Punjab & Haryana High Court held In the case of M/s Maken Cement Industries vs. CIT that it is settled principle that the substantial question of law would only be based on the documents which were before the authorities below and also which were subject matter of consideration before the Tribunal. Once the stand was contrary before the Assessing Authority at the initial stage, the argument which is now sought to be raised cannot be addressed before the Court.
Facts of the Case
In this case assessee was following mercantile system of accounting. The question was raised by the assessee that the transport subsidy amounting to Rs.16,11,477/- which was never received by the assessee and for which merely a claim was lodged with the Jammu & Kashmir Government could be treated as income accrued and taxed in the hand of the assessee. On the other hand AO after refer the provisions of Section 80-IB held that subsidy received was an income incidental to industrial undertaking and had no direct nexus with it, and would not be eligible for deduction and the amount had been added as income. Accordingly, it was contended that it was never the case before the assessing authority as now contended that the amount had never been received.
Contention of the Assessee
The learned counsel for the assessee submitted that amount of transport subsidy was never received by the assessee and therefore it could not be treated as income in the hands of the assessee. He placed reliance upon the Transport Subsidy Scheme, 1971 circulated by the Jammu & Kashmir Development Finance Corporation Limited to submit that freight charges for movement was to be determined on the basis of transport rates fixed by the authorities from time to time or the actual freight paid, whichever is less.
It was further contended that once only a sum of Rs. 5,17,123/- had been received out of Rs. 21,18,637/-, balance of Rs. 16,11,477/- could not be added to the income of the assessee. Reliance has been placed upon the judgment of the Apex Court in Commissioner of Income-Tax, Bombay City Vs. Messrs. Shoorji Vallabhdas and Co. (1962) 46 ITR 144 (SC) to submit that once there was neither accrual nor receipt of income though entry had been made in the books, it was only hypothetical income and had not materialized.
Contention of the Revenue
The ld counsel of the revenue submitted that keeping in view the provisions of Section 80-IB the assessment officer held that subsidy received was an income incidental to industrial undertaking and had no direct nexus with it, and would not be eligible for deduction and the amount had been added as income. Accordingly, it was contended that it was never the case before the assessing authority as now contended that the amount had never been received.
Held by CIT (A)
The CIT (A) partly allowed the appeal. It was held that u/s 80-IB, the assessee was not eligible for deduction since the receipt of transport subsidy did not fall in the category of direct source of profit but was any other profit. However, benefit of a sum of Rs. 16,11,480/- was allowed on account of the fact that it had not been received by the assessee and therefore, need not be taxed.
Held by ITAT
ITAT held that followings the judgment of the Apex Court in CIT Vs. Sterling Foods (1999) 237 ITR 579 (SC) and CIT Vs. Pandian Chemicals Ltd. 262 ITR 278 (SC), benefit of rebate under section 80IB cannot be allowed.
Also ITAT held that benefit of Rs. 16,11,480 given by CIT (A) cannot be granted to the assessee because the assessee had not filed any documentary evidence supporting its claim for the concerned assessment year and had adopted the mercantile system of accounting. It had credited subsidy receivable on 21.3.2002 and therefore, it was considered to be received on the said date.
Held by High Court
It is clear that assessee apart from adopting mercantile system of accounting had chosen to take benefit of Section 80-IB of the Act. It had never taken the plea before the authorities below which is now sought to be raised that it was only liable to be assessed to the tune of Rs. 5,17,123/- which was actually received in the year concerned.
Once that was not the specific case before the assessing authority and neither the same material had been placed before the Tribunal, we are of the view that the substantial question of law which is now sought to be raised on the strength of aforesaid clause of the Scheme is not permissible.
Accordingly, appeal of the assessee dismissed.