TMI Blog2019 (10) TMI 353X X X X Extracts X X X X X X X X Extracts X X X X ..... the provision of MAT. In holding so, we rely on the order of this co-ordinate Bench of this Tribunal in the case of Sicpa India (P) Ltd. [ 2017 (3) TMI 1383 - ITAT KOLKATA] The undisputed fact is that the incentive received by assessee is not in the nature of income earned during the course of business. Therefore, in our considered view, same cannot be regarded as income for the purpose of MAT u/s 115JB of the Act. Thus, the amount of incentive received by assessee should be excluded from the determination of book profit under the provision of Section 115JB - we reverse the order of Ld. CIT(A). and direct the AO to delete the same - Decided in favour of assessee Disallowance made on account of Industrial Promotion Assistance and Deferred Sales Tax Liability - HELD THAT:- It is noted that this Tribunal in assessee s own case for Assessment Year 2010-11 held that subsidies given to promote industries are not subjected to tax Disallowance made u/s 14A - CIT-A deleted the addition - HELD THAT:- This Court in Cheminvest Limited vs. Commissioner of Income Tax-VI, [ 2015 (9) TMI 238 - DELHI HIGH COURT] which ruled in the absence of any exempt income, disallowance under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made by the Assessing Officer on account of leave encashment in the facts and circumstances of the case. 5. Heard both parties and perused the materials available on record. The Hon ble Supreme Court in the case of Exide Industries Ltd. vs. Union of India granted stay against the decision of Hon ble High Court of Calcutta in the case of Exide Industries Ltd. reported in 292 ITR 470(Cal) until further orders vide order dated 08.09.2008. Further, during the pendency of Civil appeal the Hon ble Supreme Court was pleased to direct assessee therein to pay tax as if section 43B(f) is on the Statute Book though it would be entitled to make claim in the return vide order dated 08.05.2009. Keeping in view of the above orders of Hon ble Supreme Court, on similar cases, this Tribunal is remanding the matter to the file of Assessing Officer to decide afresh after awaiting final order of Hon ble Supreme Court in the case of Exide Industries Ltd. (supra). We find this Tribunal in assessee s own case remanded the similar issues from Assessment Years 200506 to 2011-12 which are placed on record at pages 229 to 230 and respectfully following the same, we deem it proper to rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al subsidy since capital in nature 59,75,000/- The assessee claimed that the above receipts are not taxable in the hands of assessee under the normal provision of computation of income. Therefore, same are also eligible for deduction u/s 115JB of the Act. The assessee also submitted that sales tax remission and state capital subsidy was received by it under the West Bengal Incentive Scheme, 2000, which was given to it to achieve industrialization of backward areas as well as to generate employment opportunities. However, the AO observed that there is no provision under the Income Tax Act for allowing deduction on account of capital receipt under the provision of Sec. 115JB of the Act. Accordingly, AO disallowed the claim of assessee and added to the total amount of subsidy received by it while calculating the tax under Minimum Alternate Tax (MAT) provision. 11. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that incentive was received by it on account of sales tax remission of ₹3,98,70,574/- and state capital investment subsidy amounting to ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eported that the balance sheet and profit and loss account, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted. The appellant has contended that an item without any element of profit or income ,when credited to the profit and loss account prepared under Part-2 Part III of Schedule IV of the Companies Act, 1956, lays down that' P L should be made to closely disclose the working of the company. Since, in the present case, the subsidy has been credited to P L a/c, in order to work out the real profit of the company u/s 115JB said amount needs to be deducted, following the decision of the Hon'ble Supreme Court in Apollo Tyres (2002) 255 ITR 273 (SC) rw Indo Rama Synthetics (I) Ltd vs CIT(2011) 330 ITR 363(SC). The appellant has also relied upon the judgment in the case of CIT vs Veekaylal Investments CO.(P) Ltd (2001) 249 ITR 597(BOM), although the copy of judgment in this case was not furnished. The reliance on the decision by the Hon'ble Mumbai High Court by the appellant is found to be misplaced, it was observed by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This is in view of the definition of 'book profit' as given in the Explanation to section 115JB, the net profit as shown in the profit and loss account, in the relevant previous year, can only be adjusted i.e., increased or reduced, as the case may be, by reference to heads referred in clauses (a) to (ha) and clauses (i) to (iv) of the Explanation to section 115JB. It is found from findings of fact on record that the assessee admittedly, had itself credited the amounts of S.T subsidy and state investment subsidy to the profit and loss account which was duly certified by the auditors ,in view thereof the A.O correctly held that no adjustment could be made subsequently for computation of MAT profits by reducing the impugned receipts from the 'book profit' for the purpose of 115JB of the Act. It is the case of the assessee that since these impugned receipts are in the nature of capital, receipts, it was contended that the same shall not be charged to tax and as such the same should be reduced from the net profit determined in the profit and loss account prepared by the assessee' while computing book profit within the meaning of section 15JB of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (supra) have been reiterated and relied upon by the Supreme Court in the case of CIT v. HCL Comnet Systems Services Ltd. [2008] 305 ITR 409/174 Taxman 118 which has been rendered in the context of section 115JA of the Act. As per sub-section (5) of section 115JB of the Act, which reads as save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section . Having regard to expression save as otherwise provided in this section used in this subsection (5) of section 115JB of the Act, we are of the considered opinion that the expression save as otherwise provided in this section 115JB clearly means that what is provided in section 115JB should be religiously followed and anything over and above the matter provided in section 115JB will be subject to other provisions of the Act. The provisions of section 115JB have an overriding effect upon other provisions of the Act as is evident from the section itself. Thus, the method of computation of book profit provided in the Explanation to section 115JB should be strictly followed while computing the book profit and the normal provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net profit as computed by the assessee and then make the adjustments under sec. 115JB. The moot question that needs to be decided is whether Parts IT and II of Sch. VI to the Companies Act permit the exclusion of the capital gain from the P L Account or not? In other words, can a P L A/c drawn up without considering the capital gain said to be in accordance with the provisions of Parts II and II of Sch. VI to the Companies Act or not? It was accordingly held that in the absence of any provision for exclusion of exempted capital gain in the computation of book profit under the provisions contained in Explanation to section 115JB of the Act, the assessee is not entitled to the exclusion thereof as claimed. Thus, the argument that impugned capital receipts are to be reduced from the net profit shown in the profit and loss account prepared under the Companies Act for the purpose of computing book profit under section 115JB of the Act is not tenable. If such reduction is allowed from the net profit determined in the profit and loss account for the purpose of computing book profit under section 115JB of the Act, the same would certainly be against the above referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 9(1) (i) it can look through the transfer of shares of a foreign company holding shares in an Indian company and treat the transfer of shares of the foreign company as equivalent to the transfer of the shares of the Indian company on the premise that Section 9(1)(i) covers direct and indirect transfers of capital assets ... The language of the section is unambiguous and there is no doubt regarding its interpretation particularly when there is specific mechanism provided in sec.115JB, which is a code in itself for computation of deemed income of MAT companies. The exclusion of the impugned capital receipts sought by the appellant is not tenable by giving purposive interpretation particularly since such interpretation is to transform the concept of Book profit for the purpose of section 115JB of the Act. On the contrary, the sections which impose the charge or levy, should be strictly construed and this position though was reiterated by the Apex Court in CIT v. Mahaliram Ramjidas [1940] 8 ITR 442; and subsequently by the Supreme Court in (PC) India United Mills Ltd. v. CEPT[1955] 27 ITR 20 in the case of India United Mills and thereafter the vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80 taxmann.com 87 (Kolkata-Trib) after considering the judgment of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT (20102) 255 ITR 273/122 taxman 562 has decided the issue in favour of assessee. The ld. AR in support of assessee s claim also relied on the judgment of Hon'ble Supreme Court in the case of CIT vs.Chaphal Kar Brothers, Pune reported in 400 ITR 279 (SC). He requested the Bench to decide the issue on merit. On the other hand, Ld. DR supported the order of Authorities Below. 13. We have heard the rival contentions of both the parties and perused and carefully considered the material on record; including the judicial pronouncements cited and placed reliance upon. From the foregoing discussion, we note that subsidy was given by the Govt. of West Bengal for the purpose of enabling the entrepreneurs to establish new industry and also expand the existing industries. Under normal computation of income the subsidy given to promote the industries are not subject to tax, therefore, an item which is not taxable cannot be brought to tax under the provision of MAT. In holding so, we rely on the order of this coordinate Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. 23. We have already seen that the issue whether subsidies in question can be regarded as income at all is no longer res integra and has been concluded by the Hon'ble Jammu Kashmir High Court in the case of Balaji Alloys (supra). In the aforesaid decision the Hon'ble J K High Court on identical facts held that excise duty subsidy and interest subsidy were capital receipts not chargeable to tax. In view of the aforesaid decision of the Hon'ble High Court rendered on identical facts as that of the Assessee's case, there can be no doubt that subsidies in question does not have any character of income. 24. When a receipt is not in the character of income, can it form part of the book profits for the purpose of Sec.115JB of the Act, is the question that arises for consideration. The ITAT Kolkata Bench in the case of Dy. CIT v. Binani Industries Ltd. [2016] 178 TTJ 658 : had to deal with a case where the question was as to whether receipts on account of forfeiture of share warrants amounting to ₹ 12,65,75,000/-, being a capital receipt, would be liable for taxation u/s 115JB. The tribunal afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (supra) which in turn was based on the ratio laid down in the decision of the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra) as a case in which the income in question was taxable but was exempt under a specific provision of the Act and but for the exemption, the income would be chargeable to tax and such items of income should also be included as part of the book profits. But where a receipt is not in the nature of income at all it cannot be included in book profits though it is credited in the profit and loss account. The Bench followed the decision of the Lucknow Bench in the case of L.H. Sugar Factory Ltd. (supra), where receipts on account of carbon credits which were capital receipts not chargeable to tax and hence not in the nature of income were held not included in the book profits. The Bench also referred to the decision of the Mumbai Bench of the ITAT in the case of Shivalik Venture (P.) Ltd. (supra) which was a case where the question was whether profits arising on transfer of a capital asset by a company to its wholly owned subsidiary company which is not treated as income u/s 2(24) of the Act and since it does not form part of the total income u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly and confirm the order of the CIT(A) in this regard. In light of the aforesaid discussion, we are of the view that the subsidies in question should be excluded for the purpose of determination of book profits u/s.115JB of the Act. We hold accordingly and dismiss Gr.No.2 raised by the Revenue. Similarly, we further find that Hon'ble Supreme Court in the case of Chaphas Kar Brother Pune (supra) has decided the issue in favour of assessee. The relevant extract is reproduced below:- 27. Since the subsidy scheme in the West Bengal case is similar to the scheme in the Maharashtra case being to encourage development of Multiplex Theatre Complexes which are capital intensive in nature, and since the subsidy scheme in that case is also similar to the Maharashtra cases, in that the amount of entertainment tax collected was to be retained by the new Multiplex Theatre Complexes for a period not exceeding four years, we are of the view that West Bengal cases must follow the judgment that has been just delivered in the Maharashtra case. The undisputed fact is that the incentive received by assessee is not in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the decision of the Coordinate Bench of this Tribunal in assessee s own case for A.Ys. 2003-04 and 2004-05 rendered vide its order dated 23.10.2009 (supra), wherein the similar amount of incentive received by the assessee-company under the same scheme of West Bengal Government has been held to be capital in nature not chargeable to tax. Respectfully following the said decision of the Tribunal, we uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and dismiss Grounds No. 3 4 of the Revenue s appeal. 13. In view of the above discussion and further thereto, it is noted that this Tribunal in assessee s own case for Assessment Year 2010-11 held that subsidies given to promote industries are not subjected to tax vide order dated 27.04.18 at page 208 of paper book and the same has been followed in Assessment Year 201112 vide order dated 12.09.2018 at page 229 of paper book. It is noted that the CIT(A) placed reliance on the order of Kolkata Tribunal. Therefore, we find no infirmity in the order of CIT(A). Thus Ground No.2 raised by the Revenue is dismissed. 13. In view of the above, we find no infirmit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered in the context of allowability of deduction under Section 57(iii) of the Act, where the expression used is for the purpose of making or earning such income . Section 14A of the Act on the other hand contains the expression in relation to income which does not form part of the total income. The decision in Rajendra Prasad Moody(supra) cannot be used in the reverse to contend that even if no income has been received, the expenditure incurred can be disallowed under Section 14A of the Act. Respectfully following the above decision as no exempted dividend income has been earned by the assessee. I am of the opinion that no disallowance u/s 14A can be made in this case. Accordingly the addition made by the A.O of ₹ 19,246,532/- is hereby deleted. The appeal of the assessee on this issue is allowed. 16. Further to the above, the Hon ble Supreme Court in the case of Oil Industries Development Board vide order dated 16.02.2018 upheld the ratio laid down by the Hon ble High Court of Delhi in the case of Cheminvest Limited (supra). For ready reference, the relevant portion of which is reproduced hereinbelow: The Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of the assessee under the normal provisions was added by the Assessing Officer while computing the book profit of the assessee under section 115JB. Although the disallowance so made under section 14A amounting to ₹ 6,43,924/- while computing the income of the assessee under the normal provisions of the Act was restricted by the ld. CIT(Appeals) to ₹ 30,000/-, he held that the amount of disallowance so sustained, however, could not be added while computing the book profit of the assessee-Company under section 115JB as the disallowance so sustained at 1% of the exempt dividend income was on notional basis, which could not be termed as expenses actually incurred by the assessee in relation to the exempt dividend income. Reliance in this regard was placed by the ld. CIT(Appeals) on the decision of Delhi Bench of ITAT in the case of Goetze India Limited reported in 32 SOT 101, wherein it was held that the provisions of sub-section (2) and sub-section (3) of section 14A could not be imported into clause (f) of Explanation (1) to section 115JA. 26. We have heard the arguments of both the sides and also perused the relevant material available on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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