TMI Blog2023 (6) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... stry of Garments Industry, decision rendered in case of Shree Balaji Alloys [ 2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT] which has been affirmed in case of Ponni Sugars Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT] holding that excise duty refund granted with the object of social problem of unemployment in the state by accelerating the industrial development was a capital receipt, we find no illegality or perversity in the impugned findings returned by the CIT(A) holding receipt of excise duty by the assessee as capital in nature. Decided against the Revenue. Allowance of foreign exchange fluctuation loss on reinstatement of loan - claim disallowed by the AO on the ground that the assessee company has capitalized it in the books of account - HELD THAT:- CIT(A) by following the order passed u/s 143(3) for A.Y. 2009-10 in which year foreign exchange fluctuation loss amortised in the books was allowed. Assessee company has claimed the foreign exchange fluctuation loss to in the revised return. When the Revenue has itself allowed the claim of the assessee of foreign exchange fluctuation loss amortised in the books in A.Y. 2009-10 and 2011-12 no extraneous reasons h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of section 40, the term Tax shall include and shall be deemed to have always included any sur-charge or cess by whatever name called, on such tax - education cess on income tax and dividend distribution tax is integral part of income tax under the Income Tax Act payable by the assessee covered by provision of section 40(a)(ii). Assessee has fairly conceded that as per amendment vide Finance Act, 2022 disallowance made by the Ld. CIT(A) on account of education cess on income tax and dividend distribution tax is not sustainable in the eyes of law. So the deletion of education cess on income tax and dividend distribution tax made by the Ld. CIT(A) is not sustainable in the eyes of law and disallowance made by the AO is ordered to be restored. Hence, ground raised by the Revenue is allowed. - ITA No.7792/M/2019 , ITA No.655/M/2020 - - - Dated:- 20-1-2023 - SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER For the Assessee : Shri Yogesh Thar, A.R. Shri Chaitanya Joshi, A.R. For the Revenue : Shri Sanjeev Kashyap, D.R. ORDER Per : Kuldip Singh, Judicial Member: At the very outset, the Ld. A.R. for the M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 25,39,40,496/- collected by the assessee was not revenue in nature despite the fact that the same was collected by the assessee on goods which were exempted from levy of any duty as per the Central Excise Department's Notification No. 50/2002-CE dated 10.06.2003. (iii) Whether the CIT (A) erred on facts and in the circumstances of the case and in law in holding that the excise duty of Rs. 25,39,40,496/- collected by the assessee was capital in nature by comparing the scheme of exemption under which the claim was made by the assessee by such other schemes wherein the mode of incentive was in the nature of refund/reimbursement or subsidy. (iv) Without prejudice to the above, whether the CIT (A) erred on facts and in law, directing the AO that the Excise duty exemption is not required to be deducted from the cost of assets, if the same is treated as capital receipts by the A.O. ignoring the provisions of explanation 10 to section 43(1) of the Act? (v) Whether the CIT (A) erred on the facts and in the circumstances of the case and in law, in not appreciating the fact that the provision to explanation 10 section 43(1) of the I.T .Act, was intended to cover any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leave to add, alter, amend and modify any of the above grounds of appeal. 3. Briefly stated facts necessary for consideration and adjudication of the issues at hand are : the assessee is a limited company, into the business of manufacturing of asbestos cement sheets and accessories and pre-engineering building products. During the year under consideration the assessee company has claimed receipts from its core business and other income from sale of scrap, excess provisions written back, interest from banks and others, miscellaneous income etc. The assessee filed its original return of income for the year under consideration declaring total income at Rs.Nil under the normal provisions of Income Tax Act, 1961 (for short the Act ) and book profit at Rs.53,24,13,045/- under section 115JB of the Act. The return filed by the assessee was processed under section 143(1) of the Act. Thereafter, the assessee filed revised return of income on 31.03.2013 declaring total income at Rs.Nil under the normal provisions and book profit at Rs.13,90,35,231/- which was subjected to scrutiny. Notices under section 143(2) and 142(1) along with questionnaire were served upon the assessee and in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase law paper book. 7. We have perused the findings returned by the co-ordinate Bench of the Tribunal on this very issue wherein issue has been decided in favour of the assessee by returning following findings: 12. We have heard the submissions of both the parties and perused the material available on record. We find that the present issue is fully covered in assessee s own case in ITA.No.814/Mum/2007 for the A.Y. 2003-04 wherein the Tribunal allowed relief in respect of the matter in issue. Further, the Special Bench of the Tribunal in the case of DCIT vs., Reliance Industries Ltd., [2004] 88 ITD 273 (Mum) held that sales tax subsidy received under the Package Scheme of Incentives, 1979 is for the purpose of industrial development of the backward districts as well as generation of employment, thus, establishing a direct nexus with the investment in fixed capital assets and hence, a capital receipt. Against this Special Bench order of the Tribunal, the Department filed an appeal before the Hon ble High Court of Bombay which is pending for adjudication. In this connection, it is relevant to state that the Hon ble Supreme Court in the case of Union of India vs., Kamlakshi Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deration, by returning following findings: 16. We have heard the rival submissions of both the parties and perused the material available on record. We find that the objective of grant of Excise Duty Incentive as envisaged in Office Memorandum dated 07-01-2003 [Refer Page No. 245-262 of FBI issued by Ministry of Commerce Industry is industrialization of backward area of Uttaranchal for generation of employment and utilization of local resources. Hence, the incentive received by assessee is on capital account. The Ld. CIT(A) also treated the sum as capital receipt by taking strength from the Judgment of Hon ble Jammu Kashmir High Court in the case of Shree Balaii Alloys vs.- CIT (2011) 51 DTR 217 (J K) which has been affirmed by Hon'ble Apex Court vide Civil appeal No. 10061 of 2011 dated 19-04-2016. Further the Hon ble Jammu and Kashmeer High Court while rendering its Judgment in the case of Shree Balaji Alloys -vs.- CIT (supra) had relied on the principles laid down by the Hon'ble Apex Court in the case of Sahnev Steel Press Works - vs. - CIT (1997) 228 ITR 253 (SO CIT - vs. - Ponni Sugars Chemicals Ltd. (2008) 306 ITR 392 (SC) and after analyzing the Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of account. On the contrary, in AY 2011-12, the AO has added back foreign exchange fluctuation gain to taxable income ignoring the fact that the appellant company had de-capitalized the same in books of account, similar to the treatment accorded in AY 2009-10. The above chain of events showed that the AO had taken two different views in two different years for the same matter which was not permissible. Similar was the case for the claim of foreign exchange fluctuation loss amortized in books of account. Following the stand take by the Department in order u/s 143(3) for AY 2009-10 wherein foreign exchange fluctuation loss amortized in books was allowed, the appellant company had claimed foreign exchange fluctuation loss amortized in books during instant year amounting to Rs.34,13,340/- in the revised return. The facts and circumstances in AY 2009-10 and AY 2011-12 were same and there was no material change for both the years. It showed that the AO had taken a view in AY 2011-12 which was contrary to the view taken by his predecessor in AY 2009-10 for the same matter which was not permissible. Further in the assessment order u/s 143(3) for AY 2010-11, the AO had taken the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht on record by the Ld. D.R. for the Revenue as to why it should not be allowed for the year under consideration. Moreover, for earlier two years Revenue has accepted the decision of AO allowing the foreign exchange fluctuation loss amortised in the books. So we find no illegality or perversity in the impugned findings returned by the Ld. CIT(A), hence ground No.3 raised by the Revenue is hereby dismissed. Ground No.4 15. The assessee has claimed weighted deduction of Rs.15,87,471/- on R D expenses under section 35(2AB) of the Act, which has been disallowed by the AO on failure of the assessee to bring on record certificate issued by the prescribed authority [Secretary of Department of Scientific and Industrial Research, Government of India(DSIR)]. 16. However, the Ld. CIT(A) allowed the same by thrashing the facts in the light of the order passed by the co-ordinate Bench of the Tribunal in case of Zeus Numerix Private Ltd. vs. ITO in ITA No.3464/M/2012 dated 21.04.2015 by returning following findings: 16. I have duly considered the submissions of the appellant. The brief facts of the case are that the appellant company is having its inhouse research facility at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther in terms of Rule 6(4) of the Income Tax Rules, the appellant company had filed its application in Form 3CK before the DSIR for grant of approval u/s 3512AB) vide its letter dated 23.09.2011 which was filed on 28.09.2011. However the DSIR vide letter dated 04.07.2012 had granted its approval in Form ICM in terms of Rule 6(5A) for the period from 01.04.2011 to 31.03.2012. In view of the above, it was argued that the appellant company was also entitled to weighted deduction u/s 35(2AB) for the relevant year. On careful consideration of facts and circumstances of the present case, I am inclined to agree with the arguments of the appellant. The grievance of the AO that requisite certificate had been signed by Scientist-G and not the Secretary, DSIR, does not appear to be correct. This issue had been addressed by the Hon'ble Mumbai ITAT in the case of ACTT Vs. Ferment Biotech Ltd. (64 SOT 246) wherein it was held that the DSIR had authorized one of its Nodal Officers to issue order of approval on or behalf of the Secretary for the purpose of section 35(2AB) of the Act. Therefore where the certificate in Form 3CM was signed by Scientist-G then it had to be taken as approval by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute that the assessee had applied to the competent authority for getting the approval/recognition and only after the verification of all the details, the prescribed authority had issued the approval letter. It was held that the fact that approval was not in prescribed Form No.3CM was not a serious discrepancy which shall result in disallowance of deduction u/s 35(2AB). Further the Hon'ble Delhi High Court in the case of Maruti Suzuki India Ltd. (397 ITK 728) had analyzed the provisions of section 35(2A8) of the Act and also applying the ratio laid down by the Hon'ble High Court of Delhi in the case of Sandan Vikas (India) Ltd. (335 ITR 117) the Hon'ble High Court of Gujarat in Claris Lifesciences Ltd. (326 FTR 251) held that for availing the benefit under section 35(ZAR) of the Act, what was relevant was not the date of recognition or cutoff date mentioned in the certificate of DSIR or even the date of approval, but the existence of recognition. It was further held that if R D centre was not recognized, it was not entitled to deduction; but if it was recognized, it was entitled to the benefit. It was further observed that the Hon'ble Gujarat High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Sandan Vikas (India) Ltd. (335 ITR 117) and the Hon ble Gujarat High Court in case of Claris Lifesciences Ltd. (326 ITR 251) on the issue in question where it is held by the Hon ble High Courts that for the purpose of section 35(2AB) existence of recognition is relevant and not the date of recognition or not of date mentioned in the certificate of DSIR or even the date of approval. In the instant case it is undisputed fact that R D centre to be run by the assessee company has been recognized. When it is so the Ld. CIT(A) has rightly allowed the benefit of deduction claimed by the assessee under section 35(2AB) of the Act. So finding no illegality or perversity in the impugned order passed by the Ld. CIT(A) ground No.4 is determined against the Revenue. Grounds No.5(i) 5(ii) 20. The AO disallowed the exclusion of sales tax incentives, excise duty exemption and exclusion of profits on sale of assets of Rs.7,01,07,115/-, Rs.25,39,40,496/- and Rs.6,93,30,203/- respectively while computing the book profit under section 115JB of the Act. However, the Ld. CIT(A) has allowed the same by following his earlier years order by returning following findings: 23. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal are accordingly allowed. 21. The Ld. CIT(A) has also passed the order following the decision rendered by co-ordinate Bench of the Tribunal in case of ACIT Vs. Shree Cement Ltd. (2012 TIOL-02-ITAT Jaipur) wherein it is held that sales tax incentive and excise duty exemption are required to be excluded while computing the book profit under section 115JB of the Act as the same was in the nature of capital receipt. Moreover, object of the MAT provisions is to bring out the real profit of the company. Hon ble Supreme Court in case of Indo Rama Synthetics (I) Ltd. vs. CIT 330 ITR 363 also held that object of MAT provisions is to bring out the real profits of the company. So in case we include the capital receipts in computation of MAT the very purpose of section 115JA and 115JB would be defeated. 22. We are of the considered view that when a receipt is not in the nature of income it is not to be formed part of the taxable profit and as such sales tax incentive and excise duty exemption and profit on sale of fixed assets are not chargeable to tax, hence rightly ordered to be excluded from computing the book profit under section 115JB of the Act by the Ld. CIT(A). So we f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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