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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
AJAY KUMAR MITTAL & RAJ RAHUL GARG, JJ.
Pr. Commissioner of Income Tax I, Ludhiana - Appellant
Versus
M/s B.B.F. Industries Limited - Respondent
ITA No.143 of 2015 (O&M)
Decided On : 26-04-2016
Income Tax Act - Reopening of Assessment - Section 147/148 - Summary of Acts and Sections: Income Tax Act, 1961, Section 147/148 - The court held that the reopening of the assessment under section 147 of the Income Tax Act, 1961 was not valid and justified as the assessee had disclosed all primary facts before the Assessing Officer at the time of original assessment proceedings. The court also discussed the issue of deduction under section 80IB of the Act on various subsidies and held that the subsidies were derived from industrial undertaking and eligible for deduction under section 80IB of the Act.
Fact of the Case:
The case involved the reopening of the assessment under section 147 of the Income Tax Act, 1961 and the issue of deduction under section 80IB of the Act on various subsidies. The assessee had disclosed all primary facts before the Assessing Officer at the time of original assessment proceedings. The Tribunal quashed the reopening of the assessment and allowed the appeal.
Finding of the Court:
The court found that the reopening of the assessment under section 147 of the Income Tax Act, 1961 was not valid and justified. It also held that the subsidies received by the assessee were derived from industrial undertaking and eligible for deduction under section 80IB of the Act.
Issues: The issues involved the validity of the reopening of the assessment under section 147 of the Income Tax Act, 1961 and the eligibility of subsidies for deduction under section 80IB of the Act.
Ratio Decidendi: The court held that the reopening of the assessment under section 147 of the Income Tax Act, 1961 was not valid and justified as the assessee had disclosed all primary facts before the Assessing Officer at the time of original assessment proceedings. It also held that the subsidies received by the assessee were derived from industrial undertaking and eligible for deduction under section 80IB of the Act.
Final Decision: The appeals by the revenue were dismissed, and the reopening of the assessment under section 147 of the Income Tax Act, 1961 was quashed. The subsidies received by the assessee were held to be eligible for deduction under section 80IB of the Act.
Ajay Kumar Mittal, J.
1. This order shall dispose of ITA Nos.143, 146, 147, 190 and 191 of 2015 as learned counsel for the parties are agreed that similar questions are involved in all these appeals. However, the facts are being extracted from ITA No.143 of 2015.
2. ITA No.143 of 2015 has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 20.11.2014 Annexure A.IV passed by the Income Tax Appellate Tribunal, Chandigarh (in short, “the Tribunal”) in ITA 1162/CHD/2012 for the assessment year 2006-07. The appellant had filed CM No.25157-CII of 2015 seeking permission to amend the substantial questions of law. The said application was allowed vide order dated 09.12.2015 and the following amended substantial questions of law were taken on record:-
“(i) Whether on the facts and circumstances of the case the Hon'ble Income Tax Appellate Tribunal was right in law in quashing the reopening of the assessment under sections 147/148 of the Income Tax Act, 1961, holding the same to be a mere change of opinion and also on the grounds that the assessee at the time of original assessment proceedings had disclosed all the primary facts before the Assessing Officer, whereas the proceedings under section 147 of the Income Tax Act, 1961 were initiated within the period of four years from the end of the relevant assessment year and hence first proviso to section 147 of the Income Tax Act, 1961 was not applicable in the case of the assessee?
(ii) Whether the Hon'ble Income Tax Appellate Tribunal is justified to hold that proceedings under section 147 of the Income Tax Act, 1961 are based upon change of opinion whereas the assessee had claimed deduction under section 80IB of the Income Tax Act, 1961 on various subsidies whereas the same was not admissible in view of the law laid down by the Hon'ble Apex Court in the case of Liberty India vs. CIT, (2009) 317 ITR 218 (SC)?
(iii) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal was justified in allowing relief to the assessee by holding that various subsidies i.e. Interest subsidy, freight subsidy and insurance subsidy received by the assessee are capital receipt in nature?
(iv) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal was justified in allowing relief to the assessee by also accepting its alternative plea that after reducing these subsidies from the expenditure incurred, no further income was left under the head of subsidy, whereas actually by reducing the subsidy from the expenses, the assessee is claiming deduction under section 80IB on these subsidies in indirect manner by enhancing the profit of the eligible business to that extent?
(v) Whether the Hon'ble Income Tax Appellate Tribunal is justified in law in allowing deduction under section 80IB of the Income Tax Act, 1961 on various subsidies received by the assessee, whereas the same is not allowable in view of the law laid down by the Hon'ble Apex Court in the case of Liberty India vs. CIT, (2009) 317 ITR 218 (SC)?”
Questions No.(i) and (ii) have been claimed in ITA No.143 of 2011 only whereas Questions No.(iii) to (v) have been claimed in all the other connected appeals which are identical.
3. A few facts relevant for the decision of the controversy involved as narrated in ITA No.143 of 2015 may be noticed. Return declaring an income at Rs. 1,58,69,445/- was filed on 29.11.2006 and assessment was completed under section 143(3) of the Act on 26.11.2008 at an income of Rs. 2,15,83,400/-. Later on, the assessment was reopened under section 147 of the Act on 9.3.2011 and assessment was completed on 30.11.2011 at an income of Rs. 3,29,06,269/- after disallowing deduction under section 80IB of the Act amounting to Rs. 1,05,05,352/- on account of various subsidies by not treating the subsidies as part of profits eligible for deduction under section 80IB of the Act. Aggri
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