TaxTMI 
TaxTMI 
2010 (11) TMI 1096
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....he sales tax remission of the said amount to be capital in nature and has accordingly credited the same to the Capital Reserve of the company. The assessee explained that the said remission of sales tax has been granted by the Govt. of West Bengal under West Bengal Incentive Scheme for promotion of the industrialization of the backward areas of the State. The incentives were given for setting up or expansion of the existing units and, therefore, in capital field and hence not includible as revenue receipt/income. In support of its claim, the assessee relied on several judicial pronouncements as listed on page 2 of the assessment order. It was further stated that the decision of Hon'ble Supreme Court in the case of Sahney Steel & Press Works Ltd. Vs. CIT 228 ITR 253 is not applicable to the facts and circumstances of the assessee's case inasmuch as the company has not received any subsidy and only there has been remission of the liability to pay sales tax. The Assessing Officer explaining the meaning of "New Unit" in the scheme has held that the assessee's claim that the purpose for giving his incentive is for "setting up or expansion of the existing units", was a gross misinterpret....
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....1001/K/2006 for AYs 1998-99 to 2003-04 dated 4.8.2006. He further contended that the decision of Hon'ble Apex Court in the case of Sahney Steel & Press Works Ltd. [228 I.T.R. 253 (SC)] is in favour of the assessee, because in that case the Hon'ble Apex Court distinguished between the subsidy given for running of the industry and subsidy given to the assessee to set up a business. When the incentive is given as a helping hand for running of the industry in a more profitable manner, then such incentive is to be treated as revenue receipt while when the incentive is given for setting up of the industry, the same is to be treated as capital receipt. In the case of the assessee, the incentive was given for setting up of the industry in a specified area. The fact that incentive was granted even prior to the commencement of the production, clearly proves that the incentive was for setting up of the industry and not by way of helping hand for running the industry in a more profitable manner. He further stated that the Hon'ble jurisdictional High Court in the case of C.I.T. vs. Balrampur Chini Mills Ltd. [238 I.T.R. 445] has considered the decision of Hon'ble Apex Court in the case of Sahne....
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....sion of the Hon'ble Apex Court and held as under: "That on a careful reading of the order of the Tribunal in the case of Reliance Industries Ltd. it was clear that the ratio of the judgment of the Supreme Court in Sahney Steel and Press Works Ltd. v. CIT [1997] 228 ITR 253 had been correctly interpreted and applied. The Supreme Court had laid down the following principles : (i)The character of the subsidy (whether revenue or capital) in the hands of the recipient will have to be determined by having regard to the purpose for which the subsidy is given; (ii) If the subsidy is given as assistance to the assessee in the carrying on of his trade or business, it is a trading receipt; (iii) In determining the character of the subsidy, the source of the fund is immaterial. The Scheme framed by the Government of Maharashtra in 1979 and formulated by its resolution dated January 5, 1980, had been analysed in detail by the Tribunal in its order in Reliance Industries Ltd. for the assessment year 1985-86. The Tribunal had come to the conclusion that the thrust of the scheme was that the assessee would become entitled for sales tax incentive even before the commencement of the production, w....
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....icate within one month from the date of registration with this Directorate. (3) This registration certificate is valid for a period of two years from the date of registration and may be revalidated subject to the conditions stipulated in the scheme. (4) You should furnish during the validity of this certificate - (a) Progress reports of the implementation of the project, physical targets achieved and new fixed capital investment made for the approved project in the enclosed form. (b) Date of commencement of power supply for production purposes. (c) Date of starting commercial production. (d) Total number and date of appointment of new/additional factory workers in the unit and (e) Yearly report on the working and performance of the unit." 4.4. From the above it is evident that the assessee became entitled to incentive subject to fulfillment of certain conditions. Registration certificate was issued by Directorate of Industries on 8.8.1995 which was even prior to the commencement of the setting up of the project. The assessee applied to the West Bengal Industrial Development Corpn. for allotment of a land vide its letter dated 1.9.1995. Thus, even the applica....
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....he commercial production of the unit for a period 7 (seven) years as per para 14.2.1 and 14.1.5 of the scheme subject to the condition that the said exemption will be withdrawn on the unit reaching the ceiling presented for remission of sales due on finished goods as stipulated. c. State Capital Investment Subsidy : State Capital Investment @ 20% of the fixed capital investment made/to be made in the approved project subject to a limit or ₹ 20 lakh as per para 12 of the scheme. d. Waiver of Electricity Duty : Waiver of electricity duty on the electricity consumed for production purposes for a period of 5 years from the date of commercial production of the unit as per para 11 of the scheme." 4.6. From the above certificate it is evident that subsidy is limited to 85% of the gross value of the fixed capital asset or ₹ 50 crores whichever is less. Thus, a ceiling has been imposed on the subsidy based on the percentage of the investment in fixed assets. Admittedly, commercial production was started much after the issue of eligibility certificate by the Directorate of Industries and West Bengal Industrial Development Corpn. Ltd. In the case of Reliance Industries Lt....
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....quota of sugar is capital receive or revenue receipt. Their Lordships relying upon the decision of Hon'ble Apex Court in the case of Sahney Steel & Press Works Ltd. (supra) held the receipt to be capital receipt. The relevant finding in this regard is at page-449 of the Report, which reads as under :- "Thus their Lordships made it clear that whether it is a revenue receipt or capital receipt, it is to be seen for which purpose it has been given to the assessee? If it is given for running the day-to-day business, that is a revenue receipt. If it is given to meet the capital cost of asset, then it is a capital receipt. The admitted fact in this case is that the incentive has been received by the assessee for payment of the loan, which was taken for expansion of plant and machinery - a capital asset. Therefore, in view of the decision of their Lordships, the receipt is a capital receipt." 5.1. From the above it is evident that whether the receipt is revenue receipt or capital receipt would depend upon the purpose for which the incentive is given. If it is given for running day-to-day business, it would be a revenue receipt. But if it is given to meet the capital cost of asset, t....