DCIT, Circle - 3, Kolkata, Kolkata v. M/s. Cosmic Ferro Alloys Ltd., Kolkata

ITA 2308/KOL/2010 | 2006-2007
Pronouncement Date: 09-04-2014 | Result: Allowed

Appeal Details

RSA Number 230823514 RSA 2010
Assessee PAN AACCC1730C
Bench Kolkata
Appeal Number ITA 2308/KOL/2010
Duration Of Justice 3 year(s) 3 month(s) 8 day(s)
Appellant DCIT, Circle - 3, Kolkata, Kolkata
Respondent M/s. Cosmic Ferro Alloys Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 09-04-2014
Appeal Filed By Department
Order Result Allowed
Bench Allotted A
Tribunal Order Date 09-04-2014
Date Of Final Hearing 09-11-2011
Next Hearing Date 09-11-2011
Assessment Year 2006-2007
Appeal Filed On 31-12-2010
Judgment Text
I.T.A. NO.: 2308/KOL./20 10 ASSESSMENT YEAR : 2006-200 7 PAGE 1 TO 4 1 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTA NT MEMBER) I.T.A. NO.: 2308/KOL./2010 ASSESSMENT YEAR : 2006-2007 DEPUTY COMMISSIONER OF INCOME TAX ................. ..............APPELLANT CIRCLE-3 KOLKATA 8/2 ESPLANADE EAST DWARLI HOUSE 2 ND FLOOR KOLKATA-700 069 -VS.- M/S. COSMIC FERRO ALLOYS LTD 4/1 SIKKIM COMMERCE HOUSE MIDDLETON STREET 4 TH FLOOR PARK STREET KOLKATA-700 071 [PAN : AACCC 1730 C] APPEARANCES BY: SHRI VIKASH KR. AGARWAL JCIT SR. D.R FOR THE DEP ARTMENT SHRI B.C. JAIN FCA FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : APRIL 07 2014 DATE OF PRONOUNCING THE ORDER : APRIL 09 2014 O R D E R PER ABRAHAM P. GEROGE : 1. IN THIS APPEAL FILED BY THE REVENUE IT IS AGGRI EVED AN ADDITION OF RS.2 50 00 000/- MADE BY THE ASSESSING OFFICER CON SIDERED BY THE ASSESSEE AS CAPITAL RECEIPT WAS DELETED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). I.T.A. NO.: 2308/KOL./20 10 ASSESSMENT YEAR : 2006-200 7 PAGE 1 TO 4 2 2. FACTS APROPOS ARE THAT ASSESSEE A MANUFACTURER OF FERRO ALLOYS & ALLIED PRODUCTS HAD FILED ITS RETURN FOR THE IMPUG NED ASSESSMENT YEAR DECLARING LOSS OF RS.2 63 09 450/-. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE ASSESSING OFFICER THAT A SUM OF RS.2 50 00 000/- BEING SUBSIDY FROM WEST BENGAL IND USTRIES DEVELOPMENT CORPORATION (IN SHORT WBIDC) WAS CREDITED BY THE ASSESSEE UNDER THE HEAD CAPITAL RESERVES. ARGUMENT OF THE ASSESSEE B EFORE THE ASSESSING OFFICER WAS THAT THE SUBSIDY WAS NOT ACTUALLY RECEI VED AND WHEN RECEIVED IT WOULD BE REDUCED FROM THE VALUE OF PLANT AND MAC HINERY. ASSESSING OFFICER HOWEVER WAS OF THE OPINION THAT ASSESSEE HAD ACQUIRED ALL THE FIXED ASSETS AND CAPITAL WORK-IN-PROGRESS WAS ALREA DY PUT TO USE. THOUGH THE ASSESEE PLACED RELIANCE ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS.- P.J. CHEMICALS LTD. [210 ITR 8 30 (SC)] ASSESSING OFFICER WAS OF THE OPINION THAT ASSESSEE ON RECEIPT OF THE SUBSIDY WOULD DEPOSIT SUCH AMOUNT IN ITS CASH CREDIT ACCOUNT THER EBY MAKING SUCH FUND AVAILABLE FOR USE AS A PART OF ITS GENERAL POOL OF FUNDS. CONSIDERING THE SUBSIDY AS REVENUE RECEIPT ASSESSING OFFICER MADE AN ADDITION OF RS.2 50 00 000/-. 3. BEFORE THE LD. CIT(APPEALS) ARGUMENT OF THE ASS ESSEE WAS THAT THE CREDIT REPRESENTED CAPITAL SUBSIDY AND JUST BECAUSE ALL FIXED ASSETS WERE ACQUIRED WOULD NOT CONVERT IT TO A SUBSIDY IN THE R EVENUE FIELD. AS PER THE ASSESSEE SALES TAX SUBSIDY RECEIVED WHICH WAS IN T HE REVENUE FIELD WAS OFFERED AS INCOME. LD. CIT(APPEALS) AFTER GOING THR OUGH THE SUBMISSIONS OF THE ASSESSEE WAS OF THE OPINION THAT THE CAPITAL INVESTMENT INCENTIVE SCHEME BASED ON WHICH THE SUBSIDY WAS ACCOUNTED BY THE ASSESSEE WERE BASED ON GUIDELINES ISSUED BY THE STATE GOVERNMENT. ACCORDING TO HIM ELIGIBILITY CERTIFICATE MENTIONED THAT IT WAS A CAP ITAL INVESTMENT SUBSIDY SCHEME. HE THEREFORE HELD THAT THE ADDITION WAS N OT WARRANTED AND DELETED SUCH ADDITION. I.T.A. NO.: 2308/KOL./20 10 ASSESSMENT YEAR : 2006-200 7 PAGE 1 TO 4 3 4. NOW BEFORE US LD. DR STRONGLY ASSAILING THE ORD ER OF LD. CIT(APPEALS) SUBMITTED THAT THE SUBSIDY EVEN THOUGH IT WAS NOT RECEIVED BY THE ASSESSEE IT WAS A FACT THAT ALL THE ASSETS WERE BEING PUT TO USE BY THE ASSESSEE AND THERE WAS NO CAPITAL WORK-IN-PROGR ESS. THEREFORE ACCORDING TO HIM THE MONEY WHEN EVENTUALLY RECEIVE D WOULD GO ONLY TO THE GENERAL POOL AND WOULD BE USED FOR DAY-TO-DAY E XPENDITURE. THEREFORE ACCORDING TO HIM ASSESSING OFFICER WAS RIGHT IN CONSIDERING SUCH AMOUNT UNDER THE REVENUE HEAD. 5. PER CONTRA LD. AR SUBMITTED THAT THE CAPITAL SU BSIDY WAS ADMITTEDLY UNDER A SCHEME. IT WAS A CAPITAL INVESTMENT INCENTI VE SCHEME OFFERED BY THE WEST BENGAL GOVERNMENT. THEREFORE ACCORDING TO HIM BY VIRTUE OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT VS.- PONNI SUGARS CHEMICALS LTD. [306 ITR 392 (SC)] SUCH AMOU NT COULD NOT BE CONSIDERED AS A REVENUE RECEIPT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT ASSESSEE HAD ACCO UNTED FOR THE SUBSIDY OF RS.2 50 00 000/- UNDER THE HEAD CAPITAL RESERVE WITHOUT BRINGING IT INTO THE PROFIT & LOSS ACCOUNT. AT THE SAME TIME IT IS STATED BY THE ASSESSEE THAT THE AMOUNT HAD NOT BEEN RECEIVED. HEN CE THE FIRST QUESTION IN OUR OPINION THAT IS TO BE ANSWERED IS WHETHER SUBSIDY ACCOUNTED SIMPLY BASED ON AN ELIGIBILITY LETTER COULD BE CONS IDERED AS INCOME AT ALL. FURTHER LD. CIT(APPEALS) HAD GONE BY THE NOMENCLAT URE OF THE SCHEME MENTIONED IN THE ELIGIBILITY CERTIFICATE ISSUED BY THE WBIDC. NONE OF THE LOWER AUTHORITIES HAD GONE INTO THE ACTUAL NATURE O F THE SCHEME TO DECIDE WHETHER THE RECEIPT OF SUBSIDY IS TO BE CONSIDERED UNDER THE CAPITAL HEAD OR REVENUE HEAD. IT IS ESSENTIAL TO SEE THE RULES O F THE SCHEME AND GUIDELINES ISSUED BY THE CONCERNED GOVERNMENT WHICH GRANTED THE SUBSIDY. IN THE FITNESS OF THE THINGS WE ARE OF TH E OPINION THAT THE MATTER REQUIRES A FRESH LOOK BY THE ASSESSING OFFICER. WE THEREFORE SET ASIDE THE ORDERS OF LOWER AUTHORITIES AND REMIT THE ISSUE BAC K TO THE FILE OF I.T.A. NO.: 2308/KOL./20 10 ASSESSMENT YEAR : 2006-200 7 PAGE 1 TO 4 4 ASSESSING OFFICER FOR CONSIDERATION AFRESH DE NOVO IN ACCORDANCE WITH LAW. 7. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DAY OF APRIL 2014. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA THE 9 TH DAY OF APRIL 2014 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-3 KOLKATA 8/2 ESPLANADE EAST DWARLI HOUSE 2 ND FLOOR KOLKATA-700 069 (2) M/S. COSMIC FERRO ALLOYS LTD 4/1 SIKKIM COMMERCE HOUSE MIDDLETON STREET 4 TH FLOOR PARK STREET KOLKATA-700 071 (3) CIT(APPEALS) (4) CIT (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES KOLKATA LAHA/SR. P.S.