State Farms Corporation Of India Ltd., ... vs Department Of Income Tax

DCIT, vs M/s State Farms Corporation of India Ltd., Circle-9(1), Room No.-163, Farm Bhawan, 14-15, Nehru Place, C.R. Building, New Delhi. New Delhi. (APPELLANT) (RESPONDENT)

Appellant by Sh. Satpal Singh, Sr. DR Respondent by Sh.A.K.Batra, CA

ORDER PER DIVA SINGH, JM

This is an appeal filed by the Revenue against the order dated 25.05.2013 of CIT(A)-XII, New Delhi pertaining to 2010-11 assessment year on the following ground:-

1. "On the facts and circumstances of the case, the Ld. CIT(A) has erred in law in restoring this issue to the AO."

2. At the time of hearing an adjournment was moved on behalf of the assessee however in view of the peculiar facts and circumstances of the case where the only issue involved is the action of the CIT(A) in exceeding the jurisdiction granted to her by the Act, the same was rejected. In order to address the grievance posed by the Revenue it is necessary to consider the specific section invoked by the Revenue i.e Sec. 250(6) which read as under:-

250. "(1) .................................................

(2) ......................................................... (3) ......................................................... (4) .......................................................... (5) .......................................................... (6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.

2 I.T.A .No.-4405/Del/2013 (6A)..................................................................."

3. A perusal of the same shows that the CIT(A) while adjudicating upon the issues can either enhance, delete or modify the order however the power to remand the issue back is no longer vested with the said authority. On a consideration of the finding arrived at in the impugned order, it is seen that in the year under consideration the CIT(A) has directed the AO to decide the issue in the light of the direction given by the ITAT in 2008-09 assessment year. These facts are coming out from the following finding arrived at by her as under:-

"Ground No. 1 to 5 are together:

I have perused the facts stated in the assessment order as well as the facts stated by the assessee in his submissions. Assessee had produced before the AO which showed the disbursement of subsidy to dealer and cultivators at the instance of Central and state Governments. The Assessee had also produced records showing the cost of production of oil seeds, pulses and vegetables. The cost is more than selling price and the subsidiary than received on account of the same. Taking into account Seed Bank, Jetropha and Breeder Seeds there will be net loss to the assessee corporation. The Assessee had already mentioned that the assessee corporation made a net profit of Rs.375,125,601. This profit was both from its own produce of agriculture, trading in seeds and subsidy received besides income from other sources like property, interest etc. The assessee corporation submitted for taxation the profit amounting to Rs. 468,855,650/-. This clearly shows that actually the corporation has suffered a loss on account of sale of its own produce which has been partly compensated by the Government in the form of subsidy. Subsidy in this case is not a bounty but it's a recoupment of expenses incurred by the Corporation. This has been the position from A.Y.2002-02003 assessment to 2007-08 assessment.

The ITAT vide ITA No. 2912/De1l2011/dt.23 December, 2011 for the A.Y.2008- 09 has stated that:

7 .... "We have heard the rival submission and perused the material available on record. On a careful consideration of the same we are of the view that the impugned order deserves to be set aside. It is seen that on facts no evidence has been taken into consideration in regard to the terms and conditions of the specific subsidy schemes under which assessee has received subsidies. It is seen that out of the total subsidy of Rs. 10,93,93,213 the Corporation has submitted a sum of Rs.

4,91,12,536/- received as subsidy on account of growers programme. As per assessee's arguments as found reproduced in the impugned order at page 2, it is stated that "In the growers programme the assessee corporation purchases seeds and sell it to farmers at a subsidized rate, since this is a trading activity the income of the same have been offered for taxation by the assessee corporation. " However in order to consider the taxability of the subsidies received by the assessee for transporting the seeds to specific areas for causing the production of oil seeds, pulses etc. and maintaining seed banks etc. in terms of the subsidy schemes of the State/Central Government it is seen that the terms and condition of the specific subsidy schemes under which the assessee has received 3 I.T.A .No.-4405/Del/2013

subsidy have not been taken into consideration. The case law can apply only when the facts have been marshaled.

7.1 Accordingly for the reasons given herein above the issue is restored to the file of the AO with the direction to decide the same in accordance with law by way of a speaking order. Needless to say that the assessee shall be afforded a reasonable opportunity of being heard. The assessee shall place before the AO the specific subsidy Schemes relatable to the amount of Rs.6,02,85,6771- received as subsidy and shall be at liberty to place on record all relevant facts and evidences in support of its claim.

7. In the result, the department appeal is allowed for statistical purposes. Since the impugned order has been set aside and the issue has been restored to the AO the assessee's cross objection accordingly become infructuous .... "

Following the order of the ITA T vide ITA No. 2912/Del/2011 dt.23 December, 2011 for the A.Y.2008-09 this issue is restored to the AO with the direction to decide the same in accordance with law, after giving a reasonable opportunity to the assessee. The assessee shall place before the AO the specific Subsidy Scheme relatable to the amount of Rs.l,88,261,1701- received on subsidy. Hence, the appeal is allowed for statistical purposes since the order of the AO has been set aside and the issue has been restored to the AO."

4. In view of the same holding that the said direction of the CIT(A) cannot be upheld as it exceeds the jurisdiction granted to her, we deem it appropriate to substitute her conclusion with our direction to the AO to decide the issue following the directions by the ITAT in assessee's own case in 2008-09 assessment year. The position for 2009-10 should also be ascertained. The above direction is given in view of the fact that though the perversity in the order as exceeding jurisdiction is evident in the order itself however on facts both the parties were unable to assist the Bench. Accordingly the AO shall ascertain the past settled legal position on the issue and thereafter pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. Accordingly the conclusion arrived at is retained the reasoning is varied. The appeal is allowed for statistical purposes.

5. In the result the appeal of the assessee is allowed for statistical purposes.

The order is pronounced in the open court on 19th of January 2015.

Sd/- Sd/- (B.C.MEENA) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 19/01/2015 *Amit Kumar* 4 I.T.A .No.-4405/Del/2013

Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI