TaxTMI 
TaxTMI 
2020 (6) TMI 100
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.....09.2011 declaring total income of Rs. 2,49,72,665/- and claimed deduction in the computation of taxable income treating it as capital receipt. Assessment was made u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the "Act") on 22.03.2013 at assessed income of Rs. 2,51,90,665/-. Thereafter the assessment was revised by Ld. PCIT-I, Kolkata and consequently he gave direction to the A. O. vide order u/s. 263 of the Act dated 19.03.2015 to pass a fresh assessment order after considering his observation. As per direction of Ld. PCIT -I. Kolkata the A.O passed the order u/s. 263/143(3) on 12.11.2015 assessing the income at Rs. 4,50,78,115/- by making addition of Rs. 1,96,77,00/-the subsidy from the Govt. of W.B. & unpaid liability of Gratuity of Rs. 2. 10,450/-. During the course of re-assessment the AO found that the assessee credited in P&L Account an amount of Rs. 2,33,51,560/- received from West Bengal Industrial Development Corporation (in short 'WBDIC') as Industrial Promotion Assistance ( in short, 'IPA'). According to AO, in the original return the assessee treated it as revenue receipt but in the revised return the assessee changed tact and claimed deduction....
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.... addition as made by AO by holding that the Industrial Promotion Assistance received by the assessee is to be treated as a capital receipt. Aggrieved, revenue has preferred this appeal before us. 4. We have heard both the parties and perused the records. We note that the assessee company received Industrial Promotion Assistance ( IPA) amounting to Rs. 2,33,51,560/- from the Govt. of West Bengal under West Bengal Incentive Scheme 2000(WBIS-2000). In the assessment order passed pursuant to the interference by the ld. PCIT, the AO noted after verification from the website of West Bengal Industrial Development Corporation (WBIDC) that the assessee received the incentive from WBIDC (West Bengal Industrial Development Corporation Ltd) under the category of Mega Projects of WBIS-2000 for the F.Ys 2007-08, 2008-09, 2009-10 & 2010-11. The AO noted that the assessee has credited in its P & L account only Rs. 233.52 Lakhs from WBIDC on 22-09-2009 under WBIS-2000, out of which sum of Rs. 39.35 Lakhs was given under SCIS (State Capital Investment Scheme) and remaining Rs. 196.77 Lakhs was given as IPA (Industrial Promotion Assistance). Thus, according to the AO only amount of Rs. 39.35 lakhs....
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....lowing the appeal of assessee by treating the amount of Rs. 1,96,77,000/- as capital receipt in nature. Therefore, he does not want us to interfere with the impugned order of the learned CIT(A). 7. After hearing both the parties and after carefully going through the records, we note that the assessee company had received an amount of Rs. 1,96,77,000/- from Govt. of West Bengal under the West Bengal Incentive Scheme 2000 (WBIS-2000) for establishing industry in the state of West Bengal particularly in Bankura District. The State Government has approved a package of Incentive for the assessee (M/s. Sova Ispat Ltd.) vide letter no. PPI/MP/0761/2003-14/2000(12) dt. 24.09.2003 issued by the Managing Director, WBIDC approving the following package: "'The State Government has approved the following package for SovaIspat Ltd, bankura. The unit is proposed to be set up with an investment of Rs. 279 crore for the purpose of setting up of a unit for manufacturing of Sponge Iron, Rolled Products, Ferro Alloys etc in West Bengal. Package: a) Industrial Promotion Assistance equivalent to upto @75% of the Sales tax paid in previous year on sales of financial goods subj....
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.... for setting up new industrial project/unit of large, medium and small scale in the State of West Bengal. The meaning of unit as per the definition given in the scheme is that a unit in the large/medium/small scale sector having registration certificate issued by the Directorate of Industries and Eligibility Certificate by the W.B.I.D.C.L (West Bengal Industrial Development Corporation Ltd. In the case of assessee, the assessee has set up a new unit in the Bankura District of West Bengal area marked as Group 'C ' in the scheme (supra). The assessee has been classified as a Mega Project. Mega Project is referred in clause 18 (page 13) of West Bengal Incentive Scheme, 2000, which reads as under:- "18. Mega Projects: Notwithstanding anything contained anywhere in the scheme the State Govt. may consider granting special package of incentive under this scheme to a Mega Project having due regard to the characteristics of the project, case by case basis, in the following areas: i) Size of investment ii) Special nature of the industry iii) Employment potentiality, iv) Down-stream effect of the industry, v) Ancillarisation effect of t....
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....f Revenue Appeal for Asst Year 2008-09 Ground No. 5 of Assessee Appeal for Asst Year 2008-09 Ground No. 3 of Revenue Appeal for Asst Year 2009-10 Ground No. 5 of Assessee Appeal for Asst Year 2009-10 The facts of Asst Year 2008-09 are taken up for adjudication and the decision rendered thereon would apply with equal force to Asst Year 2009-10 also except with variance in figures. The brief facts of this issue is that the ld AO observed that assessee had received Industrial Promotion Assistance provided to one of its unit at Durgapur under West Bengal Incentive Scheme, 2000 to the tune of Rs. 2,55,27,120/- which was claimed by it as a capital receipt by way of a separate letter dated 8.12.2010 during assessment proceedings. It was submitted that the 2000 Scheme was formulated by the West Bengal State Government for the promotion of industry in the State. It was applicable in respect of units to be set up and also to expansion projects of existing units having investment in fixed assets. Industrial projects in the large and medium sectors were eligible for the incentives under the scheme provided such projects were covered by a detailed fe....
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....ssessment proceedings, in view of the judgment of the Hon 'ble Supreme Court in Goetze (India) Ltd. v CIT, (2006) 284 ITR 323 (SC), the claim cannot be allowed. 5.3 It is submitted that the decision of the Hon 'ble Supreme Court in Goetze (India) 's case (supra) has no application in the facts and circumstances of the instant case. In that case, the assessee sought to make a claim for deduction by a letter without revising the return. It is submitted that the instant case is not one of any claim for deduction. The assessee's contention is that industrial promotion assistance of Rs. 4, 01,64,232/- is a capital receipt and cannot form part of the taxable income. It is settled law that the subject cannot be taxed unless the charging provision clearly imposes the obligation. Even if an assessee includes a capital receipt in his return, that would not preclude him from claiming that such receipt is not taxable. There cannot be any estoppel against the statute. If in law an item is not taxable, no amount of admission or misapprehension can make it taxable. It is always open to an assessee to take the plea that the figure though shown in the return is not....
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.... (i) size of investment; (ii) special nature of industry; (iii) employment potentiality; (iv) down-stream effect of industry; (v) ancillarisation effect of the industry; (vi) export potentiality. 5.6 The assessee's unit fell under Group B, its expansion project qualified as a Mega Project and it was eligible for the incentives under the 2000 Scheme. The expansion undertaken by the assessee involved increase in manufacturing capacity of cement from 0.6 million tonnes per annum to 1.6 million tonnes per annum and was practically a new unit. The assessee was duly registered under the 2000 Scheme with the Directorate of Industries, West Bengal. In the registration certificate dated April 29, 2005, it was stipulated that the assessee would be eligible or industrial promotion assistance only after the total investment crossed the limit of Rs. 25 crores and on starting commercial production. 5.7 WBIDC issued an eligibility certificate dated August 30, 2005 to the assessee for incentives under the 2000 Scheme as a Mega Project. The said certificate recorded the fact that the assessee had made arrangements for financing th....
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....n case of failure of payment of any amount of installment of loans sanctioned and disbursed under the 2000 Scheme by due date, the entire loan or Ithe balance of the entire loan, shall be deemed to be due on the date of default and action may be taken for recovery thereof at once. " 5.9 The amount of industrial promotion assistance to which the assessee was entitled was quantified at 75% of the sales tax paid in the preceding year and the amount of assistance was to be adjusted against the sales tax liability of the year of claim. The period for which such assistance was available was twelve years if commercial production commenced within June 30, 2005 and ten years if commercial production commenced between July 1, 2005 to December 31, 2005. The assessee commenced commercial production in December, 2005 and as such was entitled to the assistance for 10 years. It is submitted that it is evident from the provisions of the 2000 scheme and the registration and eligibility certificate granted to the assessee that the object for which the assistance was granted was clearly to enable the setting up of a new unit or expansion of an existing unit and the assistance was on capital ....
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....ining the entire West Bengal Incentive Scheme 2000 and eligibility certificate issued by the competent authority approving the expansion of existing unit thereby approving the fact of assessee falling under the category of 'Mega Unit' under the said scheme. We find that Subsidy could be reduced from the cost only if it is found that the cost for acquiring the asset was directly or indirectly met out of the subsidy. In order to apply the proviso, it is necessary to show that the subsidy had been directly or indirectly used to acquire the asset though it may not be possible to exactly quantify the amount directly or indirectly used for acquiring the asset. For the purpose of applying the proviso, also it has to be found that the asset was acquired by directly or indirectly using the subsidy. It is apparent from the provisions of the 2000 Scheme and the certificate of registration and eligibility certificate that the assistance was to be made ITA No.available after the commencement of commercial production without any financial cap and was to be adjusted against the sales tax liability of the year of claim. The industrial promotion assistance was clearly not used dire....
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....s Scheme 1998 for encouragement of setting up of industrial project or expansion of existing industrial projects. It is also a fact that the maximum limit of the subsidy was restricted with reference to the value of fixed capital investment in land, building, plant & machinery but no part of the subsidiary was specifically intended to subsidize the cost of the any fixed assets, therefore, it cannot be said that subsidy was to meet a portion of cost of asset. According to us, assessee has rightly not reduced the amount of subsidy received from the actual cost/WDV of the fixed assets while claiming depreciation. It is also a fact that revenue during scrutiny assessments of the assessee for AY s 2002-03 to 2006-07 added the subsidy amount as revenue receipt but Tribunal has considered the receipt as 'capital', accepting the contention of the assessee. Even Hon'ble Supreme Court in the case of PJ. Chemicals. Ltd. (supra) has considered this issue and held that where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determinin....
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....acquiring an asset. This is again a question of fact. The relatable subsidy to such asset can be reduced from the cost only if it is found that the cost for acquiring that asset was directly or indirectly met out of the subsidy. Likewise in the proviso, it is necessary to show that the subsidy has beendirectly or indirectly used to acquire an asset but it is not possible to exactly quantify the amount directly or indirectly used for acquiring the asset. Here also, a finding of fact is necessary that an asset was acquired by directly or indirectly using the subsidy. The above Explanation and the proviso thereto do not dilute the finding of the Hon'ble Supreme Court in the case of P. J. Chemicals Ltd.(supra) that asset-wise subsidy alone can be reduced from the actual cost. The above Explanation and the proviso therein to explain the law. They are not bringing any new law different from the law considered by Hon'ble Supreme Court in the above cases. 9. In view of the above facts and circumstances of the case and legal position explained by Hon'ble Supreme Court in the case of P.J. Chemicals Ltd. (supra), we are of the vie that subsidy receipt sh....
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....ting up of large/medium/small scale eligible unit in the places prescribed at group B and C in the scheme WBIS 2000. Since the assessee fulfills the eligibility conditions prescribed by the Scheme 2000 it was entitled to industrial Promotion Assistance equivalent up to @75% of the sales tax paid in previous year which sales of finished goods subject to a maximum of 100% of the fixed capital investment for a maximum period of 15 years. Accordingly, the assessee in the year under consideration has received an amount of Rs. 1,96,77,000/- from the West Bengal under the WBIS 200 scheme. Since the object of the financial assistance as per the subsidy scheme was to be enable the assessee to set up a new unit in the areas as specified group B or C as the WBIS 2000, we are of the opinion that the subsidy was on capital account. The AO erred in relying on the decision of the Hon'ble supreme Court in Sahaney Steel (supra) wherein the facts were different and distinguishable. In that case (Sahaney Steel) the Tribunal had disallowed the claim of the assessee and the Hon'ble Supreme court in Sahaney Steel's case after analysis of the scheme therein held that the subsidy given was on revenue acco....