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TMI Blog2020 (12) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the appellant's case, the Ld. CIT(A), while not admitting the additional grounds raised by appellant, has erred in stating that decision of Supreme Court in case of NTPC [229 ITR 383] is not applicable in its case when the same is duly applicable in case of appellant. The Ld. CIT(A) ought to have appreciated that appellant is eligible to raise any additional ground before appellate authorities in view of decision of Hon'ble Gujarat High Court in case of Mitesh Impex reported in 46 taxmann.com 30 and Kush Proteins (P.) Ltd. v/s. Principal Commissioner of Income-tax [2018] 93 taxmann.com 42 (Gujarat). 1.2 In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) ought to have appreciated that interest subsidy of Rs. 5,77,14,810/- offered as income during the year and Rs. 20,39,344/- reduced from capital work in progress should instead be treated as capital receipt in view of decision of Hon'ble Supreme Court in case of Shree Balaji Alloys reported in 80 taxmann.com 239 which is duly applicable on facts of appellant's case. 1.3 In law and in the facts and circumstances of the appellant's case, the Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries and interest subsidy of Rs. 20,39,344/- received under the Technology Upgradation Fund Scheme for Textile and Jute Industries should be treated as capital receipt in view of the decision of Hon'ble Supreme Court in the case of Shree Balaji Alloys reported in 80 taxmann.com 239. 5. With regard to above referred grounds of appeal (which are connected with each other), the appellant has raised additional ground of appeal before the Ld. CIT(A) which is reproduced as at page No. 17 of the appellate order wherein appellant has claimed interest subsidy of Rs. 5,77,14,810/- received under Technology Upgradation Fund Scheme (TUFs) for textile and Jute Industries and offered as income should be treated as capital receipt. The appellant has also claimed that similar interest subsidy which is reduced from capital work in progress should also be held as capital receipts. Such additional grounds of appeal were not admitted by Ld. CIT(A) stating that as per the case of Goetze (India) Ltd. 284 ITR 323 (SC) has held that the Assessing Officer does not have power to entertain the claim for deduction otherwise than filing a revised return. 6. During the course of appellate proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn filed, the assessees did not raise any claims under section 80-IB or 80HHC of the Act. (In the case of Mitesh Implex Tax Appeal No. 2562 of 2009, such claim was though initially made but later on dropped by filing revised return). In appeal before CIT(Appeals) such claims were made. In the case of Mitesh Implex, CIT(Appeals) entertained both the claims ignoring Revenue's objection. The assessing officer was granted opportunity to oppose the claims on merits. After examination of facts on record, he disallowed the assessee's claim under section 80-IB on the ground that the manufacturing activity had not commenced during the year under consideration to enable the assessee to make such a claim. He however, accepted the assessee's claim on merits under section 80HHC of the Act, In appeal, the Tribunal rejected the Revenue's contention that in view of the judgment of the Supreme Court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323/157 Taxman 1, such claims could not have been made without filing revised return. There is some ambiguity whether the Tribunal had allowed the assessee's claim under section 80-IB of the Act on merits also or not. Counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225 to the effect that "The Appellate Assistant Commissioner, therefore, has plenary powers in disposing of appeal. The scope of his power is co-terminus with that of the Income-tax Officer He can do what the Income-tax Officer can do and also direct him to do what he has failed to do. " It was observed that there was no reason why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income-tax Officer. The Act does not place any restriction or limitation on the exercise of appellate power. It was observed that:- "The above observations are squarely applicable to the interpretation of section 251(1)(a) of the Act. The declaration of law is clear that the power of the Appellate Assistant Commissioner is co-terminus with that of the Income-tax Officer, if that be so. there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income-tax Officer No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings Ltd. [2008] 306 ITR 42/172 Taxman 258 (Delhi), the Delhi High Court held that there is no prohibition on the powers of the Tribunal to entertain an additional ground which according to the Tribunal arose in the matter and for just decision of the case. 35. In case of CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. [2012] 349 ITR 336/208 Taxman 498/23 taxmann.com 23 (Bom.) the Bombay High Court considered the issue at considerable length and held that Commissioner (Appeals) as well as the Tribunal have the jurisdiction to consider the additional claim and not merely additional legal submissions. The appellate authorities have discretion to permit such additional claims. Such claims need not be those which became available on account of change of circumstances of law but which were even available when the return was filed. 36. The Delhi High Court once again in recent judgment in the case of CIT v. Sam Global Securities Ltd. [2014] 360 ITR 682 : [2013] 38 taxmann.com 129 observed that the Courts have taken a pragmatic view and not a technical one as to what is required to be determined in taxable income. In that sense assessment proceedings are not adversarial in nature. Wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en facts necessary to examine such ground, contention or claim are already on record. In such a case the situation would be akin to allowing a pure question of law to be raised at any stage of the proceedings. This is precisely what has happened in the present case. The Appellate Commissioner and the Tribunal did not need to nor did they travel beyond the materials already on record, in order to examine the claims of the assessees for deductions under sections 80-IB and 80HHC of the Act. 41. In the decisions that we have noted above, the Courts have considered such questions when a legal contention or a claim was based on material already on record but raised at an appellate stage. On such premise we wholeheartedly agree that the appellate authority and the Tribunal would have the power to entertain any such new ground, legal contention or claim. However, it is only the Bombay High Court in the case of CIT v. Pruthvi Brokers & Shareholders (P.) Ltd. (supra), which has travelled a little beyond this preposition and come to the conclusion that even if facts necessary to examine such a claim are not placed before the assessing officer and, therefore, not on record, there would be no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is within its legitimate rights to be granted depreciation in AY 2009-10 as per the figures worked by the AO himself. We do not see any perceptible reason for not admitting such claim of the assessee. We also find bonafides in the plea of the assessee for raising new claim on account of depreciation by way of additional ground at this belated stage. The order for the AY 2012-13 was passed on 29.03.2015. By virtue of this order, the assessee came to know about the revision in the claim of depreciation concerning AY 2012-13. By that time, the order of the CIT(A) dated 13.12.2013 was already passed. Therefore, the assessee was incapacitated to put forward such new claim towards depreciation on goodwill amounting to Rs. 5,57,63,315/- for which relevant facts are duly available on record in the light of the decision of Hon'ble Supreme court in the case of Goetze (India) Ltd. vs. CIT [2006] 284 ITR 323 (SC) & NTPC vs. CIT 229 ITR 383 (SC). 22. In the result, additional ground raised by the assessee is allowed." 16. Further we have also through the decision of Hon'ble ITAT Ahmedabad in assessee's own case in assessment year 2012-13 vide ITA No. 1843/Ahd/2016 vide or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant AY 2012-13 in question being a capital receipt. 12. We find that the issue is squarely covered in favour of the assessee by the decision of the Hon'ble Supreme Court in CIT vs. Chaphalkar Brothers Pune [2017] 88 taxmann.com 178 (SC); Meghalaya Steels Ltd. [2016] 67 taxmann com 158 (SC) and CIT vs. Sham Lal Bansal [2011] 11 taxmann.com 369 (P&H). In the light of aforesaid judgments, we find merit in the plea of the assessee that having regard to the object and purposes of the scheme, the interest subsidy is required to be treated as capital receipt of non-taxable nature having regard to the propositions laid down in the judicial proceedings noted above. 13. The aforesaid view is also fortified by the legislature in view of amendment as per sub clause (xviii) to Section 2(24) of the IT Act as inserted by the Finance Act, 2015 which reads as under: "[(xviii) assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee [other than,-- (a) the subsidy or grant or r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee had made investment in Sponge Iron Plant and Mega Project (Induction manufacturing units Sponge Iron, Power, Billet) which made the assessee uiyftiic for subsidy under the Scheme taken out by the Government of West Bengal, commerce & Industries Department for making capital investments in backward area, namely, 'Bankura'. 7. The West Bengal Incentive Scheme, 2000 was expressly for the purpose of attracting private investment in the State of West Bengal in the specified areas which are industrially backward. To promote industrialization, the Government offered various incentives/subsidies including 'State Capital Subsidy' and 'Interest subsidy' when a 'unit' was set up in any area specified in Group C i.e. backward area as defined under the Scheme. At page 9 Para No. 7 of the Scheme, the areas of West Bengal have been segregated into 'Development Areas and Backward Areas' by grouping them into three Groups A, B & C. Maximum Benefits in the form of Subsidy has been given to areas under 'Group C'. The assessee had received both the subsidies for setting up industry in 'Bankura', which falls under 'Group C' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for a certain period by the State government as per details formulated in Part B of the Scheme". 9.1 The learned Tribunal on consideration of factual and legal position and scope of the schemes in question, has held the 'interest subsidy' and 'power subsides' as capital receipts and also held that the same would be excluded while computing 'Book profit' under Section 115JB of the Income Tax Act, 1961. 10. Aggrieved by the aforesaid order of the Tribunal, revenue has preferred this appeal. ................... 20. On this issue decision in the case of Sahney Steel and Press Works Ltd. (supra) relied upon by the revenue is a leading decision on the test or determining the nature and character of a subsidy under any scheme as to when it is to be treated as 'capital receipt' or 'revenue receipt' in the hands of the assessee and considering this decision of Sahney Steel & Press Works Ltd. (supra) another leading decision on this proposition of law is Ponni Sugars and Chemicals Ltd. (supra). Law laid down in these two decisions have been uniformly followed in series of decisions of the Hon'ble Supreme Court, our High Court and other H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under any Scheme to any enterprise would totally depend upon the salient features of the said Scheme. The purpose for which the incentive/subsidy is given under the Scheme is the determining factor to lay down the nature of the incentive/subsidy. If an incentive/subsidy is given as a general assistance to the assessee to carry on his business or trade, it would be an operational incentive and thus a trading receipt in the hands of the assessee. However if the object of the subsidy, irrespective of its source, is to enable the assessee to acquire new plant and machinery or for further expansion of its manufacturing capacity or for setting up a new unit, the entire subsidy must be held to be a capital receipt. The incentives/subsidies, depending upon the purpose for which they are granted, fall under two categories namely: (i) Operational incentives/subsidies which are given to the assessee to carry on his business or trade and; (ii) Fixed capital incentives/subsidies which are given to the assessee to set up a new unit or to expand its existing unit. 24. On perusal of the contents of the relevant portion under the incentive subsidy schemes in question we found that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the schemes in question are to be included for the purpose of computation of book profit under Section 115JB of the Income Tax Act, 1961 as contended by the revenue by relying on the decision in the case of Appollo Tyres Ltd. (supra). 27. 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' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of Appollo Tyres Ltd. (supra) 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 under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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