2019 (1) TMI 1978 - AT - Income Tax

Court confirms capital nature of subsidy under govt scheme, rejects Revenue appeal on Octroi refund timing.

The court upheld the capital nature of the subsidy received by the assessee under the government scheme, dismissing the Revenue's appeal challenging the ... Capital subsidy - incentive received by the assessee from Govt. of Maharashtra in the form of Octroi Refund - HELD THAT:- It is an admitted fact that the assessee has received incentive in the form of Octroi refund under Govt. of Maharashtra Package Scheme of Incentives, 2007. We find that the Coordinate Bench of the Tribunal in the case of ACIT Vs. M/s.Universal Construction Machinery and Equipments Ltd. [2018 (8) TMI 1752 - ITAT PUNE] in an identical set of facts has held subsidy received by the assessee under Package Scheme of Incentives, 2007 as capital in nature - Decided against revenue. Issues:1. Treatment of incentive received as capital subsidy.2. Claiming Octroi refund as capital subsidy without revised return.3. Entertaining fresh claim during scrutiny assessment.Issue 1: Treatment of incentive received as capital subsidyThe appeal by the Revenue challenged the order of CIT(A) regarding the treatment of the incentive received by the assessee as capital subsidy. The Revenue contended that the incentive received from the Government of Maharashtra in the form of Octroi refund should not be treated as a capital subsidy. The assessee, engaged in manufacturing electrical equipment, initially did not claim the Octroi refund as a capital receipt in the return of income. However, during assessment proceedings, the assessee requested to treat the incentive as a capital incentive. The Assessing Officer rejected this claim, citing a Supreme Court decision. The CIT(A) later held the Octroi refund as capital in nature, following decisions of the Bombay High Court.Issue 2: Claiming Octroi refund as capital subsidy without revised returnThe Revenue argued that the assessee did not claim the Octroi refund as a capital subsidy in the original return of income or through a revised return. The Department contended that the Assessing Officer should not entertain a fresh claim during scrutiny assessment. The assessee, on the other hand, received the Octroi refund under the Maharashtra Government Package Scheme of Incentives, 2007, similar to the 1993 scheme. Citing precedents, the assessee's representative argued that the subsidy received should be considered capital in nature, as held in previous tribunal decisions.Issue 3: Entertaining fresh claim during scrutiny assessmentDuring the proceedings, the Revenue vehemently defended the assessment order, emphasizing that the assessee did not make the claim of subsidy as capital in the original or revised return of income. The Department argued that the Assessing Officer lacked the authority to consider a new claim during scrutiny assessment. However, the Tribunal noted that the incentive received by the assessee from the Government of Maharashtra in the form of Octroi refund was under the Package Scheme of Incentives, 2007. Citing a similar case, the Tribunal upheld the capital nature of the subsidy, dismissing the Revenue's appeal due to the failure to challenge the findings effectively.In conclusion, the judgment addressed the issues related to the treatment of the incentive received as a capital subsidy, the timing of claiming the Octroi refund as capital, and the authority of the Assessing Officer to entertain fresh claims during scrutiny assessment. The decision upheld the capital nature of the subsidy received by the assessee under the government scheme, relying on precedents and dismissing the Revenue's appeal.