TaxTMI 
TaxTMI 
2011 (1) TMI 394
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....d this Court by their Appeals preferred under section 260A of the Act, seeking setting aside of the Income-tax Appellate Tribunal's orders of 26-11-2009, 11-11-2009, 12-11-2009, 18-12-2009, 29-12-2009, 18-12-2009, 18-2-2010 and 9-4-2010 passed in their respective Appeals, besides the orders of the Commissioner of Income-tax (Appeals) and Assessing Officers in respect of their Income-tax Returns. 2. Except variation in amounts, the issues involved in the Appeals, being identical, these were heard together, finding that the case projected by the appellants involved Substantial Questions of Law. 3. The issues that arise for determination in the Appeals, are these :- (1)Whether the amount of excise refund and interest subsidy received by the appellants-assessees, in pursuance to the incentives an-nounced and sanctioned vide Government of India, Ministry of Commerce and Industry (Department of Industrial Policy and Promotion's Office Memorandum No. 1(13)/2000-NER, dated 14-6-2002 and Central Excise Notification Nos. 56 and 57, dated 14-11-2002 and other Notifications issued on the subject, pertaining to the Industrial Policy introduced in the State of J....
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....bsp; The new initiatives, in terms of the Memorandum, were aimed at providing requisite incentives as well as enabling environment for industrial development, improving availability of Capital and increase in market access so as to give a fillip to private investment in the State. These Fiscal Incentives were to be provided to the New Industrial Units and substantial expansion of existing units. The new industrial units and existing industrial units on their substantial expansion, as defined, set up in growth centre, industrial infrastructure development centres and other locations like industrial estates, parks, export processing zones, commercial estates, etc., as notified by the Central Government, were entitled to 100 per cent excise duty exemption for a period of 10 years from the date of commencement of commercial production. All new industries in the notified locations were eligible for Capital Investment Subsidy at the rate of 15 per cent of their investment in Plant and Machinery, subject to a ceiling of Rs. 30 lakhs whereas the existing units were entitled to subsidy on substantial expansi....
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.... which may be relevant to understand the issue raised in the case, needs to be noticed. It reads thus :- "...3. The exemption contained in this Notification shall apply only to the following kind of units namely :- (a)New industrial units which have commenced their commercial production on or after the 14th day of June, 2002. (b)Industrial units existing before the 14th day of June, 2002, but which have :- (i)undertaken substantial expansion by way of increase in installed capacity by not less than twenty-five per cent on or after the 14th day of June, 2002; or (ii)made new investments on or after the 14th day of June, 2002, and such new investment is directly attributable to the generation of additional regular employment of not less than twenty-five per cent over and above the base employment limit, subject to the conditions that : - (1)The unit shall not reduce regular employment after claiming exemption, and once such employment is reduced be....
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....sioner of Income-tax and Income-tax Officers, which the Tribunal had permitted the appellants to raise as additional ground, the Tribunal came to the conclusion that the incentives received by the appellants were Revenue Receipt and not Capital Receipt. 10. In taking the above view treating the incentives as Revenue Receipt, the Appellate Tribunal was influenced by the following factors :- (i)The Excise Refund and Interest Subsidy had not been given to the appellants to establish industrial units because the industry stood already established. (ii)The incentives were not available unless and until commercial production had commenced. (iii)The incentives were recurring in nature, in that, those were limited to a period of 10 years from the date of commencement of commercial production. (iv)The incentives in the form of Excise Duty Refund and Interest Subsidy were not given to the assessees for purchasing Capital asset or for purpose of machinery. (v)The incentives were given for easy market accessibility and to run the business more profitabl....
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....erial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital count. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive/subsidy. The form or the mechanism through which the subsidy is given are irrelevant." 16. Perusal of the judgments in Sahney Steel & Press Works Ltd.'s case (supra) and Ponni Sugars & Chemicals Ltd.'s case (supra ) therefore, reveals that the Apex Court had applied the above quoted dictum to determine the purpose, which the two Schemes had intended to achieve by the incentive subsidies, permissible under the Schemes in question in those cases. I....
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....ed industrial development to provide employment opportunities to deal with the social problem of unemployment. This in our view is lop-sided interpretation of the New Industrial Policy and Concessions formulated by the Central Government for the State of Jammu and Kashmir vide Office Memorandum of 14-6-2002. 20. Therefore, in view of the clear legal position adumbrated by the Hon'ble Supreme Court of India on the issue in question, that to determine the nature and intent of the incentives as to whether those were revenue Receipts or Capital Receipts, the purpose underlying the incentives was the determinative test, there may not be any necessity of referring to the judgments of other High Courts of the Country relied upon by the appellants' learned counsel, some of which had been considered by the Hon'ble Supreme Court of India in the above referred cases. 21. Thus, finding that the New Industrial Policy and other concessions for the State of Jammu and Kashmir has not been correctly appreciated by the Appellate Tribunal, we proceed to examine the true intent and purpose underlying the Policy and the Concessions contemplated by the Office Memorandum of 14-6-2002 and statuto....
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....ment in the State, additionally creating opportunities for self-employment, hence a purpose in Public Interest. 26. In this view of the matter, the incentives provided to the Industrial units, in terms of the New Industrial Policy, for accelerated Industrial development in the State, for creation of such industrial atmosphere and environment, which would provide additional Permanent source of Employment to the unemployed in the State of Jammu and Kashmir, were in fact, in the nature of creation of New Assets of Industrial Atmosphere and Environment, having the potential of employment generation to achieve a social object. Such incentives, designed to achieve Public Purpose, cannot, by any stretch of reasoning, be construed as production or operational incentives for the benefit of assessees alone. 27. Thus, looking to the purpose of eradication of the social problem of unemployment in the State by acceleration of the industrial development and removing backwardness of the area that lagged behind in Industrial development, which is certainly a purpose in the Public Interest, the incentives provided by the Office Memorandum and statutory notifications issued in this behalf, to ....