| The Tax Publishers2020 TaxPub(DT) 4048 (Mum-Trib) INCOME TAX ACT, 1961
Section 143(3)
Where assessee company was engaged in business of manufacturing and trading in yarns, fabrics and textiles and it received substantial subsidies in various Government Schemes, said receipt did not become taxable, merely because it was erroneously offered to tax by the assessee in the return of income as revenue department is entitled to collect only legitimate tax that are due from the assessee.
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Assessment - Additions to income - Subsidies received from Government were earlier offered to tax by assessee but before CIT(A) same were claimed to be capital receipts -
Assessee company was engaged in business of manufacturing and trading in yarns, fabrics and textiles. Assessee received subsidies in various schemes of Central and State Governments. Originally, assessee accepted the subsidies as revenue in nature and offered the same for taxation purposes. However, before CIT(A), assessee raised additional grounds of appeal that subsidies were capital in nature and were not taxable. CIT(A) held that subsidies were given to assessee for promoting capacity expansion, globalization of textile trade and employment generation and were capital receipts not chargeable to tax. Held: The receipt did not become taxable, merely because it was erroneously offered to tax by the assessee in the return of income. The department is entitled to collect only legitimate tax that are due from the assessee. Gujarat High Court in the case of CIT v. Milton Laminates Ltd. after considering the decision of the Supreme Court in case of CIT v. Shelly Products had held that assessed income could be below the returned income. CIT(A) was justified in holding that assessed income could go below the returned income. Thus, there was no infirmity in the entire order of the CIT(A) granting relief to the assessee both on technicalities and on merits.
REFERRED : CIT v. Ponni Sugars & Chemicals Ltd. (2008) 306 ITR 392 (SC) : 2008 TaxPub(DT) 2302 (SC), CIT v. Shelly Products & Anr. (2003) 261 ITR 367 (SC) : 2003 TaxPub(DT) 1281 (SC), CIT v. Pruthvi Brokers & Shareholders (P) Ltd. (2012) 349 ITR 336 (Bom) : 2012 TaxPub(DT) 2671 (Bom-HC), CIT v. Milton Laminates Ltd. (2013) 218 Taxman 108 (Guj-HC) and Gujarat Gas Co. Ltd. v. Jt. CIT (2000) 245 ITR 84 (Guj) : 2000 TaxPub(DT) 1344 (Guj-HC).
FAVOUR : In assessee's favour.
A.Y. : 2012-13, 2013-14 & 2014-15
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