Relief to Reliance Industries: ITAT deletes addition of Sales Tax Incentive/subsidy holding it as Capital in Nature [Read Order]

Reliance Industries - ITAT - Sales Tax Incentive - subsidy Capital - Taxscan

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench deleted the  addition of sales tax incentive/subsidy holding it as capital in nature.

The assessee, Reliance Industries Ltd. is engaged in the business of oil and gas exploration, refining of crude oil, manufacturing of and trading in petrochemicals, polyester, fiber intermediates, textiles, generation and distribution of power, operation of jetties and related infrastructure, retail marketing of petroleum products and investments.

The assessee filed its original return of income declaring total income under normal provisions and under section 115JB of the Income tax Act,1961. The assessee subsequently revised its return of income and filed revised return declaring total income under normal provisions and under section 115JB of the Income tax Act, 1961.  Assessment was completed at total income under the normal provisions of the Act and book profit under section 115 JB of the Act.

One issue on which addition was made by the Assessing Officer was bringing to tax sales tax incentive receipt which was claimed by the assessee as capital receipt not liable to tax. The CIT(A) had allowed the appeal on this issue by referring to several case laws from ITAT in assessee’s own case from Assessment Year 2007-08 to 2012-13.

The assessee submitted that this issue is covered in favour of the assessee by a catena of decisions of ITAT in assessee’s own case as well as several other decisions. He further referred that ITAT Special Bench in assessee’s own case decided the issue in favour of assessee.

The assessee had not claimed depreciation in earlier years on the plant/units on the ground that the claim for depreciation was optional as laid down by Apex Court in the Mahendra Mills case.

The Assessing Officer, however, thrust depreciation relating to plant/units upon the assessee in earlier years so reduced the WDV of the said plant/unit. The assessee has during the year under consideration claimed depreciation on the said plant/units as law was amended prospectively making granting of depreciation compulsory in terms of Explanation 5 to section 32(1) of the Income Tax Act.

Depreciation so claimed was on the basis of WDV as per WDV of the year after which depreciation had not been claimed by the assessee. The Assessing Officer, however, allowed depreciation on the basis of reduced WDV arrived at after thrusting depreciation upon the assessee in the preceding year. Accordingly, the Assessing Officer allowed depreciation of Rs.64,47,59,69,037/- as against the claim of Rs. 65,18,82,98,458.

CIT(A) has granted relief following earlier orders of ITAT. He had noted that it was held that the claim for depreciation cannot be thrust upon the assessee. Nevertheless, the Assessing Officer has consistently rejected the claim of the assessee based on the stand taken at assessment stage in earlier years. CIT(A) noted that the current year issue is consequential. Accordingly, following earlier orders of ITAT in assessee’s own case, he decided the issue in favour of the assessee.

The two-member bench of Shamim Yahya and Amarjit Singh while upholding the decision of CIT(A) said that issue is squarely covered in favour of the assessee by decision of ITAT in assessee’s own case in order for Assessment Year 2007-08, 2009-10 and 2010-11 to 2012-13.

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