Pushkar Chemical and Fertilisers Pvt. Ltd. Vs DCIT (ITAT Mumbai)
The Income Tax Appellate Tribunal (ITAT), Mumbai, disposed of two connected appeals involving the assessee and the Revenue for Assessment Years (AY) 2012-13 and 2014-15. Both appeals arose from proceedings under Section 154 of the Income-tax Act, 1961, and primarily concerned the characterization of fertilizer subsidy received under the Government of India’s Nutrient Based Subsidy (NBS) Policy and the scope of rectification proceedings.
The assessee, engaged in the manufacture of chemicals, dyes, fertilizers and bio-fertilizers, had originally offered the fertilizer subsidy received under the NBS Policy as revenue receipt. Subsequently, relying on the “purpose test” evolved through judicial precedents, it contended that the subsidy was capital in nature and therefore not chargeable to tax. According to the assessee, the subsidy was intended to encourage modernization, balanced fertilization, investment, competitiveness and long-term growth of the indigenous fertilizer industry, rather than to supplement profits or reimburse operational expenses.
Assessment Year 2012-13
For AY 2012-13, the original assessment was completed under Section 143(3), followed by reassessment under Section 143(3) read with Section 147 on 30.12.2018. The assessee filed a rectification application under Section 154 on 01.03.2019 against both the original assessment and reassessment orders. Apart from seeking MAT credit, the assessee claimed that the fertilizer subsidy constituted a capital receipt.
