2014 (5) TMI 1087

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....down by the Tribunal in assessee's own case in earlier years. 4. The ld. DR for the revenue placed reliance on the orders of the authorities below. 5. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to the treatment of the sales tax subsidy. During the year under consideration, the assessee had received sales tax subsidy of Rs. 12,58,32,695/-which was declared as capital receipts in the computation of income. The Assessing Officer show caused the assessee as to why the said receipts should not be treated as revenue receipts in the hands of the assessee in view of the ratio laid down by the jurisdictional High Court in CIT Vs Abhishek Industries Ltd. 286 ITR 1 (P&H). Reply of the assessee before the Assessing Officer is incorporated at pages 2 to 4 of the assessment order. The Assessing Officer, thereafter has gone through the claims of subsidy granted by the Government of Gujrat and had held the same to be revenue receipts taxable in the hands of the assessee in view of the ratio laid down by the Hon'ble Punjab & Haryana High Court in CIT Vs Abhishek Industries Ltd. (supra). 6. We find that the issu....

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....eability of sales tax subsidy was decided against the assessee in the preceding years following the ratio laid down in CIT Vs. Abhishek Industries (supra). However it was pointed out by the learned A.R. for the assessee that the legal position is uncertain and there are decisions of other High Courts and Jurisdictional Punjab & Haryana High Court under which the sales tax subsidy has been held to be capital receipts. Our attention was drawn to the scheme dated 11.9.1995 placed at pages 56 to 77 of the Paper Book and it was pointed out by the learned A.R. for the assessee that the subsidy was given for establishing new premier/prestigious units in the State of Gujarat. Clause 5(ii,(iv) and (x) lays down criteria of the industry which qualifies for the said scheme It was further pointed out by the learned A.R. for the assessee that the sales tax subsidy available to a unit established in Gujarat varies on account of the amount of investment and also the area where it was located. Certain conditions of the said scheme as per the learned A.R. for the assessee were not there in any other scheme. One such condition was wherein the assessee had to contribute 2% of the sales tax incentives....

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.... existing industry, it was capital in nature and it was not taxable in the hands of the assessee. The learned A.R. for the assessee pointed out that the scheme before the Hon'ble Gujarat High Court was for the modernization of existing unit. 7. Further contention of the learned A.R. for the assessee was that under the scheme formulated by the Government of Gujarat, there was no outflow of Government and the scheme was formulated to promote industrial growth in the State of Gujarat. The basic idea was to establish units in the State in order to provide employment to the local person for which the Government formulated the scheme under which the sales tax was collected by the assessee, which was not deposited in the accounts of the Government. This incentive was given after start of the unit but the same could not be stated to be for running the unit, as per the learned counsel. The learned A.R. for the assessee placed reliance on the ratio laid down by the Hon'ble Supreme Court in Ponni Sugars & Chemicals Ltd. Vs. CIT [306 ITR 392 (SC)] and pointed out that the purpose of the scheme was a policy enactment for the State and in order to determine the nature of subsidy grant....

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.... to be capital receipt. The scheme of the Government of Haryana was considered in DCIT Vs. Maruti Suzuki India Ltd. in ITA No.2188/Del/2010 and the Tribunal had held the receipt to be capital receipt. Further reliance was placed on Napco Industries Ltd. Vs. CIT (supra). 8. The learned A.R. for the assessee concluded by stating that the Tribunal in the orders relating to the earlier years had merely followed the ratio laid down by the Hon'ble Punjab & Haryana High Court in CIT Vs. Abhishek Industries (supra) and had not considered the factum of the scheme of State of Gujarat. The learned A.R. for the assessee pointed out that ground No.3 raised was purely without prejudice to the ground No.2 raised by the assessee that the subsidy received by the assessee arose in the course of business and the same was to be held as business income in the hands of the assessee. Reliance was placed on the ratio laid down by the Chandigarh Bench of the Tribunal in the case of Abhishek Industries Vs. JCIT in ITA No.321/Chd/2009 relating to assessment year 2004-05 - order dated 27.9.2011. 9. The learned D.R. for the Revenue pointed out that the issue raised vide ground No.2 in the present app....

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....& 2004-05 before the Hon'ble Punjab & Haryana High Court were identical to the issue raised in the assessment year 2005-06. 11. The contention of the learned A.R. for the assessee now before us, however, is that the issue is covered in favour of the assessee in view of the ratio laid down by the Hon'ble Supreme Court in Ponni Sugars & Chemicals Ltd. Vs. CIT (supra) with regard to the taxability of incentives bestowed to new/extended sugar factory. It was pointed out by the learned A.R. for the assessee that the Hon'ble Apex Court in Ponni Sugars & Chemicals Ltd. Vs. CIT (supra) following the earlier decision of the Hon'ble Supreme Court in Sahney Steel & Press Works Ltd. (supra) had held that the subsidy received by the assessee was in the nature of capital receipt, since the object behind the same was setting up of new unit/expansion of existing business. Further reliance was placed on the decision of the Calcutta High Court in CIT Vs. Rasoi Ltd. (supra) pointing out that the taxability of the receipts given by way of subsidy, essentially boils down to the purpose for which the subsidy was granted. The contention of the assessee was that the purpose of granting ....