TaxTMI 
TaxTMI 
2022 (11) TMI 531
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....nd in law, the CIT(A) erred in not allowing the deduction under 80IC on the interest income of Rs.38,984 earned on vendor deposits." 2. Briefly stated, facts of the case are that the assessee filed return of income on 29/11/2014 declaring total income of Rs,35,96,53,730/-. The case was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short, 'the Act) were issued and complied with. The assessment under section 143(3) of the Act was completed on 23/12/2016 wherein the claim of the assessee for incentives received under the Package Scheme of Incentive (PSI-2007) was held by the Assessing Officer as revenue receipt as against the claim of the assessee as capital receipt. The Assessing Officer also disallowed the claim of deduction under section 80IC of the Act. 3. Aggrieved, the assessee filed appeal before the Ld.CIT(A), who partly allowed the appeal. Further aggrieved, the assessee is before the Tribunal by way of raising the grounds as reproduced above. 4. Before us, the assessee has filed a paper book containing pages 1 to 264. 5. At the outset, the Ld.Counsel of the assessee submitted that Ground No.3 was not pressed by the asse....
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.... given Industrial Promotion Subsidy. Neither the PSI, 2007 nor the Eligibility Certificate has elaborated the purpose for which the subsidy was given to the appellant. The quantum of the subsidy was to be decided on the basis of fixed capital investment made by the appellant, but, that is also not a determining factor to decide the purpose of the subsidy. The appellant is free to use the subsidy at its will for any purpose. Thus, it cannot be said that the subsidy given to the appellant was t only for the setting up of new business or expansion of the new business. The appellant has also not furnished the utilization of the subsidy given by the State Government. The purpose which has been explained by the Hon'ble Supreme Court in the cases of Ponni Sugar & Chemicals Ltd. (supra) and also Sahney Steel & Press Works Ltd. (228 ITR 253), is the purpose which was specific for the appellant and in respect of the end-use or utilization of such subsidy. This specific aspect or purpose is missing in the case of the Industrial Promotion Subsidy given by the State Government to the appellant. Thus, respectfully following the decisions of Ponni Sugar & Chemicals Ltd. (supra) and S....
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....orted the orders of the lower authorities. She specifically referred to the direction of the dispute resolution panel wherein the decision of the honourable Bombay High Court in decision of special bench in case of Reliance Indusres Limited , has been sent back by the honourable Supreme Court to the file of the honourable Bombay High Court for deciding it afresh. Therefore, she submitted that this issue has not reached finality. In any case it is submitted that the receipt of sales tax incentive by the assessee is based on / ales made by the assessee and therefore is revenue in nature. 39. We have carefully considered the rival contention and perused the orders of the lower authorities. On Perusal of the PSI, 2007 shows that the subsidy has been granted to encourage industrial growth in less developed areas of the State. The quantification of subsidy is linked with the amount of investment made in setting up of the eligible units. Payment of the subsidy is in the form of refund of VAT and CST paid on sale. Assessee claimed before the lower authorities that the subsidy was a capital receipt and, hence, not chargeable to tax which was rejected As held by Hon Supreme court in....
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....2007 under which the assessee has received assistance from the State Government. The relevant extract of the Preamble of PSI, 2007 reads as under: "PREAMBLE In order to encourage the dispersal of I:ndustries to the less developed areas of the State, Government has been giving a Package of Incentives to New/Expansion Units set up in the developing region of the State since 1964 under a Scheme popularly known as the Package Schemes of Incentives. Tin Package Scheme of incentives, introduced in 1564, was amended from time to time. The last amended scheme, commonly known as the 2007 Scheme is operative from the 1st April, 2007. The Slate has declared the new Industrial, Investment, Infrastructure Policy 2006 to ensure sustained Industrial growth through Innovative initiatives for development of key potential sectors and further improving the conducive industrial climate In the State, for providing the global competitive edge to the State's Industry. The policy envisages grant of fiscal incentives to achieve higher and sustainable economic growth with emphasis on balanced Regional Development and Employment through Greater Private and Public Inves....
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....hall be payable to ADAPL on ADAPL complying with the requirements under PSI 2007. 2.1 Electricity Duty exemption for the period of 7 years from the date of commencement of commercial production. 2.2 100% exemption from payment of Stamp Duty. 2.3 Industrial Promotion Subsidy (IPS) equivalent to 75% of "ELIGIBLE INVESTMENTS (as defined in PSI 2007 )" made w.e.f 28"1 March, 2007 and made with such a period stipulated in the ." Package Scheme of Incentives 2007. The IPS will however be limited to 75% of ADAPL's eligible investments less the amount of benefits availed at Sr.No.2.1 & 2.2 as per the period prescribed therein or to the extent of taxes paid to the State Government within a period of 7 years whichever is lower. 3. The IPS mentioned at 2.3 will be admissible only after the company employs 500 number of persons on regular basis within one year from the date of commencement of commercial production at the proposed project and at least 75% of these employees are local persons." 19. A bare perusal of the Preamble to PSI, 2007 shows that the incentives are offered by the State Government to the entrepreneurs for making investment an....
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....ved subsidy as refund of sales tax, therefore, it is a trade receipt. The assesses has received subsidy in the form of refund of sales lax for setting up of Mega Project in classified Area C of the State of Maharashtra and upon providing employment to more than 500 persons, as specified under the scheme. 21 One of the objection by the CIT(A) in rejecting the claim of assesses is that the assesses has failed to complied with only one of the two criterias laid down under the PSI, 2007 for claiming benefit of Industrial Promotion Subsidy, i.e. employment criteria. The other condition of minimum investment is not fulfilled. According to Memorandum of Understanding, the assessee was required to invest approximately Rs. 117 cores and offer employment to 510 persons. A perusal of the eligibility certificate dated 17-03-2009 at page 112 of the paper book shows that as against expected investment of Rs.117 crores the assessee had made investment of Rs.94.53 crores between 28-03-2007 to 05-12-2008. The assesses had started commercial production on 01-12-2008. The total period of investment available with the assessee is from 28-03-2007 to 27-03-2012. Thus, there was still time avail....
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.... to 30.11.2015 Date of effect of the EC 01.12.2008 Period for investment From 28.03.2007 to 27.03.2012 Entitlement of : (1) Electricity Duty exemption for the period of 7 years from the dale of commencement of commercial production (from 01.12.2008 to 30.11.2015). (2) 100% exemption from payment of Stamp Duty. (3) Industrial Promotion Subsidy (IPS) equivalent to 75% of your Eligible Investments i.e. Rs. 11700.00 lacs to be made w.e.f. 28.03.2007. 1. Limited to 75% of your eligible investments less the amount of benefits availed at Sr. 1 & 2 above as per the period prescribed therein OR 2. To the extent of taxes paid to the State Government within a period of 7 years, whichever is lower. The afore stated incentives shall be sanctioned and released upon submission of land use conversion to industrial purpose permission and building plan approvals from competent authority on or before 02.03.201 O.- It is evident from the eligibility certificate issued by Directorate of Industries, Government of Maharashtra that the....
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.... and to run the business profitably. The Hon'ble High Court after thoroughly examining the salient features of the New Industrial Policy under which the subsidy was extended to the assessee and also the ratio of judgements rendered by the Hon'ble Apex Court in the case of Sahney Steel and Press Works Ltd (supra) and approval thereof in Ponni Sugars and Chemicals Ltd (supra) has held as under:- "16) Perusal of the judgements in Sahney Steel and Press Works Ltd (supra) and Ponni Sugars and Chemicals Ltd (supra), therefore, reveals that the apex Court had applied the above quoted dictum to determine the purpose, which the two schemes had intended to achieve by the incentive subsidies, permissible under the schemes in question in these cases. It was, therefore, in the context of respective subsidy incentive schemes in the two cases, that the subsidy in Sahney Steel and Press Works Ltd was held to be revenue receipt whereas the subsidy in Ponni Sugars & Chemicals Ltd (supra) was held as capital receipt. 17) We are supported in taking this view by the observations made by the Hon'ble Supreme Court of India in a later decision reported as Mepoo Industri....
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....urt of India on the issue in question, that to determine the nature and intent of the incentives as to whether thoso were Revenue Receipts or Capital Receipts, the purpose underlying the incentives was the determinative test, there may not be any necessity of referring to the judgments of other High Courts of the Country rolled upon by the appellants' learned counsel, some of which had been considered by the Hon'ble Supreme Court of India in the above referred cases. 21) Thus, finding that the New Industrial Policy and other concessions for the State of Jammu and Kashmir has not been correctly appreciated by the Appellate Tribunal, we proceed to examine the true intent and purpose underlying the Policy and the Concessions contemplated by the Office Memorandum of June 14, 2002 and statutory notifications issued in this behalf. 22) Perusal of the Office Memorandum dated 14.06.2002 indicating New Industrial Policy and other concessions for the State of Jammu and Kashmir, makes it explicit that the concessions were issued to achieve twin objects viz. (i) Acceleration of industrial development in the State of Jammu and Kashmir, which had been found lagging behi....
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....he State, for creation of such industrial atmosphere and environment, which would provide additional Permanent source of Employment to the unemployed in the State of Jammu and Kashmir were in fact, in the nature of creation of New Assets of Industrial Atmosphere end Environment, having the potential of employment generation to achieve a social object. Such incentives, designed to achieve Public Purpose, cannot by any stretch of reasoning, be construed as production or operational incentives for the benefit of assessee alone. 27. Thus, looking to the purpose, of eradication of the social problem of unemployment in the State by acceleration of the industrial development and removing backwardness of the area that lagged behind in industrial development, which is certainly a purpose in the Public Interest, the incentives provided by the Office Memorandum and statutory notifications issued in this behalf, to the appellant-assessees cannot be construed as mere Production and Trade Incentives, as held by the Tribunal. 28) Making of additional provision in the Scheme that incentives would become available to the industrial units, entitled thereto, from the date of commenc....
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....Brothers after considering the ratios laid down in the case of Sahney Sleel and Press Works Ltd. (supra) and Ponni Sugars and Chemicals Ltd. (supra) has held that the purpose for which the subsidy was given is relevant factor to determine whether the same is capital or revenue receipt. If the object was to enable the assesses to set up a new unit then receipt of subsidy would be on capital account. In the aforesaid case, the State Government had granted subsidy in the form of exemption from Entertainment Duty on Construction of multiplex theatres. The Hon'bie High Court held that the fact that the subsidy was not meant for repayment of loan taken for construction of multiplexes cannot be a ground to hold that subsidy receipt was on revenue account. The relevant extract of the findings of the Hon'ble Jurisdictional High Court are as under: "5. Since the object of subsidy was to promote construction of multiplex theatre complexes, in our opinion, receipt of subsidy would be on capital account. The fact that the subsidy was not meant for repaying the loan taken for construction of multiplexes cannot be a ground to hold that subsidy receipt was on revenue account becau....