Economic Explosives Ltd. Vs ACIT (ITAT Nagpur)
ITAT Nagpur held that sales tax subsidy is capital subsidy and accordingly it should be reduced for computation of book profit under section 115JB of the Income Tax Act. Accordingly, appeal allowed.
Facts- The case of the assessee was selected for complete scrutiny under CASS. Notably, the assessee was entitled to the Sales Tax Subsidy viz., Value Added Tax and Sales Tax collected by the assessee on sales made during the year under consideration. The Sales Tax Subsidy was linked to the investment made by the assessee, however, it was payable in the form of the VAT and/or sales tax collected by the assessee.
In the return of income, the assessee claimed the Sales Tax Subsidy as capital receipt and deducted the same while computing the income under the head ‘Profit and Gains of Business or Profession’ under the normal provisions of the Act. However, while computing the book profit under the MAT provisions of the Act, the assessee did not correspondingly reduce the book profit.
The Assessing Officer while computing the book profit has not made any downward adjustments to the book profit on account of sales tax subsidy. CIT(A) confirmed the order. Being aggrieved, the present appeal is filed.
