Income Tax Appellate Tribunal - Ahmedabad
Chiripal Industries Limited, ... vs The Dy.Cit., Circle-1(1)(2),, ... on 2 April, 2024
आयकर अपीलीय अधिकरण, अहमदाबाद नयायपीी
IN THE INCOME TAX APPELLATE TRIBUNAL,
'' D'' BENCH, AHMEDABAD
BEFORE Ms SUCHITRA KAMBLE, JUDICIAL MEMBER
And
SHRI WASEEM AHMED, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No. 708/AHD/2023
धििाधरण वरध/Asstt. Year: 2014-2015
Chirpal Industries Limited, D.C.I.T,
Chirpal House, Vs. Circle-1(1)(2),
Shivranjani Cross Road, Ahmedabad.
Satellight,
Ahmedabad-380015.
PAN: AAACC8513B
(Applicant) (Respondent)
Assessee by : Shri Biren Shah, AR
Revenue by : Shri Ankit Jain, Sr.DR
सुिवाई की तारीख/Date of Hearing : 06/03/2024
घोरणा की तारीख /Date of Pronouncement: 02/04/2024
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad, arising in the matter of assessment order passed under s. 143 r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2014-15.
2. The assessee has raised the following grounds of appeal:
ITA no.708/AHD/2023 A.Y. 2014-15 2
1. The Ld.CIT(Appeals)-12, Ahmedabad has erred in law and on facts in confirming the disallowance of depreciation of Rs.79,24,946/- made in the Assessment Order passed u/s.143(3) r.w.s 147 of the I.T Act having effect of reducing the claim of deduction made u/s.80IA of the Act to the extent.
2. Ld.CIT(A) has erred in law and on facts in confirming the validity of the reassessment proceedings u/s.148 of the Act which was initiated based on no new set of facts and was merely in form of review of Assessment Order earlier passed u/s.143(3) of the Act in respect of the year under consideration.
2.1 All relevant details pertaining to the claim of deduction 80IA of the Act had duly been brought on record by appellant during the original assessment proceeding.
3. Ld.CIT(A), has erred in law and on facts in not appreciating the fact that the appellant, in the return of income filed for the year under consideration, had duly given effect to the adjustment required for the depreciation of Rs.79,24,946/- and therefore, no further adjustment was required.
4. The appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal on before of the final hearing of appeal.
2.1 The assessee has also raised the additional grounds of appeal which are reproduced as under:
1. In law and in the facts of the appellant's case, Ld.Assessing Officer may be directed to reduce the total income of the assessee by Rs.3,96,42,334/- received by assessee as interest subsidy under Technology Upgradation Fund Scheme (TUFS) since these receipts qualify in the nature of capital receipt.
2. In law and in the facts of the appellant's case, Ld.Assessing Officer may be directed to reduce the book profit computed u/s.116JB by Rs.3,96,42,334/- received by assessee as interest subsidy under Technology Upgradation Fund Scheme (TUFS) since these receipts qualify in the nature of capital receipt.
3. The appellant craves leave to add to amend or to raise any further grounds of appeal as case may arise.
3. The only grievance of the assessee is that the learned CIT-A erred in confirming the order of the AO by sustaining the addition of the depreciation of ₹ 79,24,946.00 claimed under the provisions of The Companies Act.
4. Briefly stated facts are that the assessee has claimed the deduction under section 80-IA of the Act amounting to ₹ 3,96,92,887.00 which was computed after the reduction of the depreciation of ₹ 79,24,946.00 claimed under the provisions of The Companies Act. As per the AO, the assessee was to add back such the ITA no.708/AHD/2023 A.Y. 2014-15 3 depreciation in the computation of income and thereafter the assessee should have claimed the depreciation as deduction as per the provisions of the Income Tax Act relating to the power division. But the assessee has not done so. According to the AO such depreciation was to be disallowed and added to the total income of the assessee as the assessee was denied the deduction claimed by it under section 80 IA of the Act in the assessment framed under section 143(3) of the Act. Thus, the AO disallowed the same and added to the total income of the assessee.
5. Aggrieved assessee preferred an appeal to the learned CIT-A and contended that the ITAT has allowed the claim of the assessee for the deduction under section 80 IA of the Act. Accordingly, the assessee should have been allowed higher amount of deduction as per the calculation of the AO. The assessee further furnished the amount of deduction eligible under section 80-IA of the Act in the manner as detailed below:
In the case of appellant actual deduction u/s.80IA should be as under:
Particulars Amount
Profit as per Profit & Loss A/C of 39692887/-
Power Plant Profit & Loss A/C
Add: Depreciation claimed as per 7924946/-
Companies Act
Less: Depreciation allowable as 386800/-
per Income Tax Act
Deduction allowable as per 47231033/-
Section 80IA
2.4 It is further submits that the same deduction of Rs.4,72,31,033/- as per above
claimed by the appellant in the statement of total income on a different way, but ultimate amount of deduction is same as per above formula. Deduction claimed by the appellant in the statement of total income as under:
Particulars Amount
Profit after add or less as per
STI
Add: Depreciation allowable as (+) 386800/-
per Income tax
Less: Depreciation claimed in P & (-) 7924946/-
L as per companies Act
Less: Deduction claimed u/s.80IA (-)39692887/-
Ultimate Deduction as per section (-)47231033/-
80IA
ITA no.708/AHD/2023
A.Y. 2014-15
4
Copy of statement of total income highlighting the above amount is enclosing here with for your ready reference and record.
6. However, the learned CIT-A allowed the ground of appeal of the assessee in part by observing as under:
7. Main ground of appeal is regarding disallowances of depreciation of Rs.79,24,946/-. The fact is, as narrated above that the appellant has wrongly deducted depreciation of Rs.79,24,946/- as against amount allowable under the Act of Rs 3,86,800/- (CVL Boiler, Stem Turbine, etc Rs 141/- + Rs 3,86,659/-). This action of the AO is as per law and the objection of the appellant is dismissed irrespective of the fact that Hon'ble ITAT has allowed the claim of section 801A to the appellant in appeal against the non-granting of the deduction in the original assessment u/s 143(3). The provision of depreciation allowance as per the Income tax Act is specific and prevails over the requirement as per the Companies Act while computing the income. The Ground of appeal is Partly Allowed.
7. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us.
8. The ld. AR before us filed a paper book running from pages 1 to 152 and contended that the ITAT once has already allowed claim of the assessee for the deduction under section 80-IA of the Act and therefore if any disallowance is made, which eventually result in the greater profit, then the higher amount of profit should be allowed as deduction under section 80-IA of the Act to the assessee.
9. On the other hand, the ld. DR before us vehemently supported the order of the authorities below.
10. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the AO in the assessment framed under section 143(3) of the Act has disallowed the deduction claimed by the assessee under section 80-IA of the Act. Furthermore, the AO also found that the assessee has worked out the amount of deduction claimed under section 80-IA of the Act after reducing the amount of depreciation of ₹ 79,24,946.00 as per the provisions of The Companies Act. According to the AO, such depreciation claimed under The Companies Act is not allowable ITA no.708/AHD/2023 A.Y. 2014-15 5 deduction and therefore the same was disallowed and added to the total income of the assessee. The ld. CITA also upheld the finding of the AO subject to the depreciation calculated under the provisions of the Income Tax Act.
10.1 Before we go into the issue whether the amount of the depreciation in dispute is eligible for deduction while calculating the income of an undertaking eligible for deduction under section 80 IA of the Act, it is important to note that the disallowance made by the AO for the deduction claimed by the assessee under section 80-IA of the Act in the assessment proceedings carried out under section 143(3) of the Act has been allowed by the ITAT in ITA No. 2582/AHD/2017. The copy of the order of the ITAT is placed on pages 126 to 134 of the paper book. Thus, we are of the view that once the deduction has been allowed under section 80-IA of the Act, even any disallowance is made relating to the eligible undertaking, is not going to extend any benefit to the Revenue in the given facts and circumstances. It is for the reason that the assessee shall be entitled for claiming deduction under section 80 IA of the Act of the higher amount. Thus, even we assume but without admitting that the disallowance has to be made on account of the depreciation in dispute, which will eventually result greater profit of the eligible undertaking which will be allowed as deduction under section 80 IA of the Act. Accordingly, we set-aside the finding of the ld. CIT-A and direct the AO to delete the addition made by him. Hence ground of appeal of the assessee is allowed.
Now coming to the additional ground of appeal raised by the assessee.
11. The only interconnected issue raised by the assessee in the additional grounds of appeal is that the total income and the book profit of the assessee should be reduced by the sum of ₹ 3,96,42,334.00 representing the interest subsidy received under Technology Upgradation Fund Scheme being capital receipt not chargeable to tax.
ITA no.708/AHD/2023 A.Y. 2014-15 6
12. At the outset, the learned counsel for the assessee before us submitted that this Tribunal in the case of DCIT versus M/s Jindal worldwide limited in ITA No. 1843/AHD/2016 involving identical issue has admitted additional ground of appeal and set aside the issue to the file of the AO for fresh adjudication as per the provisions of law. Accordingly, the ld. AR before us contended that such finding of the ITAT in the case cited above is also applicable in the instant set of facts. Therefore, the ld. AR submitted that similar direction can also be issued by the ITAT in the case on hand.
13. On the other hand, the ld. DR before us opposed to admit the additional ground of appeal raised by the assessee in the light of the ratio of the judgment of Hon'ble Supreme Court in the case of CIT v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297 (SC)
14. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the issue raised by the assessee in the additional ground of appeal is identical to the issue in the case of M/s Jindal worldwide limited cited above where in the ITAT has observed as under:
11. We shall now turn to the additiona l ground ra ise d by the ass ess ee in its cros s objection which re ads as unde r:
"On the facts and the circumstances of the case and in law, the interest subsidy of Rs.2,16,45,161 received by the assessee under Technology Upgradation Fund Scheme (TUFS) for Textile and Jute industries during the above assessment year should be treated as capital receipt."
11.1 The additional ground ha s bee n admitted to adjudicate the le gal iss ue in the light of the ava ilable view take n by the co-ordinate be nch in DCIT vs . M/s. Adani Ga s Ltd. IT A Nos. 775/Ah d/2014 & Ors . order dated 17.10.2018. The re leva nt opera tive para of the order of the co- ordina te bench is re produced he reunder:
"21.4 A legal issue also cropped up in the course of hearing as to whether additional ground could be raised in a cross objection filed by the assessee under s.253(4) of the Act. On being enquired on this aspect of the matter, it was submitted on behalf of the assessee that there is no perceptible distinction between the position of law qua cross objection in the matter of filing additional ground. It was submitted that a cross objection has all the ITA no.708/AHD/2023 A.Y. 2014-15 7 trappings of a regular appeal more so in the light of language employed under s.253(4) of the Act.
21.5 We find ourselves in agreement with the propositions made on behalf of the assessee that in a cross objection, there is no bar to raise legal issues for the first time before ITAT. A cross objection is like an appeal. It has all the trappings of an appeal. It is filed in the form of memorandum and it is required to be disposed in same manner as an appeal. Even where the appeal is withdrawn or dismissed for default, cross objection may nevertheless be heard and determined. Cross objection is nothing but an appeal, a cross appeal at that. This apart, raising of additional ground would only enable the authority concern to correctly assess the tax liability of the assessee. Similar view has been expressed by the co-ordinate bench in the case of ITO vs. Jasjit Singh (Del) in cross objection Nos. 138 to 142/Del/2014 interim order dated 23.09.2014. We thus do not see any impediment in entertaining the additional grounds. The relevant facts are available on record.
21.6 In so far as the merits of the claim made in additional ground is concerned, we observe that where the AO has readjusted the quantum of depreciation in the subsequent assessment year, the assessee 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."
11.2 Havin g admitted the additional ground for adjudication as noted above we now turn to the re leva nt facts touching the is sue . As pointed out on beha lf of the ass ess ee, a Technology Upgra da tion Fund Sche me (T UFS ) was introduced in 199 9 to catalyz e investments in textile industries . The purpos e of scheme unde r which the subsidy was give n was sta te d to be to sustain and prove the competitivene ss and for long term viability of textile industry. The concerne d ministry of textile adopted TUFS sche me envis aging technology upgradation of the industry as pe r the scheme. The object of the scheme wa s to enhan ce sustainable growth in va lue cha in for ove rall growth of textile industry. Pursu ant to TUFS, ce rtain su bs idy be nefits by wa y of inte rest on re imburseme nt of loans take n from auth orized age ncies for investment in plant an d ma chinery for spinning units and other ma chinerie s in textile industry wa s availed by textile sector.
ITA no.708/AHD/2023 A.Y. 2014-15 8 11.3 In this background, it was contended on beha lf of the as se sse e that the ass ess ee herein as obta ined subs idy by wa y of re imbursemen t of in te re st unde r the sche me. The ass ess ee has trea te d the aforesa id interes t re imburseme nt subs idy mis ta kenly as re venue re ce ipt in the P&L account and disclose d the same by way of ne t off from in te re st expe nse s. The taxable income was thus sta te d to be ove rsta te d to this exte nt. It was contended that the chara cter of such subsidy in the hands of re cipient asse ss ee is capital in natu re having re ga rd to the purpose for which the subsidy was give n i.e. acceleration of de velopment of textile industry.
11.4 Re ference wa s ma de to the notes forming part of the finan cial account de tailin g the interes t subsidy aggregating to Rs .2,16,45,16 1/- as re du ce d from the interes t costs. Our attention was also adverted to Notes to the Fin ancial Stateme nt wherein suitable disclosure wa s made towards claim of interes t su bs idy.
11.5 In the circumstance s, it is the cas e of the as se sse e that whe re such subsidy is inte nded and be stow ed not with the object of run ning the bus ine ss but with a solemn object of attra cting industrial inves tmen t or expa nsion, such interes t subsidy is in the na ture of cap ita l re ce ipt an d th e re fo re ca n not be re duc ed from the in te re s t cos ts . It is thus conte nded that such capital re ce ipt is not cha rge able to tax in the re leva nt AY 2012 -13 in que stion be ing a capital re ce ipt.
12. We find that the iss ue is squa re ly covere d in favour of the ass ees see by the decis ion of the Hon 'ble Su preme Court in CIT vs. Ch aph alkar Brothers Pune [20 17] 88 taxmann.com 17 8 (SC); CIT vs. Me gha laya Ste els Ltd. [201 6] 67 taxmann.com 158 (SC) and CIT vs. Sham La l Ba nsal [2011] 11 taxmann.com 369 (P&H ). In the light of aforesa id ju dgments, we find me rit in the plea of the ass ess ee that having re ga rd to the object and purposes of the scheme, the in te re st subsidy is re qu ired to be trea te d as capital re ce ipt of non- taxable natu re ha ving re ga rd to the propos itions laid down in the judicia l proceedin gs noted above.
13. The aforesa id view is also fortif ied by the legis lature in vie w of amendment as pe r sub cla use (xviii) to Se ction 2(2 4) of the IT Act as inse rte d by the Finance Act, 2015 which re ads as unde r:
"[(xviii) ass istance in the form of a subsidy or grant or cas h incentive or duty drawback or waive r or conces sion or re imburseme nt (by whatever na me calle d) by the Ce ntra l Government or a State Governme nt or any auth ority or body or age ncy in cas h or kind to the ass ess ee [othe r than, --
(a ) the subs idy or grant or re imburseme nt which
is take n in to account for de te rmination of the
actual cost of the as se t in accordance with
the provisions of Expla nation 10 to clause (1)
of se ction 43; or
ITA no.708/AHD/2023
A.Y. 2014-15
9
(b) ........................ .. "
A claim on beha lf of the asse sse e, as a corolla ry to said amendment, such a capital re ce ipt may become cha rge able to tax which is otherw ise a capital re ce ipt w.e.f. 01.04.2016. The aforesa id amendment has thus come into force w.e.f. AY 2016-17 which re inforces the impres sion of such capital rece ipt be ing out of tax net for the ass ess ment ye ar in que stion.
14. Thus , on firs t principle s, we find ourse lves in total agre ement with the contentions on be half of the asse ss ee for non chargeability of such capital re ce ipts regardle ss of its trea tmen t in books as reve nue re ce ipts . We are howe ver cons ciou s in same va in that the issu e has be en raised for the first time be fore the Tribunal. The Reven ue auth orities had no occasion to look into the re leva nt facts . We accordingly cons ider it expedie nt to re store the iss ue to the file of the AO for ve rification of re leva nt factua l aspects towards quantum of re ce ipt of interes t subsidy and re leva nt documentation in this re ga rd, if so cons idered ne ce ss ary in the opinion of the AO. The AO shall accordingly grant re lie f to the asse sse e in accorda nce with law in the light of our obse rvations and shall exclude the subsidy from the ambit of taxation on be ing satisf ied about the factua l correctn ess on quantum of su ch subsidy.
15. In the re sult, the additiona l ground ra ise d by the asse ss ee in its cross objection is allow ed for sta tistical purpose s.
14.1 As the issue raised before us is identical to issue discussed above, therefore respectfully following the order of the coordinate bench discussed above, we admit the additional ground of appeal of the assessee and set aside the issue to the file of the AO for fresh adjudication as per the provisions of law and in the light of the order of the tribunal in the case of M/s Jindal worldwide limited discussed above. Hence the ground of appeal of the assessee is allowed for the statistical purposes.
14.2 Before parting, it is important to note that the appeal before us emanates from the order passed under section 143(3) read with section 147 of the Act. Therefore, a question strikes to our mind whether the assessee can seek relief by way of additional claimed raised in the additional ground of appeal in the income escaping proceedings. In this regard, we note that there was identical issue before the Hon'ble Karnataka High Court raised in the case of Karnataka State Co-
ITA no.708/AHD/2023 A.Y. 2014-15 10 operative Apex Bank Limited Vs. DCIT reported in 130 taxmann.com 114 wherein it was held as under:
11. In the instant case, admittedly, there is no original assessment order in the case of the assessee and it was only an intimation under section 143(l) of the Act, which cannot be treated to be an order in view of decision of the Supreme Court in Rajesh Jhaveri (supra).
Therefore, the question of reassessment of the income of the assessee by the Assessing Officer does not arise. In the proceeding under section 148 of the Act, it was the first assessment and the same could have been done considering all the claims of the assessee. Therefore, the decision rendered by the Supreme Court in Sun Engineering Works (P.) Ltd. had no application to the fact situation of the case. Even assuming for the sake of argument that if an intimation under section 143(1) of the Act is considered to be an order of assessment, in the subsequent reassessment proceeding, the original assessment proceeding get effaced and the Assessing Officer was required to consider the proceeding de novo and to consider the claim of the assessee.
14.3 The above judgment was rendered by the Hon'ble Karnataka High Court after considering the decisions of the Hon'ble Supreme Court in the case of CIT v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297 (SC), V. Jaganmohan Rao v. CIT and Excess Profit Tax, [1970] 75 ITR 373 (SC), ITO v. Mewalal Dwarka Prasad, [1989] 176 ITR 529/43 Taxman 40 (SC), 'ITO v. K.L. Srihari (HUF) [2001] 118 Taxman 890/250 ITR 193 (SC), and 'Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd.' [2007] 291 ITR 500/161 Taxman 316 (SC) and reached a conclusion that even assuming for the sake of argument that if an intimation under section 143(1) of the Act is considered to be an order of assessment, in the subsequent reassessment proceedings, the original assessment proceedings gets effaced and the Assessing Officer was required to consider the proceedings de novo and to consider the claim of the assessee.
14.4 It is also to be noted that the above judgment was challenged before the Hon'ble Supreme Court which has been admitted by the Hon'ble Supreme Court reported in 138 taxmann.com 23. However, we note that no stay on the operation of Hon'ble Karnataka High Court has been granted. Thus, respectfully following the judgment of Hon'ble Karnataka High Court, we set aside the issue raised by the assessee in the additional ground of appeal for fresh adjudication as per the provisions of law. Hence, the additional ground of appeal of the assessee is allowed for the statistical purposes.
ITA no.708/AHD/2023 A.Y. 2014-15 11
15. In the result, the appeal of the assessee is partly allowed for the statistical purposes.
Order pronounced in the Court on 02/04/2024 at Ahmedabad.
Sd/- Sd/-
(SUCHITRA KAMBLE) (WASEEM AHMED)
JUDICIAL MEMBER ACCOUNTANT MEMBER
(True Copy)
Ahmedabad; Dated 02/04/2024
Manish