2016 (7) TMI 1329

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....al receipt. 2. The facts in brief are that the petitioner is a public limited company having its registered office at Surat. On October 16, 1990 the State Government declared a new industrial policy whereunder it promulgated a scheme for special incentives to certain units. 3. The petitioner got registered under the said scheme and therefore, became entitled to recover from the Government a sum of Rs. 51.15 crores by way of subsidy, which it could recover by recovering the sales tax and not paying the same to the Government. The petitioner started recovering sales tax from the assessment year 1995-96. However, the Assessing Officer, respondent No. 2 herein, treated it as revenue receipt. Being aggrieved by the same, the petitioner mov....

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....ision of the Bombay High Court in the case of CIT v. Reliance Industries Ltd. [2011] 339 ITR 632 (Bom) wherein, it has been held that where the object of subsidy in the form of sales tax incentive was to set up a new unit in a backward area to generate employment, then such receipt was a capital receipt. 4.2 Reliance was also placed on a decision of this court in the case of Deputy CIT v. Inox Leisure Ltd. [2013] 351 ITR 314 (Guj) wherein, it has been held that the character of receipt of a subsidy in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is granted. In other words, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is im....

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....the State Government. The petitioner had set up the unit in an area, which made it entitled to receive 75 per cent. of the capital investment over a period of 8 years from the date of commencement of commercial production. It transpires that the petitioner was issued the permanent registration number, which presupposes that the new unit had commenced its commercial production and had completed its project. The petitioner was also issued the eligibility certificate, which was amended from time to time and lastly, by amendment dated April 12, 1999, the sales tax exemption was fixed at Rs. 50.07 crores being 75 per cent. thereof. The petitioner, therefore, started to retain sales tax from the assessment year 1995-96 onwards. 7. On an analys....