TaxTMI 
TaxTMI 
2017 (2) TMI 1456
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....entral-I, Kolkata has erred in not appreciating the facts that the subsidy was paid to assist the assessee in carrying on its trade or business and hence is in the nature of a revenue receipt. 4. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in accepting the wrong interpretation of the incentives/subsidies given by the assessee. 5. That on the facts and in the circumstances of the case, the order passed by the Ld. CIT(A), Central-I, Kolkata is not only erroneous but prejudicial to law. 6. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearings." 3. As can be seen from the grounds of appeal the only question that arises for consideration in this appeal is as to whether a sum of Rs. 7,48,27,500/- received by the assessee as Industrial Promotion Assistance under the West Bengal Incentive Scheme 2000 for establishing the industry in the state of West Bengal which is disbursable by way of sales tax paid is a capital receipt not chargeable to tax. The AO was of the view that the aforesaid receipt was revenue in nature and cha....
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....l by the assessee the CIT(A) held that the receipt in question was a capital receipt not chargeable to tax. In Coming to the aforesaid conclusion the CIT(A) apart from relying on several judicial pronouncements placed reliance on the decision of Hon'ble Calcutta High Court in the case of CIT vs Rasoi Ltd. 335 ITR 438 (Cal). In the aforesaid decision the Hon'ble Calcutta High Court held that the sales tax subsidy received by the assessee from the Government of West Bengal was a capital receipt not chargeable to tax. The Hon'ble Calcutta High Court held that the subsidy was a capital receipt not chargeable to tax. The CIT(A) following the aforesaid decision was of the view that the subsidy in question was capital subsidy not chargeable to tax. Aggrieved by the order of CIT(A) the revenue has preferred the present appeal before the Tribunal. 5. We have heard the submissions of the ld. Counsel for the assessee and the ld. DR. It was not disputed before us that identical subsidy received by an assessee was a subject matter of consideration by the Hon'ble ITAT 'C 'Bench in the case of DCIT vs M/s. Budge Budge Refineries Ltd in ITA No.1552/Kol/2010. This Tribunal in its order dated 14.....
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....ate industrial development of the state and the incentive was given for setting up of industries in West Bengal and for the purpose of determining the amount of subsidy to be given, sales tax / VAT paid by the assessee on its finished products after setting up of the unit was taken as the basis. We find that the 'Purpose Test' is to be seen while ascertaining the taxability of subsidy in the facts and circumstances of the case. The Purpose Test clearly proves that the subsidy herein is contemplated for setting up of the industry / eligible unit for promotion of industries in the State of West Bengal. The quantification of subsidy alone is based on reimbursement of 75% of sales tax / VAT actually paid by the said eligible unit after commencement of the project. We hold that the quantification thereon would be irrelevant for taxability of the same going by the objects of the incentive scheme 2000 of West Bengal Government. We also find that the Hon'ble Apex Court in the case of CIT vs Ponni Sugars & Chemicals Ltd & Ors reported in (200 306 ITR 392 (SC) had held as under:- "The character of the receipt of a subsidy in the hands of the assessee under a scheme has t....
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.... to run the business more profitably 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 the existing unit, the receipt of the subsidy is on capital account. It is the quality of the payment that is decisive of the character of the payment and not the method of the payment or its measure. Held, dismissing the appeal, that the object of the subsidy was the expansion of business capacities, modernization, and improving marketing capabilities and thus, those were for assistance on capital account. Merely because the amount of subsidy was equivalent to 90 per cent. of the sales tax paid by the beneficiary that did not imply that it was in the form of refund of sales tax paid. The subsidy was a capital receipt. " 7.3. It is not in dispute that the West Bengal Industrial Development Corporation Ltd had acknowledged the fact of assessee setting up a new unit for the production of Edible Oil Refinery Plant and Captive Power Generation Unit at Budge Budge, 24 Parganas, Burdwan District covered under Eligibility Certificate stated supra (enclosed in paper b....
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....2003) The department has been relying on the Hon'ble Supreme Court decision in the case of Sahney Steel and Press Works Ltd.(supra). The Calcutta High Court in the case of CIT vs. Chindwara Fuels (supra) has followed the Apex Court decision. This decision has also been followed by Hon'ble ITAT, Kolkata in the case of East India Pharmaceuticals Works Ltd. (supra). The A.O in his assessment order simply quoted the case laws and held that WBIPA receipt is a capital receipt. The A.O has not analysed the facts nor compared the facts with the facts of the Supreme Court case (Sahney Steel & Press Works Ltd. (supra). On the other hand the Hon'ble ITAT, Kolkata has dealt this issue in a number of cases and held that the subsidy/assistance received from West Bengal Government is a capital receipt. Before I proceed to discuss the ITAT order which are in favour of the appellant, I would first prefer to examine the facts of Sahney Steel & Press Work Ltd. (supra) wherein the Apex Court treated the subsidy as 'revenue' in nature. The Apex Court deeply examined the salient features of the scheme formulated by the Andhra Pradesh Government. It noticed the following cond....
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....notification No. 1460 - F.Y. dated 27th May 1994 recites the Resolution of the Govt. of West Bengal, Starting as follows: "Whereas certain industries in the State have been passing through an acute financial crisis and it has been considered necessary to extend financial assistance to tide over such crisis for promotion of such industries, it has been decided in the public interest to formulate a scheme to allow financial assistance to the manufacturing units in West Bengal of such. " It is clear from the above preamble to the Resolution that the scheme for allowing assistance to industries is to help them to tide over the financial crisis faced by the industries and for promotion of the industries themselves. The Scheme of the Govt. of West Bengal does not relate to new industries alone and rather allows benefit under the scheme to new as well as existing units pertaining to certain "industries ". The purpose of the Scheme is definitely to remote the specified industries and to help the units under such industries to tide over the financial crisis being faced by the industries as such. There is nothing in the scheme which could be considered to help the industrie....
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....sed by the Tribunal. We have found that the Tribunal has extensively dealt with the matter including the facts, material and evidence placed before the Tribunal or adjudication. We do not find any reason to interfere with the order so passed by the learned Tribunal nor the order so passed by the learned Tribunal suffers from any legal infirmity nor we find any substantial question of law is involved in the appeal ." 6.4 Decision: The facts of the case and the issue involved in the present case is similar to facts of the cases decided by the jurisdictional Kolkata Tribunal and High Court. l find in the later years (A. Y. 2001-02) in the appellant's own case my predecessor following the jurisdictional ITAT decisions [Rasoi Ltd., Mendine Pharm. Ltd. (supra)} held the WB1PA as capital receipt. I am also of the view that the sole purpose behind the grant of assistance is to tide over the financial crisis and promotion of industries and that both these activities are related to capital field and cannot be linked up with day to day operations of the appellant in any manner. Respectfully following the jurisdictional Kolkata ITAT and High Court decisions discussed earl....