Capital nature of sales tax incentive upheld; consequential assessment fails once revisional order is quashed.

Sales tax incentive linked to industrial development and fixed capital investment was treated as a capital receipt and therefore not taxable as revenue receipt. Following the Tribunal's earlier order in the assessee's own case and the Special Bench view on similar incentive schemes, the Revenue's challenge failed. Where a revisional order under section 263 forms the foundation of a consequential assessment, the assessment cannot survive once that revisional order is quashed, and it is void ab initio. Both Revenue appeals were dismissed.

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Issues: (i) Whether sales tax incentive received under the incentive scheme was a capital receipt and not taxable as revenue receipt. (ii) Whether the assessment order passed under section 143(3) read with section 263 of the Income-tax Act, 1961 became void ab initio after the section 263 order was quashed.

Issue (i): Whether sales tax incentive received under the incentive scheme was a capital receipt and not taxable as revenue receipt.

Analysis: The incentive was received under the same scheme earlier examined in the assessee's own case. The earlier order of the Tribunal, following the Special Bench view on similar incentive schemes, had treated such sales tax incentive as linked to industrial development and fixed capital investment, and therefore as capital in nature. The Revenue did not bring any contrary binding decision to dislodge that view, and the issue was already covered by the Tribunal's own decision in the assessee's case for an earlier year.

Conclusion: The sales tax incentive was held to be a capital receipt, and the Revenue's challenge failed.

Issue (ii): Whether the assessment order passed under section 143(3) read with section 263 of the Income-tax Act, 1961 became void ab initio after the section 263 order was quashed.

Analysis: The section 263 order constituted the foundation for the consequential assessment. Once the revisional order was vacated by the Tribunal, the basis for the consequent assessment ceased to exist. On that footing, the appeal against the consequential order was treated as no longer surviving on merits.

Conclusion: The consequential assessment order was held to be void ab initio and the Revenue's challenge failed.

Final Conclusion: Both Revenue appeals were dismissed after the Tribunal upheld the capital nature of the sales tax incentive and sustained the view that the consequential assessment could not survive once the revisional order had been set aside.

Ratio Decidendi: A sales tax incentive linked to industrial investment and covered by a previously applicable and identical incentive scheme is capital in nature, and a consequential assessment cannot survive once the revisional order forming its foundation is quashed.

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