2021 (7) TMI 266

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.... 2014- 15. 2. The brief facts of the case are as under : The assessee namely, Inox Air Products Pvt. Ltd., is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing and selling of Industrial / Medical gases. The return of income for the A.Y. 2014-15 was filed on 27.11.2014 declaring a total income of Rs. 1,32,98,33,950/-. Against the said return of income, the assessment was completed by the Asst. Commissioner of Income Tax, Circle - 11, Pune (hereinafter referred as "the Assessing Officer) at a total income of Rs. 141,87,22,120/-. The disparity between the returned income and the assessed income is on account of the following additions : (i) Addition of subsidy ....

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....unced by the Government of Jarkhand, the assessee is entitled for Capital Investment Subsidy of 5% of its fixed capital subject to maximum of Rs. 4 crores and 75% of the amount received by the Government towards commercial taxes i.e., (VAT and CST) for a period of 7 years from date of commercial production i.e., 13.12.2008. The capital subsidy was accounted on accrual basis by crediting capital subsidy under Reserves and Surplus. Similarly, in respect of the Jejuri Unit, the assessee company had made investments towards expansion of the existing plant at Jejuri. The cost of investment on the expansion is eligible for subsidy under Industrial Promotion Subsidy under Package Scheme of Incentives 2007 issued by the Government of Maharashtra....

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....subsidy in all the three States, ld.CIT(A) has concluded that the subsidy was given for capital investment and the same is also linked to the capital investment. He further concluded that the fact that part of the subsidy was given by way of refund of sales tax paid by the appellant will not change the character of the subsidy and therefore, held that it is a capital receipt. However, the ld.CIT(A) considering the provisions of Explanation 10 of Sec.43(1) of the Income Tax Act, directed the Assessing Officer to reduce the amount of the subsidy received from the respective block of assets. 6. Being aggrieved by the decision of ld.CIT(A) holding it to be a capital receipt, the Revenue is in appeal before us in appeal No.1118/2017. The asse....

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....84 ITR in support of the proposition that though the subsidy was calculated in terms of the cost of the employees it does not mean that the subsidy is granted with intention to supplement the revenues of the assessee company. 9. The ld.CIT D.R. placed reliance on the orders of lower authorities and pleaded that since the investment was granted in terms of employment generation and in terms of refund of sales tax paid, the same should be treated as revenue in character placing reliance on the decision of Hon'ble Supreme Court in the decision of Sahney Steel & Press Works Ltd. (supra). 10. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the subsidy received by the assessee co....