ITAT upholds VAT Remission Disallowance as assessee Fails to raise issue of allowabiility of Subsidies under Chapter VI A [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that although prima facie, the issue goes in favour of the assessee in view of the various judgements rendered by the  Supreme Court as well as  High Court, those aspects were never examined by the authorities below as the assessee did not file any appeal against the order dated 24.06.2020 passed under Section 143(3) of the Income Tax Act.

The assessee filed its return of income for the assessment year 2014-15 by declaring total income of Rs. 15,68,73,064/- and claimed deduction of Rs. 10,11,41,141/- under Chapter VIA under section 80-IE of the Income Tax Act being profit derived from manufacturing activities which included a deduction of Rs. 84,53,370/- in respect of VAT Remission as part of profit derived from the industry running under the name and style of M/s. Purbashree Printing House.

While framing the assessment under section 143(3) of the Act dated 18.3.2016,  AO disallowed an amount of Rs. 84,53,370/- in the hands of assessee on the ground that such VAT Remission cannot said to be core activity or for the purpose of the manufacturing business carried on by the assessee. Subsequent to the assessment order, assessee had filed rectification petition under Section 154 of the Income Tax Act on various dates i.e. 21.04.2016, 09.04.2019 and 16.09.2020 respectively by which assessee requesting the AO to rectification of the mistake in the assessment order passed under Section 143(3) due to the various decisions rendered by Supreme Court as well as High Court in favour of the assessee on the same issue involved in the case of the assessee.

However,  AO vide order dated 24.06.2020 rejected the prayer for such rectification petition filed by the assessee stating that the alleged issue was not a mistake apparent from the record. Since the issue involved was purely a matter of litigation and same did not come under the purview of Section 154 of the Income Tax Act.

Dissatisfied with the above, assessee preferred an appeal before the  CIT(A) where the  CIT(A) sustained the order passed by the  AO and dismissed the appeal of the assessee. Aggrieved, the assessee appealed before the tribunal.

After hearing both the parties, the tribunal observed that although prima facie, the issue goes in favour of the assessee in view of the various judgements rendered by the Hon’ble Supreme Court as well as Hon’ble High Court and subsequently even CBDT has also issued a circular no. 39/2016 dated 29.11.2016 by clarifying the issue for admissibility of various subsidies under Chapter VIA of the Act and regarding allowability of various subsidies in the hands of the assessee. However, those aspects were never examined by the authorities below as the assessee did not file any appeal against the order dated 24.06.2020 passed under Section 143(3) of the Income Tax Act.

The two member bench consisting of Manish Borad (Accountant member) and Sonjoy Sarma (Judicial member) held that they were inclined to sustain the order passed by the authorities below. However, the assessee may prefer an appeal before the  CIT(A) against the assessment order dated 24.06.2020 passed by the  AO along with an appropriate petition for condonation of delay and in by specifying the reason for such delay that event  CIT(A) may sympathetically consider such application filed by the assessee and decide such issues on the merits of the case. Thus the appeal was dismissed.

To Read the full text of the Order CLICK HERE

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