowmick contended as follows. Mr. Khaitan submits that on perusal of the purpose / object of granting the aforesaid interest subsidy and power subsidy under the schemes in question of the Government of West Bengal, it wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 2015-16. He submits that the revenue has not challenged before this Hon ble Court the finding of the Tribunal that the interest and power subsidies are capital receipts and are not income liable for tax under the normal computation provisions. Once it is accepted that the said subsidies are not income within the meaning of section 2(24) of the Act, the same cannot also form part of the total income or be subjected to tax under section 115JB of the Act. He submits that the subject matter of taxation under the Act is income . The charging section 4 of the Act provides for levy of tax in respect of Total income . Total income is defined in section 2(45) of the Act to mean the total amount of income referred to in section 5, computed in the manner laid down in this Act . The material portion of section 5 reads as under:- 5. (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes, all income from whatever source derived which- Thus, the total income in the relevant assessment year 2010-11consists of all items of income as defined in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent delivered by the Hon ble Supreme Court in Ponni Sugars and Chemicals Limited case [2008] 306 ITR 392 reads thus (page 400): The importance of the judgment of this court in Sahney Steel case lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. It the object of the subsidy scheme was to enable the assessee to run the business more profitable then the receipt is on revenue account. On the other hand, if the object of the assistance under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y schemes in question we found that in the case of the assessee, the State Government under the West Bengal Incentive Scheme, 2000, and West Bengal Incentive to Power Intensive Industries Scheme, 2005 , had actually granted the subsidy with the sole intention of setting up new industry and attracting private investment in the state of West Bengal in the specified areas in the present case Bankura which is industrially backward hence the same was of the nature of non-taxable Capital receipt. Thus according to the purpose test laid out by the Hon ble Supreme Court, various and High Courts including our Court the aforesaid subsidy should be treated as capital receipt in spite of the fact that computation of Power subsidy is based on the power consumed by the assessee. It is well established from submission of the assessee as enunciated above that once the purpose of a subsidy is established; the mode of computation is not relevant as held in the decisions of the Hon ble Supreme Court in the case of Sahney Steel and Press Works Ltd. Vs. Commissioner of Income tax [1997] 228 IRT 253(SC); CIT Vs. Ponni sugars and Chemicals Ltd. [2008] 306ITR 392 (SC) and the decision of our High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961. The third issue involve in the instant appeal which requires adjudication is whether the action of Tribunal entertaining / allowing the claim which was made by the assessee before the Assessing Officer by filing a revised computation instead of filing a revised return since the time to file the revised return was lapsed, for claiming to treat the incentive subsidies in question as capital receipts instead of revenue receipts as claimed in original return. The Assessing Officer had denied this claim. Revenue has attacked the order of the tribunal by relying on the decision in the case of Goetze (India) Ltd. Vs. CIT reported in 284 ITR 323 (SC). This case does not help the revenue/appellant. In this case Supreme Court has made it clear that its decision was restricted to the power of the Assessing authority to entertain a claim for deduction otherwise than by a revised return, and did not impinge on the power of the Appellate Tribunal under Section 254 of the Income Tax Act, 1961. The Hon ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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