Case Details:

Meena Agency Limited vs. Pr. CIT

Appeal No.:

ITA No. 43/Rjt/2020

Order pronounced by:

ITAT Rajkot Bench

Date of Order:

02-06-2020

In favour of:

Assessee

Assessment Year:

2015-16

• The assessee is a limited company engaged in the manufacturing and marketing of calcined bauxite, bricks and castables as well as generation of power.

• The assessee in the A.Y. 2015-16 has received incentive of Rs. 73,24,821/- being refund of VAT under scheme of Government of Gujarat. The assessee treated the receipt as capital receipt not chargeable to tax.

• However, the Pr. CIT was of the view that such incentive was disbursed for meeting running expenses and operating of the business. Therefore, the same should be treated as revenue expenditure.

• Accordingly, the Ld. Pr. CIT held that the assessment order passed by A.O. was erroneous in so far prejudicial to the interest of revenue and directed the AO to add impugned amount to the total income of the assessee. Being aggrieved, the assessee is in appeal before Tribunal.

• This Tribunal in the own case of the assessee has treated such receipt as capital receipt not chargeable to tax for the A.Y. 2010-11 in ITA No. 240/RJT/2014.
• As such, there is no error in the order of the A.O. as alleged by the Ld. Pr. CIT.

• We note that the ITAT in the own case of the assessee has decided the identical issue in favour of the assessee. Thus, the AO has taken one of the possible views by treating the incentive as capital receipt not chargeable to tax.

• Therefore, in our view the order of the A.O. cannot be held as erroneous in so far prejudicial to the interest of revenue.

Cases relied upon:

• CIT vs. Max India Limited 295 ITR 282 (SC)
• Malabar Industries Co. Ltd. vs. CIT 243 ITR 83 (SC): The phrase ‘prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the A.O. Every loss of revenue as a consequence of an order of the A.O. cannot be treated as prejudicial to the interests of the revenue. For example, when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law.