TaxTMI 
TaxTMI 
2021 (2) TMI 862
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.... (2) Whether on the facts and in the circumstances of the case, the Ld. CIT(A), Indore was justified in deleting the aforesaid addition without appreciating the fact that the capital subsidy is altogether a separate subsidy given by MP Govt. and hence, the subsidy under question cannot be claimed as capital in nature. (3) Whether on the facts and in the circumstances of the case, the Ld. CIT(A, Indore was justified in deleting the aforesaid addition while ignoring the fact that VAT and ST assistance are reimbursement after adjusting input tax rebate on the amount of value added tax and central sales tax and they have no nexus or proximity with cost of investment or the cost of expansion of plant. (4) The appellant reserves the right to add, amend or alter the ground of appeal on or before the date the appeal is finally heard for disposal. (5) The appellant craves leave to add to or deduct from or otherwise amend the above grounds of appeal. 3. The brief facts of the case as culled out from the records are that the assessee is a private limited company engaged in business of manufacturing of leaf spring & assemblies and also engaged in the busines....
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....hney Steel & Press works Ltd. Case (supra) the Court had categorically stated that the scheme in hand was an incentive scheme and it was not a scheme for setting up the industries. In- the said case, the salient features of the scheme were examined and it was noticed that the scheme formulated by the Government of Andhra Pradesh was admissible only after the commencement of production. The subsidy in the case of the assessee is also an incentive subsidy as the credit of V A T subsidy is directly linked with the sale of manufacturing goods. (ix) The Govt. of MP has also been granting capital/investment subsidy & the V A T subsidy is different from that. (explained in subsequent paras) (x) The assessee also placed reliance on the judgment of jurisdictional High Court in the case of (1986) Taxman 4 (Madhya Pradesh), High court of Madhya Pradesh, Commissioner of Income tax Vs Dusad Industries, Misc Civil Case No. 98 of 1984, November 4, 1985. On perusal of decision in that case it is observed that in that case of refund of sales tax was subject to certain terms and conditions. However, in the case of assessee the sales tax or VAT subsidy is not conditional. (....
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.... of the time and manner of payment. 1. Chaphalkar Brothers (2013) 33 taxmann.com 431 (Bombay High Court) 2. CIT vs. Chaphalkar Brothers (2018) 400 ITR 279 (SC). 3. CIT vs. Rasoi Limited (2011) 335 ITR 438 (Cal) 4. Senairam Doongarmall v. CIT AIR 1961 SC 1579 (SC). 5. Shree Balaji Alloys v. ITO (2010) 127 TTJ 129 (ASR). 6. Pr. CIT vs. Shyam Steel Industries Ltd. (2018) 93 Taxmann.com 495 8. Further Ld. Counsel for the assessee placed reliance on the finding of Ld. CIT(A) who was decided the issue in favour of the assessee, placing reliance on the various decisions and judgments referred in the impugned order. 9. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments referred and relied by the Ld. counsel for the assessee. Though, the revenue has raised 5 grounds of appeal but the sole grievance is with regard to the finding of Ld. CIT(A) deleting the addition of Rs. 2,57,07,188/- made by the assessing officer treating the Sales Tax Subsidy as revenue in nature. This case was first heard on 06.10.2020. Thereafter case was re-fixed for certain clarifications and for f....
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....eu of investment made in the backward area for establishing business. 10. Ld. Assessing officer on the basis of his observation which were relied by Ld. DR mentioned in the preceding paras was not convinced with this claim and treated it as a revenue receipts however, when the order came up before First Appellate Authority, he in view of settled judicial precedence and in the light of facts of the instant case deleted the addition observing as follows: 4.1 Ground No. 1: Through this ground of appeal the appellant has challenged the addition of Rs. 2,57,07,188/- on account of Revenue Subsidy claimed as Capital Subsidy. The appellant in the revised return treated the subsidy received from the Madhya Pradesh Government under Industrial Promotion Policy-2004 of Rs. 2,57,07,188/- as capital receipt which was inadvertently included as revenue receipt in the return filed u/s. 139(1) of the Income Tax Act 1961. The Government granted the subsidy to achieve the objects of acceleration of Industrial Development and Generation of Employment. 4.1.2 The object of the scheme was not to supplement the profits made by industries. The subsidies given under the said scheme by th....
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....is held that sales tax subsidy given under dispersal of Industries scheme as incentive to set up industries in areas other than Mumbai, Pune and Thane is capital receipt. 5. Delhi Tribunal in case of Dy. CIT v. Indo Rama Textiles Ltd. (2012) 53 SOT 515 (Delhi)(Trib.) Sale tax subsidy from Government of Maharashtra under Sales Tax Subsidy Scheme of 1993 was held to be capital receipt not liable to tax. 6. Dy. CIT v. Bhushan Ltd. (2015) 155 ITD 750 (Chand.)(Trib.) it is held that Sales tax subsidy Industrial unit covered under West Bengal Incentive Scheme, 1999, sales tax subsidy received from Government was capital receipt and not liable to tax. 7. The Bombay High Court in case of CIT vs. Kirloskar Oil Engines Ltd. (2014) 364 ITR 88.(Bom.)(HC) wherein subsidy received to set up a new unit was held to be capital in nature. In the present case, it can be observed from the Scheme that the objectives for granting incentives to increase employment to establish new industrial units and enhance new capital in the State and not with a view to assist the companies in carrying out their business operation. 4.1.4 The fact of the above cases squarely....
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....18] 100 taxmann.com 159 (Delhi - Trib.) 3. Bhushal Steel vs. CIT(SC) 4. PCIT vs. Welspun Steel Ltd. [2019] 103 taxmann.com 436 (Bombay) 5. Johnson Matthey India (P.) Ltd. vs. DCIT [2018] 91 taxmann.com 200 (Delhi - Trib.) 6. Universal Cables Ltd. vs. DCIT [2015] 57 taxmann.com 95 (Kolkata - Trib.) 14. It will be worthwhile to reproduce the finding of ITAT, Kolkata Bench in the case of Universal Cables Ltd. vs. DCIT [2015] 57 taxmann.com 95 (Kolkata - Trib.) wherein also similar type of subsidy given by the State Government of M.P. for the promotion of industry in the state was held to be capital in nature observing as follows: 16. We have carefully considered the observations of the Assessing Officer in the assessment order and submissions of the assessee. The subsidy was received in terms of Madhya Pradesh Industrial Investment Promotion Assistance Scheme, 2004 in respect of Technological up-gradation - cum - Expansion project for manufacture of XLPE underground power cables using Vertical Continuous Vulcanization Technology in India. The scheme has been framed with an objective to increase employment and establishing new industrial unit by enha....
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....nt Promotion Assistance:-,. An Industrial Investment Promotion Assistance, equivalent to 50% amount of Commercial Tax and Central Sales Tax (excluding Commercial Tax on the purchase of raw material) deposited by the unit in the preceding year would be given to the industry; having fixed capital investment between Rs. 1.00 crore to Rs. 10 crores. Provision for this purpose would be made in the departmental budget. This would be available for 3 years in advanced districts and for 5 years in the backward districts. Assistance will not be more than fixed capital investment. An industrial Investment Promotion Assistance equivalent to 75% amount of Commercial Tax and Central Sales Tax (excluding Commercial Tax on the purchase of raw material) deposited by the unit in the preceding year would be given to the industry having fixed capital investment more than Rs. 10.00 crores. Provision for this purpose would be made in the departmental budget. The assistance would be available as per the following chart:- S. No. Category of District Minimum eligible fixed Duration of Assistance capital investment 1. Advanced district Rs. 25 crore 3 Years 2. Backward District A R....
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....ct of the Company was of special importance and located in a backward district of category 'A', the government accorded the assistance for a period of 7 years instead of normal eligibility period of 5 years. However the maximum ceiling of the assistance was equivalent to fixed capital investment only. As per the Scheme, the amount of assistance which is to be claimed on yearly basis is determined @ 75% of total Commercial tax (MP VAT + CST) deposited (net of Input Tax rebate) in respect of sale of products produced using VCV technology on an yearly basis during the eligibility period. In view of these facts assessee claimed a sum of Rs. 2,61,93,863/- being 75% of the tax deposited (Net of Input tax Rebate) for the year under consideration in respect of sale of XLPE Underground Power Cables using VCV technology as capital receipt for the reason that the overall limit of exemption is linked to the fixed capital investment and is in the nature of subsidy for setting up a new unit/expansion of existing unit. The subsidy received as above, is in the nature of capital receipt and CIT(A) has rightly held so. On this issue we confirm the order of CIT(A). 15. The above decision o....
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....assessee has to be determined with respect to the purpose 10r which the subsidy is given. In other word s, in such cases, 011e has to apply the purpose test. If the object of the subsidy scheme was to enable the assessee to run business more profitably, then the receipt is of revenue account. On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit, then the receipt of the subsidy/assistance is given which determines the nature of the incentive subsidy. The form or the mechanism through which the subsidy is given is irrelevant,. In that case, the receipt of subsidy was capital in nature as the assessee was obliged to utilize subsidy only for payment of [elm loan undertaken by the assessee for setting up of new unit/expansion of existing unit. Keeping in mind the object behind the payment of incentive subsidy, the payment received by the assessee under the scheme was not in the course of trade but was of capital nature. 11. Therefore, in order to determine the nature/character of subsidy, one has to examine the object or the purpose for which Subsidy is given. In the instant ca....
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....ment in Sahney Steel (SC) has been correctly interpreted and appreciated by the Bench.(Para 28) The Scheme framed by the Govt. of Maharashtra in 1979 and formulated by its Resolution dated 5.1.1980 has been analysed in detail by the Tribunal in its order in RIL for the A.Y. 1985-86 which we have already referred to in extenso. On an analysis of the Scheme, the Tribunal has come to the conclusion that the thrust of the Scheme is that the assessee would become entitled for the sales tax incentive even before the commencement of the production, which implies that the object of the notified backward area. The Tribunal has, at more than one place stated that the thrust of the Maharashtra Scheme was the industrial development of the backward district as well as generation of employment thus establishing a direct nexus with the investment in fixed capital assets. It has been found that the entitlement of the industrial unit to claim eligibility for the incentive arose even whole the industry was in the process of being set up. According to the Tribunal, the Scheme was oriented towards and was subservient to the investment in fixed capital assets. The sales tax incentive was envisaged only....