TMI Blog2022 (6) TMI 1250X X X X Extracts X X X X X X X X Extracts X X X X ..... bsidy was given for running the business. For determining whether subsidy payment was 'revenue receipt' or 'capital receipt', character of receipt in the hands of the assessee had to be determined with respect to the purpose for which subsidy is given by applying the purpose test, as held in Sahney Steel Press Works Ltd.'s case (supra) itself and reiterated in later judgment in CIT v. Ponni Sugars Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT ] referred to in the impugned order of the Tribunal. Assessee appeal allowed. - T.C.A. No.166 of 2016 - - - Dated:- 20-6-2022 - Honourable Mr. Justice R. Mahadevan And Honourable Mr. Justice Mohammed Shaffiq For the Appellant : Mr.M.Swaminathan And Mrs.V.Pushpa Standing Counsel For the Respondent : Mr.T.N.Seetharaman JUDGMENT R.MAHADEVAN, J. This tax case appeal has been filed by the appellant challenging the order dated 20.05.2015 passed by the Income Tax Appellate Tribunal, 'C' Bench, Chennai, in I.T.A.No.1958/Mds/2014, relating to the assessment year 2011-12. 2. By order dated 23.03.2016, this court admitted the aforesaid tax case appeal on the following substantial ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer Ltd. [(2014) 365 ITR 0082 (AP)], which was subsequently followed by the ITAT, Chennai and Jaipur Benches. The operative portion of the judgment reads as follows:- 11. The decision has been upheld by the Hon ble Andhra Pradesh High Court. This decision has been subsequently followed by the ITAT Chennai and Jaipur Benches. There is no decision either from the Hon ble Supreme Court or from the Hon ble jurisdictional High Court. These decisions indicate that sale of carbon credit would result capital receipt which is not taxable. When we confronted the learned DR with regard to this position, it was contended that the position as on the day when the assessment order was passed, is to be seen and on that day these orders were not available. Therefore, the assessee cannot claim the benefit of these orders. However, we do not concur with this proposition of the learned CIT, because the Full Bench of the Hon ble Punjab Haryana High Court in the case of Aruna Luthra reported in 254 ITR 76 has held that a Court decide a dispute between the parties. The case can involve decision on facts. It can also involve a decision on point of law. Both may have bearing on the ultimate result ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Gopala Gowda (Supra), the second condition for taking action u/s 263 does not exist. The assessment order is not prejudicial to the interests of the Revenue. In view of the above discussion, we allow the appeal of the assessee and quash the impugned order of the learned CIT passed u/s 263 of the Income Tax Act. The aforesaid shows that, so far as the question as to whether, the income by sale of carbon credit could be termed as capital receipt or profit, is concerned, the Tribunal has considered the decision of the Hyderabad Bench and it has further taken note of the fact that decision of the Tribunal of Hyderabad Bench was carried before the Andhra Pradesh High Court and the said decision was not interfered with. The Tribunal, in its decision has also referred to the decision of the Apex Court with regard to power under Section 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) of the revisional authority. 4. In our view, the principal question, which may arise is, as to whether by sale of carbon credit capital receipt is generated or a profit out of the business activity of the assessee. More or less, in a similar case, the Apex Court had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature of capital receipt or revenue receipt. The view taken by this Court was that it was in the nature of capital receipt and hence not taxable. It was contended on behalf of the Revenue, relying on this decision, that just as the amount realised for sale of loom hours was held to be capital receipt, so also the amount paid for purchase of loom hours must be held to be of capital nature. But this argument suffers from a double fallacy. 5. In the first place it is not a universally true proposition that what may be capital receipt in the hands of the payee must necessarily be capital expenditure in relation to the payer. The fact that a certain payment constitutes income or capital receipt in the hands of the recipient is not material in determining whether the payment is revenue or capital disbursement qua the prayer. It was felicitously pointed out by Macnaghten, J. in Racecourse Betting Control Board v. Wildthat a payment may be a revenue payment from the point of view of the payer and a capital payment from the point of view of the receiver and vice versa . Therefore, the decision in Maheshwari Devi Jute Mills case cannot be regarded as an authority for the proposition th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee s trading operations or enabling the management and conduct of the assessee s business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is therefore not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case. But even if this test were applied in the present case, it does not yield a conclusion in favour of the Revenue. Here, by purchase of loom hours no new asset has been created. There is no addition to or expansion of the profit-making apparatus of the assessee. The income-earning machine remains what it was prior to the purchase of loom hours. The assessee is merely enabled to operate the profit-making structure for a longer number of hours. And this advantage is clearly not of an enduring nature. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abour, raw material, power etc., but it is clear beyond doubt that they are not part of fixed capital and hence even the application of this test does not compel the conclusion that the payment for purchase of loom hours was in the nature of capital expenditure. After making the aforesaid observation, at paragraph No. 10, the Apex Court, on the basis of the facts of the said case concluded as under: Similarly, if payment has to be made for securing additional power every week, such payment would also be part of the cost of operating the profit-making structure and hence in the nature of revenue expenditure, even though the effect of acquiring additional power would be to augment the productivity of the profit-making structure. On the same analogy payment made for purchase of loom hours which would enable the assessee to operate the profit-making structure for a longer number of hours than those permitted under the working time agreement would also be part of the cost of performing the income earning operations and hence revenue in character. Accordingly, the payment made for purchase of loom-hours by Jute Mill Company was held to be Revenue expenditure. 6. At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shpa, learned Senior Standing Counsel is by referring to the substantial questions of law framed by the assessee and it is submitted that if the receipts from sale of carbon credit has to be treated as a capital receipt, then the assessee could not have claimed it as a deduction under Section 80IA of the Act and if the substantial question of law as framed by the assessee is to be answered, it should be answered against the assessee. 31.In our considered view, there is a slightly different approach that needs to be adopted, as this Court exercises power under Section 260A of the Act, while deciding the substantial question of law. The assessee is required to place all materials before the Assessing Officer and make a full and true disclosure of their entire financial. If any query is raised by the Assessing Officer, the assessee is bound to answer. Thereafter, it is the Assessing Officer, who has to apply the law and complete the assessment. It has been held that it is not for the assessee to assist the Assessing Officer to complete the assessment in a particular manner or to supply a draft assessment order to the Assessing Officer. At this juncture, it is beneficial to refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er referring to the above decisions, it was pointed out that the Appellate Tribunal is competent to pass such orders on the appeal, as it thinks fit and it would be the duty of the Tribunal to decide all questions on fact and law before it, even though it was not raised by the departmental authorities. After referring to the powers of the Tribunal and that of this Court and the Hon'ble Supreme Court, it was pointed out that based on the cardinal principle, which has been incorporated as a veritable constitutional provision, that no tax can be levied or collected save under authority of law. 35.It was further pointed out that the task of an Appellate Authority under the taxing statute, especially a non-departmental authority like the Tribunal, is to address its mind to the factual and legal basis of an assessment for the purpose of properly adjusting the taxpayer's liability to make it accord with the legal provisions governing his assessment. Since be-all and end-all of the statutory provisions, especially those relating to the administration and management of income tax is to ascertain the taxpayer's liability correctly to the last pie, if it were possible, the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to be made in the assessee's tax liability qua the various decisions of the Court, which have held that receipt on account of sale of carbon credit is capital in nature. 38.In the instant case, the assessee while preferring appeal before the CIT(A), has specifically raised a contention that the receipts from sale of carbon credit is a capital receipt and cannot be included in the taxable income. Though this ground raised by the assessee before the CIT(A) has been recorded in the order, the CIT(A) did not take a decision on the same. Similar ground was raised by the assessee before the Tribunal, which was not considered by the Tribunal, though the Tribunal refers to all the decisions relied on by the assessee, but would pin the assessee to his claim made under Section 80IA of the Act and accordingly, negatives it. This finding of the Tribunal is wholly erroneous and perverse. The Tribunal was expected to apply the law and take a decision in the matter and if the CIT(A) or the Assessing Officer had failed to apply the law, then the Tribunal was bound to apply the law. This is so because, in the light of the decisions referred above, the receipt by way of sale of carbon c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . To sustain and prove the competitiveness and overall long term viability of the textile industry, the concerned Ministry of Textile adopted the TUFS scheme, envisaging technology upgradation of the industry. Under the scheme, there were two options, either to reimburse the interest charged on the lending agency on purchase of technology upgradation or to give capital subsidy on the investment in compatible machinery. In the present case, the assessee has taken term loans for technology upgradation and subsidy was released under agreement dated 12-7-2005 with Small Industry Development Bank of India. The relevant clause of the agreement under which the subsidy was given is as under:- Para 8, to prevent mis-utilization of capital subsidy and to provide an incentive for repayment, the capital subsidy will be treated as a non-interest bearing term loan by the Bank/Fis. The repayment schedule of the term loan however will be worked out excluding the subsidy amount and subsidy will be adjusted against the term loan account of the beneficiary after a lock-in-period of three years on a pro-rata basis in terms of release of capital subsidy. There is no apparent or real financial los ..... X X X X Extracts X X X X X X X X Extracts X X X X
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