B R Agrotech Ltd. vs. ACIT Circle-4(1) on Excise Duty Subsidy as Capital Receipt – Assessment Year 2014-15

B R Agrotech Ltd. vs. ACIT Circle-4(1), New Delhi: Excise Duty Subsidy as Capital Receipt

Case Number: ITA 6247/DEL/2019

Appellant: B R Agrotech Ltd, New Delhi

Respondent: ACIT Circle-4(1), New Delhi

Assessment Year: 2014-15

Date of Filing: 2019-07-23

Order Date: 2021-09-02

Type of Order: Final Tribunal Order

Introduction

This case involves B R Agrotech Ltd., a New Delhi-based company, which challenged the treatment of an excise duty subsidy received under a government scheme. The subsidy was originally classified as a revenue receipt, which was included in the company’s taxable income for the assessment year 2014-15. B R Agrotech Ltd. argued that this subsidy should be treated as a capital receipt, which would not be taxable, and therefore sought rectification under Section 154 of the Income Tax Act.

Background and Grounds of Appeal

B R Agrotech Ltd. filed its income tax return declaring a total income of ₹8,14,50,536 under normal provisions and a book profit of ₹14,67,75,360 under Section 115JB of the Income Tax Act. The primary issue at hand was whether the excise duty subsidy received by the company could be classified as a capital receipt and excluded from the computation of book profit under Section 115JB.

The appellant argued that the subsidy was granted with the objective of encouraging industrial development and employment generation in backward areas, specifically in Himachal Pradesh and Jammu & Kashmir. This subsidy, according to the appellant, was not a production incentive but rather a capital receipt intended to promote public interest.

The appellant raised several grounds in their appeal, including:

• The order passed by the CIT(A) was ex-parte, without providing the appellant an opportunity of being heard.
• The CIT(A) erred in not considering the excise duty subsidy as a capital receipt, despite Supreme Court rulings and CBDT Circulars that support this classification.
• The CIT(A) failed to consider the appellant’s claim regarding the treatment of the excise duty subsidy in the computation of book profit under Section 115JB.

Tribunal’s Analysis and Judgment

The Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘A’ thoroughly examined the facts of the case, the relevant legal provisions, and the judicial precedents cited by both parties. The Tribunal noted the following key points:

1. Nature of Excise Duty Subsidy

The Tribunal observed that the excise duty subsidy was provided to promote industrial development and employment generation in specific regions. Referring to the judgment in the case of Shree Balaji Alloys vs. CIT, the Tribunal emphasized that such subsidies are intended to achieve a public purpose and should be classified as capital receipts.

2. Applicability of Section 154

The Tribunal addressed the question of whether the issue could be rectified under Section 154 of the Income Tax Act. It cited the CBDT Circular No. 68, which clarifies that a mistake apparent from the record, including one arising from a subsequent Supreme Court judgment, can be rectified under Section 154. The Tribunal concluded that the appellant’s request for rectification was valid and within the scope of Section 154.

3. Exclusion from Book Profit under Section 115JB

The Tribunal further held that since the excise duty subsidy is classified as a capital receipt, it should not be included in the computation of book profit under Section 115JB. The Tribunal referred to multiple judicial pronouncements, including the Supreme Court’s ruling in Apollo Tyres Ltd. vs. CIT, which supported the exclusion of capital receipts from book profit computation.

Conclusion

After considering the facts, the applicable law, and judicial precedents, the Tribunal ruled in favor of B R Agrotech Ltd. The Tribunal held that the excise duty subsidy received by the appellant should be treated as a capital receipt and not be included in the computation of book profit under Section 115JB. The Tribunal allowed the appeal and directed the authorities to rectify the assessment accordingly.

Order Pronounced in the Open Court on 02/09/2021.

Signed by:

(Amit Shukla) Judicial Member

(Dr. B. R. R. Kumar) Accountant Member

Date: 02/09/2021

Assistant Registrar, ITAT, Delhi

B R Agrotech Ltd. vs. ACIT Circle-4(1) on Excise Duty Subsidy as Capital Receipt – Assessment Year 2014-15