2022 (9) TMI 247

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....(3) r.w. Section 254 of the Income Tax Act, 1961 (the Act) concerning AY 2007-08. 2. The grounds of appeal raised by the assessee read as under: "1. Under the facts and circumstances of the case, the order passed by AO u/s 143(3) r.w.s. 254 of the Act is illegal & bad in law being barred by limitation. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs. 17,66,395/- by holding that sales tax incentive provided by Government of Rajasthan to encourage establishment/ enhancement of production capacity and for generation of employment is a revenue receipt and not a capital receipt as claimed by the assessee." 3. Ground No.1 is dismissed being not pressed in the course of hearing. 4. Ground No....

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.... the second round of proceedings. 8. We have perused the appellate order and the order of the Assessing Officer and other material adverted in the course of hearing. The solitary question in contention is to determine the nature and character of sales tax incentive of Rs.17,66,395/- received by the assessee in the facts and circumstances of the case. It is the case of the assessee that sales tax incentive was given by the Government of Rajasthan for investment in Rajasthan to encourage the establishment / enhancement of production capacity and for generation of employment as envisaged in clause (3) of the scheme, namely, 'The Rajasthan Sales Tax / Central Sales Tax Exempt Scheme for Industries, 1998' as notified by the Government of Raja....

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.... is irrelevant. The object has to be seen and not the form in which it is granted. Under the West Bengal scheme also, the amount of entertainment tax collected is to be retained by the new multiplex theatre complexes for a period not exceeding four years and the objects of both the schemes are same. Therefore, the subsidy by way of exemption/remission of entertainment duty under both the schemes is capital receipt. (ii) PCIT Vs. Deepak Vegpro (P) Ltd. (2018) 401 ITR 89 (Raj.) (HC) Subsidy from Government in the form of VAT reimbursement related to encourage setting up of the new units and to generate fresh employment opportunities in the State is not taxable since it constituted capital receipt. (iii) CIT & Anr. S....

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....e and there was no condition towards capital utilization which implied that the policy makers envisioned greater profitability as an incentive for investors to expand units, for rapid industrialization of the State, ensuring greater employment and thus the subsidy is revenue in nature. It is submitted that the said decision of Hon'ble Delhi High Court has been stayed by Hon'ble Supreme Court vide order dt. 20.11.2017 (PB 36) and thus this decision is not applicable more particularly when the Supreme Court after the decision of Delhi High Court has held such receipts as capital receipt. 10. On a reading of the incentive scheme, it is noticed that the Government of Rajasthan proposed incentive by way of exemption from payment of sales tax ....