TaxTMI 
TaxTMI 
2016 (7) TMI 1662
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....75/-) availed in the relevant year by treating it as a revenue receipt. 2. The Appellant prays that the order of the learned Commissioner of Income Tax (Appeals)-LTU on the grounds be set aside and that claim of the Appellant be allowed." 3. Rival contentions have been heard and record perused. Facts in brief are that Assessee Company is engaged in the business of manufacturing saw pipes and spiral pipes. It set up and started industries in Anjar-Kutch (Gujarat) in 2005. Accordingly the assessee company became eligible for subsidy scheme provided by central and State Government for development of earthquake prone area - Anjar-Kutch (Gujarat). The assessee is regularly assessed to tax under the provisions of the Income Tax Act,1961. For the relevant year, i.e., A.Y. 2009-10, the assessee had filed the return of income on 29/09/2009 computing total income at Rs.37,21,96,759/-. In the course of the assessment proceedings, by a letter dated 11/01/2013, the assessee filed a revised computation of Income wherein the subsidy by way of VAT exemption of Rs.15,84,40,288/- and excise refund of Rs.10,49,23,175/- was reduced from the total income and the book profit u/s 115JB of the Act trea....
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....et tax exemption equivalent to the investment made within a period of 10 years from the date of first sale. In the scheme Industrial unit will charge VAT and retain the same as an Incentive. 4.1 Following judgments of various High Courts saying that Incentives declared by the Government for development are of capital nature were referred before the AO : - . 1. Shree Balajl Alloys Vs. CIT 333 ITR 335 - High Court of Jammu Kashmir held that Refund of Excise under subsidy scheme Is a capital nature and not taxable, 2. Vinod Kumar Jain vs. ITO, Jammu, ITAT, Amritsar Bench (Special Bench) (IT Appeal Nos. 65& 68 (Asr.) of 2010) 140 ITD 1, held that excise duty refund is to be treated as capital receipt. 3. CIT vs. Rasoli ltd. [2011J 245 CTR. 667 (Cal High Court) - Sales Tax subsidy received is capital receipt. 4. CIT vs. Reliance Industries lid. [2011] 339 ITR 632 (Bom. High Court) Sales Tax Incentive was a capital receipt." 5. However, the AO did not convince with the assessee‟s reply and held as under: 1. All the Incentives are production Incentives in the sense that the company will be entitled to these incentives only after it goes into production. 2. The scheme w....
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....or the purpose of manufacturing goods without payment of sales tax/VAT. Similarly, assessee was also entitled to exemption from the payment of sales tax In respect of sale of finished goods intermediaries, by products, waste and scrap produced by the eligible unit and assessee was required to furnish details of purchases of raw materials and sales to meet with the input/output norms prescribed under the exim policy of the Central Government and the same had to be , certified by the Chartered Accountant, Even though the quantum of incentives by way of sales tax/value added tax exemption was linked to and restricted by the eligible fixed capital investment, the benefits/incentives were to be available for a period of 5/7/10 years, depending upon the quantum investment and the benefit of sales tax exemption was available only from "the date of commencement of commercial production" and which was defined as "date of first sale bill" under clause 3.3 of the notification. Conditions in clause 5, 7 and 8 of the notification dated 09/11/2001 clearly show that the commercial production was to be the bed rock for availing the sales tax remission benefits and the "industrial unit shall have t....
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....h came into effect from 1/4/20,06, also unequivocally speak about and link the grant of value added tax incentives by way of exemption' of VAT to become available, only if, the goods are purchased and sales are effected by the, eligible unit located. In Bhuj district of Gujarat state after certain date only. Thus, even under the Gujarat Value Added Tax 2003, provisions for availing VAT remission benefits by way of exemption from payment of VAT at source are more or less similar to the sales tax provisions. 8. The CIT(A) further observed that there was no physical receipt of benefits by way of sales tax Incentives in the form of exemption of sales tax, purchase tax/value, added tax since assessee was exempted from payment of purchase/sales/value added tax at the point and sale itself from the first day of sale itself. Thus, there was neither a constructive receipt nor a constructive payment by the assessee and when that is the fact of the case, the question of ST/VAT exemptions being capital receipts do not arise. 9. After having above discussion CIT(A) confirmed the action of AO declining assesseee‟s claim for treating subsidy as capital receipt basically on the plea th....
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....at incentive was not paid as percentage of investment so as to call the same as capital receipt but was payable to assessee only after commencement of the commercial production. Reliance was placed on the decision of Hon‟ble Supreme Court in the case of Shaney Steels Press Works Ltd. (supra). 12. We have considered rival contentions and carefully gone through orders of authorities below. We have also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by ld. AR and ld. DR during the course of hearing before us in the context of factual matrix of the case. 12.1 From the record we found that to avail the benefits of Incentive scheme Issued by Central and State Government, the assessee has set up and started Industries at Anjar - Kutch (Guj.) in the year 2005. The assessee got the benefits year to year on Investment made under the Incentive scheme and credited to profit and loss account. The said receipt are capital receipt in nature therefore not liable to tax while computing the income tax on such income as the various high courts has given their decision that the Excise duty and Sales tax incentives received f....
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....y steel case lies in the fact that it has discussed and analyzed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the receipt in the hands of the assessee has to be determined with respect to* the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme is to enable the assessee to run the business more profitably then 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 an existing unit then the receipt of the subsidy would be on capital account. Therefore, it is the object for which the subsidy/ ....
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....he Hon‟ble Supreme Court in CIT vs. Ponni Sugar and Chemicals Ltd.306 ITR 392 (SC), the Hon‟ble Jammu and Kashmir High Court in the case of Shree Balaji Alloys, held that the subsidy by way of excise duty refund and interest subsidy given by the Central Government for setting up new industries in notified backward areas in Jammu and Kashmir was a receipt on capital account and not income. The decision of Hon‟ble Jammu & Kashmir High Court has been recently affirmed by Hon‟ble Supreme Court.The facts in all these cases are identical to the case of the assessee with respect to subsidy received by way of refund/exemption of excise duty/VAT/Sales Tax. However, the Assessing Officer has wrongly held that the facts are different and has refused to follow this judgement. One of the reasons given by the Assessing Office not to follow the judgement of Hon‟ble Bombay High Court was that the SLP against this judgment is pending before the Hon‟ble Supreme Court. 15. In the case of Rasoi Ltd. 335 ITR 438 (Cal), Hon‟ble Calcutta High Court following the principle laid down by the Hon‟ble Supreme Court in CIT vs. Ponni Sugar and Chemicals Ltd.; 306....
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....er the subsidy scheme is to enable the assessee to set up a new unit the receipt of subsidy would be on the capital account. iii) Once the undisputed facts pointed towards the object and that being to enable the assessee to set up a new unit then the receipt was a capital receipt." 18. We had carefully gone through Gujarat Industrial Policy 2003 and Incentive Scheme 2001 for Economic Development of Kachchh District. As per Gujarat Industrial Policy for setting up industrial park state government was encouraging participation of private sector for setting up small estates and specialized industrial parks. As per the scheme eligible unit will be provided subsidy in the form of sales tax exemption in respect of units having investment upto Rs.10 crore, equal to 100% Fixed eligible investment. In case investment is more than 10 crore and upto 50crores the exemption will be for 7 seven years period equal to 100% on fixed eligible investment. The incentive scheme 2001 for economic development of Kachchh District came into force from 31 July,2001 wherein the following units were eligible under the scheme:- i. New SSI units & new medium & large scale units are eligible. ii. Expansio....
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....btained or necessary amendments should have carried out in the existing license or registration. (b) For the new project, separate identifiable investment shall have to be made and it should not be a part of existing project or expansion thereof. For new scheme, it is necessary to have a separate building and the accounts should also be maintained separately. However, the new project using the utilities such as water, power, steam and pollution control facilities form the existing units shall not loose the eligibility to receive the incentives under the scheme. 20.2 As per clause Eligible units will be able to avail of the benefits of sales tax exemption or sales tax department on their eligible fixed capital investment. Under the sales tax incentive, the -tax to-be recovered against the sales proceeds under the Gujarat Sales Tax Act or Central Sale Tax Act shall be considered. The units shall have to opt for one of the following incentives. (a) Sales Tax Exemption (b) Sales Tax Deferment (c) Composite scheme for units having capital investment exceeding Rs.1 00 crore. 20.3 Under the sales tax exemption the eligible unit will be entitled to purchase the raw materials, pac....
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....IONER OF CENTRAL EXCISE l 7th FLOOR, CENTRAL EXCISE AHMEDABAD ZONE AHMEDABAD 7th Floor, Central Excise Bhavan, B/h. Polytechnic Bus-stand, Nr. Panjrapole, Ahmedabad-380 015 F. NO. V /3 0-2/CCO/Kutch/03-04 Date: CERTIFICATE This is to certify that the original value of investment in plant and machinery in the factory of MIs. Man Industries (India) Ltd., Survey No. 485/2, Anjar-Mundra Highway, Village - Khedoi, Taluka : Anjar, Dist.- Kutch, Gujarat having Central Excise Registration No. AAACM2675GXM003 in terms of Notification. No. 39/2001-CE dated 31.07.2001 is Rs. 88,70,70,832/- ( Eighty Eight Crores Seventy Lakhs Seventy Thousand Eight Hundred Thirty Two Only). This certificate is issued on the basis of a Certificate dated 28.03.2005 issued by Pradeep H. Agarwal & Associates, Chartered Accountants, Mumbai. This Certificate is issued in terms of para 3(iv) of Notfn. No. 39/2001CE dated 31.07.2001 for the purpose of availing the exemption under the said Notification. Sd/- (S.C. MATHUR) CHIEF COMMISSIONER Sd/- (D. RAJGOPALANI) PRINCIPAL SECRETARY INDUSTRIES & MINES DEPARTMENT CENTRAL EXCISE & CUSTOMS GOVERNMENT OF GUJA....
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....products. goods attract.ing special excise duty and goods that are chargeable to a confessional rate of duty of 4% or 8%. It has been decided to exempt goods manufactured in new factories that are set up in the district of Kutch within two years from now. If the investment on plant and machinery is not less than Rs. 20 crore, goods manufactured by the factory shall be exempt from excise duty without any limit. However, if the investment is less than Rs. 20 crore, the yearly exemption shall be restricted to clearances upto twice the value of such investment. Industrial unit intending to avail of the scheme of exemption shall have to obtain certificate from the Committee comprising the Chief Commissioner of Central Excise, Vadodara and the Principal Secretary to the Government of Gujarat, Department of Industries to the effect that the unit is a new unit set up in the district of Kutch. It is clarified that mere change in the name or in the nature of ownership or a change in location of an existing unit would not be considered as a new industrial unit The Ministry of Finance has also clarified that if the goods produced in the district of Kutch are in the nature of industrial i....
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....9/- total to Rs.103,88,39,728.69/- and sales tax is Rs.4,15,53,589.15/- i/e 4% of Rs.103,88,39,728.69/-. 27. From the above documentary evidence as placed on record we found that assessee has to charge VAT separately to the customers over and above the sale price of the products supplied. We had also verified invoices raised by the assessee wherein the VAT @4% is charged over and above the invoice value and collected from the customers. Thus, it is evident that assessee have availed the Sales Tax Remission Scheme wherein assessee is charging VAT/CST separately on the sale price and collecting the same from Customers. We had also verified monthly summary of VAT and CST returns filed for FY 200809,2009-10 and 2010-11 (i.e. AY 2009-10, 2010-11 and 2011-12) which is the total of invoices raised during a particular month. As per VAT Return of April2008 assessee had turnover of Rs.491,20,100/- and total tax including additional tax is shown at Rs.19,77,730/- (19,64,805+12,925). Furthermore the assessee has claimed the entire output tax of rs.19,77,730/- as Remission of Tax u/s 41 of Gujarat Value Added Tax Act,2003. Thus the assessee have claimed the entire output tax under Remission of....