CIT vs. Kirloskar Oil Engines Ltd (Bombay High Court)

DATE: (Date of pronouncement)
DATE: April 24, 2014 (Date of publication)

Click here to download the judgement (kirloskar_strictures.pdf)

Dept given “last opportunity” and warned of “heavy costs” for wasting judicial time by filing appeal on covered matters

The assessee received an incentive/ subsidy from SICOM for setting up a new undertaking. The assessee claimed that the subsidy was a capital receipt. However, the AO held the receipt to be a revenue receipt. The CIT(A) and Tribunal upheld the assessee’s claim on the basis that the issue was covered by Chaphalkar Brothers 351 ITR 309 (Bom) & Ponni Sugars 306 ITR 392 (SC). The Department filed an appeal to the High Court. HELD dismissing the appeal:

We are afraid that if the Revenue persists with such stand and as has been turned down repeatedly, that would defeat the very object and purpose of the schemes and packages devised by the States. That would also result in frustrating the entrepreneurs and defeating the purpose of setting up new industries and particularly in backward areas. The Revenue, therefore, should bear in mind that in every such case and whenever the funds or receipts are from the schemes and packages devised by the State, it should note the object and purpose of the same. If that is of the nature specified in the judgments of this Court and equally that of the Hon’ble Supreme Court, then, the Revenue must act accordingly. We hope that this much is enough so as to dissuade the Revenue from bringing such matters repeatedly to this Court. Ordinarily and for wasting judicial time and which is precious, we would have imposed heavy costs on the Revenue while dismissing this Appeal, but we refrain from doing so by giving last opportunity to the Revenue.

See also Bharti Airtel (ITAT Delhi) where similar strictures were passed and an accountability mechanism was mooted. Also see Dear Judges, Thanks For The Strictures But What About Some Follow-Up Action?

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