Case Note & Summary
The matter arises from a writ petition filed by Mandhana Industries Ltd, a public limited company engaged in textile manufacturing, against an order of the Principal Commissioner of Income Tax (Central) 1 rejecting its revision application under Section 264 of the Income Tax Act, 1961. The petitioner had received interest reimbursement under the Technology Upgradation Fund Scheme (TUFS) from the Government of India for assessment years 2006-07 to 2013-14, aggregating about Rs. 80.15 crores, which it offered as revenue receipt in its income tax returns. A search operation was conducted on 11 January 2012. The petitioner subsequently applied to the Settlement Commission under Section 245C on 22 October 2013. By order dated 30 August 2014 under Section 245D(4), the Settlement Commission determined the total income for the relevant years, made additions for unsubstantiated purchases, and granted immunity from penalty and prosecution, subject to conditions. The Assessing Officer gave effect to the Settlement Commission’s order by passing orders for each assessment year, computing tax and interest. Later, the petitioner filed a revision petition under Section 264 before the Commissioner, contending that the TUFS subsidy was capital in nature and not taxable, and that it had been inadvertently offered as income. It argued that the Commissioner’s revisional powers are wide and can entertain new grounds not previously raised. The petitioner also contended that the time limit for revision should be computed from the date of the Finance Act 2015 amendment to Section 2(24), which clarified that subsidy is revenue receipt with prospective effect. The Commissioner rejected the revision application by order dated 28 February 2018. Consequently, the petitioner filed the present writ petition challenging that rejection. The writ came up for hearing before a Division Bench comprising Justices Akil Kureshi and M.S. Sanklecha on 4 February 2019. The text provided does not include the court’s analysis and decision; it only reproduces the factual background and the petitioner’s revision application contentions. The case involved the interpretation of the scope of revisional jurisdiction under Section 264 vis-à-vis the finality of Settlement Commission orders under Section 245I and the nature of TUFS subsidy.
Issue of Consideration
Whether the revisional power under Section 264 of the Income Tax Act, 1961 can be exercised against the order of the Settlement Commission or the orders giving effect to it, and whether the subsidy received under TUFS is capital receipt.
Case Details
2019 LawText (BOM) (03) 35
Writ Petition No. 2320 of 2018
Akil Kureshi, M.S. Sanklecha
Jehangir Mistri, Nishant Thakkar, Hiten Chande, Suresh Kumar
Principal Commissioner of Income Tax (Central) 1 & Anr.
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Nature of Litigation
Writ petition under Article 226 of the Constitution of India challenging order of Principal Commissioner of Income Tax rejecting revision application filed under Section 264 of the Income Tax Act, 1961.
Remedy Sought
Petitioner sought quashing of the order dated 28.02.2018 and a direction to the Commissioner to entertain the revision application on merits and exclude TUF subsidy from total income.
Filing Reason
The Commissioner rejected the revision application holding that the Settlement Commission's order is final and cannot be revised under Section 264; the petitioner contended that the subsidy is capital receipt and the revisional power is wide enough to correct the error.
Previous Decisions
Settlement Commission order dated 30.08.2014 under Section 245D(4) determining total income and granting immunity; Assessing Officer's orders giving effect to Settlement Commission's order for each assessment year; Commissioner's order dated 28.02.2018 rejecting revision.
Issues
Whether the Commissioner under Section 264 of the Income Tax Act, 1961 has jurisdiction to revise the Settlement Commission's order under Section 245D(4) or the orders giving effect to it.
Whether the TUF subsidy received by the assessee is capital receipt not chargeable to tax.
Submissions/Arguments
Petitioner argued that TUFS subsidy is capital receipt in nature and not taxable; inadvertent offer to tax in returns does not alter its character. Commissioner's revisional powers under Section 264 are very wide and he can entertain new grounds not raised before lower authorities, as held in C. Parikh & Co. v. CIT. Delay in filing revision was attributable to lack of clarity until the Finance Act 2015 amendment to Section 2(24), which prospectively clarified that subsidy is revenue receipt. The Commissioner should condone delay and decide on merits.
Respondents' arguments are not mentioned in the provided text.
Judgment Excerpts
Considering all these aspects of the case, we are of the view that end of justice would be met by making an addition of Rs. 1,25,00,000/- to the profits disclosed by the applicant in A.Ys. 2009-10 to 2012-13 pro-rate in the proportion of unsubstantiated purchases…
ORDER GIVING EFFECT TO SETTLEMENT COMMISSION’S ORDER … Total Income u/s. 115JB Rs. 56,15,14,131/-…
The immunity granted to the applicant, however, may be withdrawn if the Commission is satisfied that the applicant has in the course of the settlement proceedings, concealed any particular material to the settlement, or has given false evidence.
Procedural History
Petitioner (assessee) filed returns of income for AYs 2006-07 to 2013-14 offering TUF subsidy as revenue receipt. Search under Section 132 took place on 11.01.2012. Petitioner filed a joint settlement application before the Settlement Commission on 22.10.2013. The Settlement Commission passed an order dated 30.08.2014 under Section 245D(4) determining total income and granting immunity. The Assessing Officer passed giving-effect orders on 26.09.2014 and for other years. Petitioner filed a revision application under Section 264 before the Commissioner on a date after 14.05.2015, alleging that TUFS subsidy is capital receipt not taxable. The Commissioner rejected the revision by order dated 28.02.2018. Petitioner challenged this rejection by way of the present Writ Petition No. 2320 of 2018.
Acts & Sections
- Income Tax Act, 1961: 264, 245D(4), 245I, 143(3), 153A, 115JB, 2(24)
