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IN THE HIGH COURT OF DELHI AT NEW DELHI

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ITA 173/2022

PR. CIT -1, DELHI

..... Appellant

Through:

Mr.Ajit Sharma, Sr.Standing Counsel.

versus

M/S. CRYSTAL CROP PROTECTION PVT. LTD...... Respondent

Through:

None.

Reserved on: 18^thJuly, 2022

%

Date of Decision: 25^thJuly, 2022

CORAM:

HON'BLE MR. JUSTICE MANMOHAN

HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA

J U D G M E N T

MANMEET PRITAM SINGH ARORA, J:

CM APPL. 26193/2022

In view of the averments made in the application, the delay of 40 days

in filing the present appeal is condoned.

Accordingly, this application is disposed of.

ITA 173/2022

1.

The present Income Tax Appeal has been filed impugning the order

dated 19^thDecember, 2019 passed by the Income Tax Appellant Tribunal

(hereinafter referred to as ‘ITAT’) in ITA No. 1539/Del/2016 for assessment

year 2011-12.

2.

The facts giving rise to the present appeal are that during the course of

assessment proceedings initiated by the Assessing Officer (hereinafter

This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/002774

referred to as ‘AO’) under Section 143(3) of the Income Tax Act, 1961

(hereinafter referred to as the ‘Act’), the AO made an addition of Rs.

2,50,000/- under Section 14A of the Act read with Rule 8D(2)(iii) of the

Income Tax Rules, 1962. The assessee opposed the aforesaid addition on the

ground that since no exempt income was earned during the relevant

assessment year there cannot be any disallowance, which plea was not

accepted by the AO. The AO had then relied upon the CBDT Circular No.

5/2014 dated 11^thFebruary, 2014 to hold that even if in the relevant

assessment year, no exempt income has been earned by the taxpayer,

disallowance of expenditure is to be provided.

3.

The assessee had then filed an appeal before the CIT(A)against the

aforesaid order dated 11^thFebruary, 2014, which was dismissed and the

aforesaid addition made by the AO was upheld.

4.

The assessee being aggrieved by the order of the CIT(A) had

approached the ITAT and challenged the addition made in consequence of

disallowance under Section 14A of the Act read with Rule 8D(iii).

Pertinently, in the said appeal, the assessee further raised an additional

ground with respect to subsidy received by it from the State of Jammu &

Kashmir. It was stated that the subsidy received by the assessee under the

“New Industrial Policy and Other Concessions Scheme” from the State of

Jammu & Kashmir is to be treated as ‘capital receipt’. It was stated that the

subsidy was wrongly reported as revenue receipt instead of a capital receipt

in the return of income in view of the decision of the Jammu & Kashmir

High Court though it was wrongly treated as ‘revenue receipt’ by the payer

in its return of income.

5.

The ITAT permitted the assessee to raise the additional ground after

This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/002774

considering the legislative intent of section 143 (3) of the Act and by relying

upon the judgments of the Supreme Court in the case of National Thermal

Power Co. Ltd. v. CIT (229 ITR 383) and Anchor Pressings P. Ltd. Vs.

CIT 161 ITR 159. The ITAT also placed reliance on a CBDT Circular No.

14(XL-35) dated 11^thApril, 1955 to note that it is the obligation of the

assessing officers to make the assessee aware about any refund or relief

which may be due to the assessee and not to take advantage of the ignorance

of the assessee of its rights.

6.

Therefore, the ITAT held that the additional ground raised by the

assessee cannot be excluded from consideration as the issue to be

determined is whether the amount of subsidy is taxable or not? The ITAT

held that this issue has to be decided by the appellate authority

notwithstanding the fact that the assessee has suo moto offered the amounts

for taxation already. The ITAT accordingly concluded that the assessee is

eligible to raise additional issues at the appellate stage.

7.

The ITAT in its impugned order after relying upon the judgment of

this Court reported i