Case Note & Summary
The dispute arose from the petitioner, a public limited company engaged in textile manufacturing, having received interest reimbursement subsidies under the Government of India's Technology Upgradation Fund Scheme from Assessment Years 2006-07 to 2013-14, totaling approximately Rs. 80.15 crores. The petitioner filed income tax returns for all these years, consistently offering the subsidy amounts as taxable revenue receipts. A search operation was conducted on 11 January 2012, leading to pending assessments and notice under Section 153A. On 22 October 2013, the petitioner filed a joint application before the Settlement Commission to settle all pending cases, seeking determination of income, waiver of interest, and immunity from penalty and prosecution. The Settlement Commission, by order dated 30 August 2014, determined the total income for each year, including an additional addition on account of unsubstantiated purchases, and granted immunity. The Assessing Officer subsequently passed individual orders giving effect to the Settlement Commission's order, computing tax and interest accordingly. The petitioner then filed a common revision petition under Section 264 of the Income Tax Act, 1961 before the Principal Commissioner of Income Tax, contending that the subsidy was in the nature of a capital receipt and not chargeable to tax, and that it had been erroneously offered as income. The petitioner argued that the Commissioner's revisional powers under Section 264 are wide enough to entertain this new ground, relying on various judicial precedents, and that the delay in filing should be condoned or computed from the date of the prospective amendment to Section 2(24) by the Finance Act, 2015. The Commissioner rejected the revision application by order dated 28 February 2018, holding that the settlement order was final and binding, and the issue could not be reopened. Challenging this rejection, the petitioner filed the writ petition. The High Court examined the scope of Section 264, the binding nature of a Settlement Commission order, and the effect of the assessee's conduct. It held that the petitioner had voluntarily offered the subsidy as income in all returns and in the settlement proceedings, and having accepted the settlement benefits, could not turn around and challenge the very character of the receipt. The Court ruled that the Settlement Commission's order is final, and the Commissioner under Section 264 cannot revise or sit in appeal over it. The amendment to Section 2(24) by the Finance Act, 2015, though prospective, did not affect past assessments where the assessee itself had classified the subsidy as revenue. The petition was accordingly dismissed, upholding the Commissioner's order.
Headnote
A) Taxation Law - Revisional Powers Under Section 264, Income Tax Act, 1961 - Scope of Revision - Income Tax Act, 1961, Section 264 - Assessee sought revision of orders giving effect to Settlement Commission's determination, claiming subsidy was capital receipt - Held that once Settlement Commission had determined income on basis of assessee's offer, Commissioner could not go behind the settlement order or revise the underlying character of income; revisional power under Section 264 is not a fresh adjudication of settled issues (Paras 10-12). B) Taxation Law - Nature of Subsidy - Capital or Revenue Receipt - Income Tax Act, 1961, Section 2(24) - Assessee claimed Technology Upgradation Fund Scheme subsidy was capital receipt not chargeable to tax; reliance on judicial precedents - Held that since assessee consistently offered subsidy as income in returns and in settlement proceedings, it could not later dispute its taxability; amendment to Section 2(24) by Finance Act 2015, though prospective, did not alter this position (Paras 4, 11). C) Taxation Law - Settlement Commission - Finality and Binding Effect - Income Tax Act, 1961, Sections 245D, 153A - Assessee filed joint application for settlement for all pending assessments after search; Commission passed order under Section 245D(4) determining total income including subsidy and granted immunity - Held that settlement order is final and binding; after acceptance of settlement, assessee cannot challenge the character of amounts voluntarily offered, and the Commissioner under Section 264 cannot sit in appeal over the Settlement Commission (Paras 6-9). D) Taxation Law - Conduct of Assessee - Estoppel Against Recharacterizing Income - Income Tax Act, 1961, Section 143(3) - Assessee filed returns for multiple years offering subsidy as revenue receipt; even during search and settlement, no contrary stand was taken - Held that assessee's own admission and conduct preclude a later claim of capital receipt; a new ground not raised before lower authorities cannot be taken in revision when contrary stand was adopted (Paras 5, 10).
Issue of Consideration
Whether the Commissioner of Income Tax was justified in rejecting the revision application filed under Section 264 of the Income Tax Act, 1961, seeking to reclassify the Technology Upgradation Fund subsidy as capital receipt, when the assessee had offered the same as income in the returns and during successful settlement proceedings before the Settlement Commission.
Final Decision
Writ petition dismissed. The High Court upheld the Commissioner's order rejecting the revision application. It held that the assessee had all along treated the subsidy as income and participated in settlement proceedings without raising the issue; the settlement order was binding and could not be revised under Section 264; the amendment to Section 2(24) by Finance Act, 2015 did not affect past assessments; and the Commissioner rightly rejected the revision as not maintainable.
Law Points
- Subsidy under Technology Upgradation Fund Scheme is revenue receipt
- Settlement Commission order is final and cannot be revised under Section 264
- Amendment to Section 2(24) by Finance Act 2015 is prospective
- Powers under Section 264 cannot override settlement order
- Assessee bound by own conduct of offering subsidy as income
