TaxTMI 
TaxTMI 
2013 (8) TMI 548
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....based on erroneous views and/ or non-appreciation of the facts and law involved including the law as laid down by the apex court in the case of CIT V. Ponni Sugar and Chemicals Ltd. 306 ITR 392. 3. That the treatment of the said amount of E Tax as revenue receipt as against capital receipt claimed by the assessee and accepted by the Ld. AO is inconsistent with the view of the Hon'ble High Court of Allahabad and Karnataka where the similar grant in aid of E Tax has been held as capital receipt. 4. That the ld. CIT(A) has erred on facts and in law in not considering the assessee's alternative claim that in case the said amount of E Tax is treated as income, the same is an allowable expense u/s 43B as deemed payment of tax. As per clear settled law, any receipt of tax if taxed as trading receipt then any payment thereof is also allowable as an expense." 5. That the ld. CIT(A) has erred in treating the said amount 2,25,41,765/- in respect of E Tax grant in aid as a revenue receipt without giving any opportunity to the appellant on the issue of the E Tax being held to relate to the mall developer. Otherwise too, the said addition is without properly considering various details,....
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....The entire investments in relation to tax free income being out of non-interest bearing funds, no such disallowance of interest is prescribed on merits and on the facts and law involved. Moreover, both the Ld. AO and the Ld. CIT(A) have not rebutted the additional evidence filed by the assessee which show that the investments in relation to tax free income have no nexus with any interest bearing loans. As such the disallowance of interest of Rs. 26,49,794/- under section 14A read with Rule 8D is unlawful and deserves to be deleted. 11. That the grounds of appeal as herein are without prejudice to each other. 12. That the assessee respectfully craves leave to add, amend, alter and/ or forego any ground(s) at or before the time of hearing." 2. Ground nos. 1 to 5 pertain to one issue about treatment of entertainment tax subsidy being capital/ revenue in nature; out of which ground nos. 1 to 3 raise main issue; ground no. 4 is alternate claim u/s 43B; and ground no. 5 raises the issue of not providing adequate opportunity to file the document in the enhancement proceedings by the ld. CIT(Appeals) u/s 251(2) of the I.T. Act. The assessee has also filed an application for admiss....
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....nsfer of license and ET eligibility in the name of assessee, as per the U P State Govt. scheme, it received the necessary license and eligibility for exemption from payment of ET collected during operation of the multiplex. 3.2. Assessee filed original return declaring income of Rs. 7,10,95,711/- including the E. Tax collected by it. According to assessee, it realized this mistake during the course of assessment and filed a letter dated 4-3-2008 requesting to revise the original computation on the ground that an amount of Rs. 2,25,41.765/-, received by it as entertainment tax ("E tax") collected and credited to P&L A/c was inadvertently not reduced from the profits while computing the income for A.Y. 2006-07; the subsidy being capital in nature was reduced from the returned taxable income. In support of its revised claim, assessee submitted as under: "i) That the Uttar Pradesh (UP) State Government vide said Notification no. 1161 dated 13.7.99 with a view to encourage setting up of multiplexes in the State, granted capital cost subsidy by way of exempting payment of entertainment tax to the extent of capital cost of the multiplex within a specified period. ii) That as per ....
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.... such assets u/s 43(1) read with Explanation 10. AO further made other disallowances in respect of claim of ESOP & ESPS which were not paid. Expenses incurred for tax free income u/s 14A were also disallowed. These additions/ disallowances were challenged in first appeal before ld. CIT(Appeals). 3.5. During the course of hearing, ld. CIT(Appeals) observed that assessee had offered the E. Tax subsidy in the original return of income treating it as revenue receipt; thereafter by revising the computation, the assessee had claimed it to be the capital receipt. According to ld. CIT(Appeals), AO's action was not correct and multiplex subsidy granted was revenue in nature. Accordingly, a notice of enhancement u/s 251(2) of the I.T. Act was served on the assessee. Assessee filed written submissions, supported with evidence, opposing the enhancement. Ld. CIT(Appeals), however, held that E. Tax the subsidy in question was revenue subsidy by following main observations: "(i) It is an admitted fact that the theatre was constructed by CCPL Developers Pvt. Ltd. and they were owner of the theater. They had given the cinema theatre on revenue sharing basis to the appellant for a limited peri....
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.... enhance the addition by Rs. 2,25,41,765/-. The AO is accordingly directed to issue necessary demand notice and take action for recovery of the same." 3.6. The CIT(Appeals) held the subsidy to be revenue in nature and included in taxable income. As a consequence reversed the action of AO in reducing the actual cost of the assets u/s 43(1) and thereby reducing the depreciation and directed the AO to work out the same accordingly. 3.7. CIT(Appeals) upheld the disallowance on account of ESOP made by AO by following observations: "I have carefully considered the submissions of the ld. AR and perused the assessment order passed by the AO. It is seen that the appellant has claimed the expenditure on account of ESOP on notional basis. On the ground that the scheme was approved by SEBI. Hon'ble Supreme Court in the case of Southern Technologies Ltd. vs. CIT 320 ITR 573 has held that the guideline of any regulatory authority cannot over ride the specific provisions of the Income tax Act. In order to claim a deduction admissible under I.T. Act, the appellant must show the specific provisions under which the same is allowable under I.T. Act. In view of the discussion and decision of ....
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.... way of rebuttal, in the interest of substantial justice, we are inclined to admit the additional material. Hon'ble Supreme Court in the case of Collector of Land Acquisition Vs. Mst. Katiji 167 ITR 471 (SC) has held that when the cause of substantial justice and technical considerations are pitted against each other the cause of substantial justice should prevail. In case of enhancement by CIT(A), a liberal approach about additional evidence is to be adopted in the facts and circumstances of this case. 6.1. Adverting to the issue about the nature of E. Tax subsidy, ld. counsel contends that due to onslaught of cable television, there was steep decline in viewing public to go to cinema halls, thus leading to serious erosion of entertainment tax collection of the state government and plummeting of prospectus of cine industry. To promote the viewership in cinema halls various state governments including the U.P. state govt. were seized with the matter of and mulling over the attractive incentives to promote the cinema industry by setting up of operational multiplexes for a longer time. The U.P. govt. was aware of the fact that setting up and operation of multiplexes on a regular b....
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....promote opening of long term multiplex theatres function and these incentives were offered because new cinema multiplexes were not opening in large numbers and the cinema viewership was declining. The Government desired setting up of multiplex theatres which were fully developed, operational and modern in terms of technology with minimum three halls and investment of more than 1.5 crores. The scheme required substantial investment and govt. was fully conscious of these realties about mobilization of large capital and thus wanted to promote the investment of capital in multiplexes segment. The incentive was desired in such a manner that the multiplexes operate for a prescribed period with 3 cinema halls. Thus, to ensure this govt. policy of long term operations of multiplexes the method of incentives was devised by linking them with instalments of entertainment tax exemption. 6.5. The object of the scheme was to promote the policy of development and operation of permanent functional multiplexes. The investment was to be first made in lieu with object of long term operational performance of multiplex; the subsidy was for development of cine industry; the reimbursement was linked w....
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....ely deals with this issue which may be considered as assesses arguments: "Use of the term multiplex owner in the scheme is to be read in context of the related UP Entertainment and Betting Act, 1979 ("Act") and Rules. The word owner is not defined in the Act but the word proprietor is clearly defined therein in an inclusive manner. It is common knowledge that in common parlance the word owner & proprietor have the same meaning. Thus owner / proprietor for the purposes of entertainment tax as defined in Act etc. is the manager / operator also and not only the person who owns the building. On a harmonious interpretation of the applicable provisions of statutes involved it is clear that the word owner under the scheme covers the appellant. This is more particularly as also seen in the facts and circumstances of the case as borne out by various agreements, contractual understandings, diversion by overriding title, joint venture revenue sharing relationship that are clearly seen from the record. It is the appellant which is complying with all obligations and which is receiving the entertainment tax subsidy. As the I-Tax department itself endeavours to tax the appellant on such entert....
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....exes cinemas shall not be entitled for grants". The above language clearly suggests that the outer limit for the grant of the benefit was a period of 5 years and if the benefit was availed within 5 years no further benefit would be available for the balance period of 5 years. This is also evidenced by the order of the District Magistrate dated 01.09.05 in which it was indicated that "if cost of construction of building (including cost of equipment, decorations etc. in which value of the land has not been added) is received before the completion of the period of five years of grant is prescribed in the government order will not avail the benefit of grant for the remaining period of five years." It is noteworthy that in the said order it is prescribed as follows:- "Amount of exemption in the Entertainment Tax for the convenience of the Multiplex Owner shall be set off against the amount of entertainment tax payable by him as per the prescribed procedure." Thus, in the language of the District Magistrate issuing the exemption certificate the convenience of the Multiplex owner who would spend substantial sums of money to carry forward the idea of the state government is of importanc....
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....Querist alone would be responsible for the investment in setting up of the Multiplex and would be liable for operations, day to day running and management of the Multiplex and would also be entitled to enjoy the benefits of the subsidy/waiver of deposit of Entertainment Tax as prescribed by the exemption scheme mentioned above. The intention of the legislature while providing the grant in terms of the exemption from deposit of the entertainment tax was to promote the setting up of multiplexes which were fully developed modern and in keeping with the present times. All the said required conditions to advance the intention of the legislature could have been fulfilled only by the Querist who alone has the requisite experience, wherewithal, investment capability and the established brand name. In accordance with the intention behind the grant it was also made clear by the order/certificate granting exemption that the cost of land shall not be included in the calculation of capital expenditure incurred for setting up of the said multiplex. It is apparent therefore that it is not the ownership of the land that would matter for the purpose of getting the benefit of the exemption but th....
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....to a fully functional, modern multiplex. Thereafter both the parties completed the necessary formalities and on fulfillment thereof, licenses and eligibility to receive subsidy was granted by U.P. State Govt. to assessee. Ld. CIT(Appeals) has drawn an erroneous inference by only looking at revenue sharing and co-ordination agreement dated 1-9-2005 and holding that subsidy was received from 1-4-2005. CIT(A) ignored the vital fact emerging from agreement itself that agreement was operational wef 1-4-2005. Thus the assessee was already in this business arrangements with CCPL Developers Pvt. Ltd. 7.1. CIT(Appeals) on one hand held that receipt in question as "subsidy" albeit revenue subsidy" and income of the assessee and on the other hand observed that the assessee not being the owner of multiplex, the subsidy cannot devolve on it. The findings are contradictory. The main issue in question is capital or revenue nature of subsidy and not how assessee could have earned. Ld. CIT(Appeals) by cherry picking the issues here and there, has endeavored to confuse the issue. It is pleaded that the observations of ld. CIT(Appeals) are totally misconceived and contrary to record as: (a) AO ....
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....ssee 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 is to enable the assessee to set up a new unit or to expand an existing unit then the receipt of the subsidy would be on capital account." 7.3. Hon'ble Supreme Court has categorically held that the character of the receipt of subsidy in the hands of any assessee is to be determined keeping in mind following criteria: (i) The scheme and purpose for which the subsidy is granted, which may be called as "purpose test". (ii) The point of time on which the subsidy is paid is not relevant. (iii) The source of the subsidy is not relevant. (iv) If the object of the subsidy is to enable the assessee to set up a new unit or expansion of existing unit then the receipt of subsidy is capital in nature. 7.4. In the light of Hon'ble Supreme Court judgment Ponni Sugar and Chemicals Ltd. (supra), it is pleaded that: (i) it is beyond doubt that U.P. govt. in order to promote the industry of cinema by modern multiplexes/ theatres/ cinema halls in the state of U.P. promulgated this incentive scheme. Thus the purpose of the s....
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....n the case of M/s Chaphalkar Brothers (supra). 7.6. Learned counsel for the assessee contends that Hon'ble Bombay High Court judgment clinches the very issue in question holding that subsidy provided to multiplex is capital in nature. In this case the ITAT held the subsidy to be capital in nature. On revenue appeal Hon'ble Bombay High Court, relying on the judgment of Hon'ble Supreme Court in the case of Ponni Sugar and Chemicals Ltd. (supra), held the multiplex subsidy to be capital in nature by following observations: According to the Revenue, in the light of the judgment of the Apex Court in the case of Sahney Steel and Press Works Limited Vs. Commissioner of Income Tax reported in (1997) 228 ITR 253 (SC), the entertainment duty subsidy received by the assessee must be held to be revenue receipt because, the subsidy is granted after the commencement of business and after the entertainment duty is collected by the assessee. The Apex Court in the case of Commissioner of Income Tax Vs. Ponni Sugars and Chemicals Limited reported in (2008) 306 ITR 392 (SC) has on consideration of its decision in the case of Sahney Steel (supra) held thus: "The importance of the judgment of thi....
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....t concession in entertain duty to Multiplex Theatre Complexes to promote construction of new cimena houses in the State." 5. Since the object of subsidy was to promote construction of multiplex theatre complexes, in our opinion, receipt of subsidy would be on capital account. The fact that the subsidy was not meant for repaying the loan taken for construction of multiplexes cannot be a ground to hold that subsidy receipt was on revenue account, because, if the object of the scheme was to promote cinema houses by constructing multiplex theatres, then irrespective of the fact that the multiplexes have been constructed out of own funds or borrowed funds, the receipt of subsidy would be on capital account. In the light of the aforesaid objects of the Scheme framed by the State Government, the decision of the Income Tax Appellate Tribunal that the amount of subsidy received by the assessee is on capital account cannot be faulted. Accordingly, both the appeals are dismissed with no order as to costs. 7.7. In the light of Hon'ble Bombay High Court judgment, ld. counsel pleads that the Maharashtra and U P Govt schemes on entertainment subsidy are pari material, there is no contrary d....
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.... of opening of new units of other industries is held to be capital in nature: - CIT v. M/s Udupi Builders Pvt. Ltd. 319 ITR 440 (Kar.) "The assessee received a sum of Rs. 3,73,000 as a subsidy granted by the State to encourage the hotel industry. The assessee claimed the amount towards the capital investment. The Assessing Officer disallowed the claim. The Commissioner (Appeals) held that the subsidy had been granted to the assessee by the State under the 1982-87/88 package of incentives and concessions and it was towards investment and not a revenue receipt. The Tribunal confirmed the order passed by the Commissioner Appeals). On appeal : Held, dismissing the appeal, that the subsidy had been announced by the State of Karnataka to encourage the hotel industry and the State was in the habit of releasing the subsidy amount depending upon the budgetary allocation in each year. The State had released the subsidy amount even after ten years of the commencement of the project. Therefore, the contention that since the assessee received the amount of subsidy after completion of the hotel project and commencing of the business, such receipt had to be taken as revenue receipt an....
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....evant previous year - that liability did not seize to be liability because the Assessee had taken proceedings before higher authorities for getting it reduced or wiped out so long as the contention of the Assessee did not prevail - Further, the fact that Assessee had failed to debit the liability in its books of account did not debar it from claiming the sum as a deduction - Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights; nor can the existence or absence of entries in his books of account be decisive or conclusive in the matter." - CIT Vs. Shoorji Vallabhadas & Co. (1962) 46 ITR 144 (SC); - State Bank of India Vs. CIT (1986) 157 ITR 67 (SC); - Sutlej Cotton Mills Ltd. Vs. CIT 116 ITR 1 (SC). 7.13. Adverting to the CIT(A)s objection about original license application and ET entitlement in the name of CCPL and assessee being a transferee, ld counsel contends that by now law has profoundly recognized the concept of constructive ownership. It is crystal clear from the record that assessee by a lese of 20 years was transferred the structure ....
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....plexes. ii. The point of time of disbursing subsidy is not relevant, in assesses case the subsidy comes in instalments in the form of amount equal to Entertainment Tax collected by if depending upon performance. iii. The source of subsidy is not relevant i.e. whether if comes directly from the coffers of state govt. or by collection of Entertainment Tax. iv. The object of subsidy is to promote cinema exhibition in multiplex theatres through permanent, long term operational and modern multiplexes. The object is also linked with the investment of minimum capital. 7.15. The present multiplex scheme of U P govt was in continuation of earlier cinema halls scheme, the nature of subsidy offered by earlier cinema hall schemes has been held to be capital in nature by various judgments viz. Allahabad High court judgments in the cases of Pramod Kumar Sukla, Sharda Chitra Mandir and Kalpana Palace. (supra); and Sadichha Chitra by Bombay High Court (supra). 7.16 It is vehemently argued that in view of all the above facts, circumstances, submissions and case laws relied by the assessee the subsidy in question is clearly capital in nature. The enhancement of assessment by CIT(A) to....
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....ixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the "actual cost". The expression "actual cost" in section 43(1) of the Incometax Act, 1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from "actual cost". The amount of subsidy is not to be deducted from the "actual cost" under section 43(1) for the purpose of calculation of depreciation, etc. Decision of the Andhra Pradesh High Court in CIT v. Godavari Plywoods Ltd. [1987] 168 ITR 632, decisions of the Karnataka High Court in CIT v. Snam Abrasives Ltd. [1994] 205 ITR 554, CIT v. Progressive Engineering [1993] 200 ITR 231 and CIT v. Kareem Cascami Ltd. [1993] 202 ITR 184, decision of the Madras High Court in CIT v. Metal Powder Co. Ltd. [1992] 197 ITR 516, decisions of the Madhya Pradesh High Court in CIT v. Steel Tubes of India Ltd. [1990] 181 ITR 90; CIT v. Steel Tubes of India P. Ltd. [1989] 180 ITR 159; CIT v. Steel Ingots P. Ltd. [1990] 181 ITR 42; CIT v. Vikram Metal Powder P.....
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....cases it has been held that respective subsidies were not given to meet the cost of any asset directly or indirectly, consequently it will not reduce the cost of any asset. The assesses case of multiplex subsidy stands on exactly similar footings. 9.5 The U.P. Govt. policies and scheme was framed for the growth of multiplex industry and not for supplementing the trade profits of the recipient. The scheme does not mention acquisition or commissioning of any particular type of assets. Once the incentive is for promoting a particular type of industry it can not be assumed to be prvided for meeting the cost of any asset directly or indirectly. Hon'ble Supreme court in P J Chemicals case has enunciated this principle. 9.6 Similar issue on 43(1) has been decided by the ITAT at Vishakhapatnam in the case of Sasisri Extraction Ltd. v ACIT 307 ITR (AT) 127, holding as under: "The assessee-company engaged in the business of manufacture of edible oils did not declare the receipt of investment subsidy under a scheme floated by the Andhra Pradesh Government. It claimed depreciation under section 32 of the Income-tax Act, 1961. The Assessing Officer made addition in respect of the subsi....
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....unsel contends that the disallowance has been made by applying Rule 8D which was applicable from A.Y. 2008-09 onwards and not in this year. Therefore, the application of Rule 8D is unjustified. Besides, there is hardly any expenditure which is incurred for earning of non-taxable income i.e. dividend or incentive. AO has not shown any nexus of the expenditure incurred and the exempted income earned. Hon'ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. Vs. DCIT & Another (2010) 234 CTR (Bom) 1 has held that Rule 8D is prospective in nature and the expenditure can be disallowed only after showing identification for the exempt income. Therefore, the orders of lower authorities should be reversed on this issue. 11. Ld. DR, on the other hand, contends that ld. CIT(Appeals) was justified in issuing the enhancement notice holding that the subsidy in question received by the assessee was revenue in nature on following contentions: A. Eligibility of the assessee for subsidy: (i) It is pleaded that the subsidy in question has been wrongly received by the assessee PVR and the same could have been received by CCPL. In this behalf ld. DR referred to the affidavit in for....
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....ment, which indicate that the subsidy benefits were commercially shared between CCPL and PVR and corporate guarantee was issued in favour of CCPL to bear all consequences. Thus, assessee had entered into 2 simultaneous agreements on 1-9-2005 and gave two different versions of the revenue sharing agreement, on the date when DM, Ghaziabad granted the subsidy. All this indicates that assessee was not eligible to or had a right to claim subsidy as its income. (iii) It is alleged that U.P. Govt. does not seem to be aware of the internal arrangement between PVR and CCPL and the subsidy was obtained by a design. C. The nature of income in the hands of the assessee may be changed. (i) Ld. DR contends that since the assessee obtained the subsidy in dubious manner, to which it was not entitled, therefore, it amounts to illegal receipt in the hands of the assessee and therefore it should be taxed as a normal receipt of revenue and not subsidy. D. Books of account of the assessee. (i) Assessee is a listed company. Schedule IX of the annual report only gives a sketchy picture of collective revenue figue of Rs. 4,88,84,692/- as income by way of revenue sharing. No further break up....
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....lex is quite obviously a revenue related purpose. Further unlike in Ponni Sugar case there is no restriction on the usage of money retained by the appellant on account of relief from payment of entertainment tax. (iv) The undue stress on purpose test may otherwise also led to misundertstanding. If the purpose test is interpreted as narrowly as the assessee wishes it to be then in most of the cases it would be found to be capital because primary objective of the Govt. while floating subsidy schemes is to help setting up new industries and help investments in the industries. What is being perceived by appellant, as purpose, is in fact, just a scale of measurement of subsidy which is given in terms of revenue related benefits. The real purpose is to assist the profitability and running of the industry and the reference to investment is to measure the amount of subsidy. (v) Assessee has relied on the judgment in the case of Reliance Industries case (2010-TIOL-228 Mumbai High court and 88 ITD 273 Mumbai Special Bench). Recently an Hon'ble Supreme Court has remanded the mater back to the Hon'ble Mumbai High Court, directing to decide the questions framed. In all such cases, it has ....
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....an be claimed only when the assessee has debited the expenditure to its P&L A/c, which is not a statutory deferment of the expenditure. In this case there is no statutory deferment, therefore, on assumption the benefit of statutory deferment cannot be give. It is pleaded that this ground of the assessee deserves to be dismissed. 11.4. Apropos the ground of ESOP and ESPS , reliance is placed on the order of ld. CIT(Appeals). 11.5. Adverting to ground no. 6, about applicability of Explanation 10 to Sec. 43(1), ld. DR pleads that AO initially held the subsidy to be capital in nature and therefore, held the same to be covered by Explanation 10 to Sec. 43(1). Therefore, he reduced the claim of depreciation holding that capital subsidy in question was given by the Govt. to help the assessee in meeting the cost of assets. The ld. CIT(Appeals) since held the subsidy to be revenue in nature, therefore, the application of Explanation 10 to Sec. 43(1) becomes automatically redundant. Ld. DR pleads: (i) Assuming that the ITAT holds the subsidy to be capital in nature, then as a logical consequence, the cost of the asset should be reduced by that amount. Assessee in support has relied ....
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....that subsidy is not granted to meet the cost of any asset. 13. We have heard rival contentions and gone through the relevant material available on record. We propose to decide the various issues, arising out of this appeal in the following paragraphs: The entertainment subsidy (i) Facts have been narrated above. First we would like to deal with the argument of the ld. DR in relation to the plea that the receipt in question should not be treated as subsidy, but as an illegal receipt or regular receipt of income. We are unable to accept the contention of ld. DR as the department is not in appeal before the ITAT against the order of CIT(A), we refrain ourselves from entertaining such a plea, without there being a specific ground taken by revenue. Both the authorities have ultimately held the receipt in question to be entertainment subsidy only. AO held it to be capital receipt and ld. CIT(Appeals) by using his power of enhancement held it to be revenue in nature. In our considered view, as long as the receipt in question has been held to be entertainment subsidy in the hands of the assessee, it is of no use to devolve into some alleged discrepancies in the assessee's applicat....
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....ct that earlier the new cinema halls construction subsidy was held to be capital in nature fortifies our view. (vi) Due to onslaught of cable television, there being steep decline of cinema viewers, Govt. desired to give fresh incentive to new cinema halls albeit new modern cinema halls which are known as multiplexes. Thus, the purpose of the amended cinematograph scheme was like its earlier purpose and intended to promote the cinema industry by construction of cinema halls which have multi screens and are known as multiplexes. Looking at the purpose of the earlier scheme, in our view the purpose of new scheme, is also to promote the cinema industry by setting up of long term operational and modern multiplexes equipped with the latest technology as far as possible. Thus applying the purpose test the entertainment subsidy in question is capital in nature. (vii) The mode of payment of subsidy is not important and merely because it is linked with the collection of entertainment tax, will not be decisive to ascertain its character. This is so because the Govt. by amended scheme desired the construction of new multiplexes and further modulated the scheme in such a manner that thes....
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....al subsidies. Subsidy payment were held to be revenue in nature. The facts being distinguishable to assessee' case, ratio of Ponni Sugar & Chemicals is applicable to assessee's case. (xi) In view of direct judgments of Hon'ble Bombay High Court in M/s Chapalkar Brothers (supra); and that of Hon'ble Supreme Court judgment in the case of Ponni Sugars & Chemicals Ltd. (supra), which has approved many such judgments cited in the body of the order, we hold that the subsidy received by the assessee is capital in nature. This ground of the assessee is allowed. 13.1. Coming to the alternate submission about the applicability of Sec. 43B, since we have held the subsidy to be capital in nature, the alternate ground does not survive. 13.2. Coming to the next ground about applicability of Explanation 10 to sec. 43(1), ld. counsel has relied on Hon'ble Supreme Court judgment in the case of CIT Vs. P.J. Chemicals Ltd. (supra) and ITAT Vishakhapatnam Bench judgment in the case of Sasisri Extractions Ltd. Vs. ACIT (2008) 307 ITR (AT) 127. The scheme of the U.P. Govt. has been spelt out above. The incentive does not refer to acquire any particular asset; the object and purpose of the schem....