TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 915
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..... 5,51,59,449/- as capital receipt though the subsidy has been granted to the assessee only after commencement of production?" 3. The above noted Income Tax Appeal No. 158 of 2010 relating to assessment years 2001-02, 2003-04, 2004-05 and 2005-06 was admitted by this Court by an order dated 25.08.2010, on the following substantial question of law : "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in treating the sums of Rs. 695.04 lakhs for the assessment year 2001-02, Rs. 4,86,26,417 for the assessment year 2003-04, Rs. 9,77,29,333 for the assessment year 2004-05 and Rs. 23,51,09,072 for the assessment year 2004-05 and Rs. 23,51,09,072 for the assessment year 2005-06 received by the assessee a capital receipts, and not as revenue receipts, contrary to the decision of the Hon'ble Supreme Court in the case of Sahney Steel Works Ltd. V CIT (1997) 228 ITR 253?" 4. Thus, in the afore-noted income tax appeals the common question is involved as to whether amount exemption from trade tax on turnover of sales of the UP Trade Tax Act, 1948, availed by the assessee, is a capital receipt as subsidy or a revenue receipt? Facts of ....
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.... manufacturer holding an exemption certificate shall be conditionally exempt. Since the object is to promote industry and, as such, the tax component which form part of the sales price, although not separately shown as tax in sales invoices; is necessarily a capital subsidy. Therefore, the amount claimed by the assessee as capital receipt was liable to be deducted from the total sales turnover disclosed by the assessee and the CIT (Appeals) and the Tribunal lawfully upheld the claim of the assessee. Therefore, it requires no interference. Reliance is placed upon the judgment of the Hon'ble Supreme Court in Commissioner of Income Tax Vs. Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392 (SC), Commissioner of Income Tax Vs. Chaphalkar Brothers [2018] 400 ITR 279 (SC), Sahney Steel and Press Works Limited and Others Vs. Commissioner of Income Tax [1997] 228 ITR 253 (SC), Commissioner of Trade Tax, U.P. and Anr. Vs. Kajaria Ceramics Ltd. (2005) 11 SCC 149 (paras 32, 36 and 37), Shri Ambica Mills Ltd. Vs. The Textile Labour Association, Ahmedabad AIR 1973 SC 1081 and a judgment of this Court in Principal Commissioner of Income Tax - I, Kolkata Vs. Shyam Steel Industries Ltd. [2018] 93 ....
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....the removal of doubts, it is hereby declared that where an eligibility certificate has been cancelled or amended under sub-section (3), the dealer shall be liable to pay tax on his turnover of the period during which the facility of exemption or reduction under this section is not admissible to him." "Section 8-A. Registration of dealers and realisation of tax by dealers ... (2) (a) No person who is not a dealer registered under this Act, shall in respect of any sale or purchase made by or through him, realise from any person any amount by way of trade tax on sale or purchase of goods or any amount in lieu of trade tax on sale or purchase of goods by giving it a different name or colour and no dealer registered under this Act, shall, in respect of any sale or purchase made by or through him, realise from any person, other than a person to whom goods are sold by him, any amount by way of trade tax on sale on purchase of goods, or any amount in lieu of trade tax on sale or purchase of goods, by giving it a different name or colour. (b) Where trade tax on sale of goods is payable on any turnover by a dealer (including a commission agent or any of the persons mentioned in t....
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....ession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee;] [other than,- (a) the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43; or (b) the subsidy or grant by the Central Government for the purpose of corpus of a trust or institution established by the Central Government or a State Government, as the case may be;] ... ______________ ... Ins. by the Finance Act, 2015 (20 of 2015), ... (w.e.f. 1-4-2016)" 11. Undisputedly, the respondent/assessee has obtained an eligibility certificate (exemption certificate) under Section 4A of the of the U.P. Act, 1948 read with the notification No. 780 dated 31.03.1995. Section 4A of the U.P. Trade, 1948 provides that where the State Government is of the opinion that it is necessary so to do for increasing the production of any goods or for promoting the development of any industry in the State generally or in any district or part of the district in particular, it may, on applica....
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....d. Exemption from tax is freedom of liability from tax on turnover of sales under Section 4A of the U.P. Act, 1948. Hence in the absence of liability to pay trade tax on turnover of sales to the extent provided in the eligibility certificate issued to the assessee under Section 4A of the U.P. Act, 1948, neither trade tax on turnover of sales to the extent of exemption from liability to tax could be collected by the assessee from the purchasers either directly or indirectly nor it could be claimed as capital receipt or subsidy and instead the entire sale price received by the assessee from the purchasers towards sale of goods is revenue receipt. Hence no deduction from revenue receipts in the name of subsidy was permissible. Allowing such claim of the assessee would result in unauthorised collection and retention of trade tax and also unauthorised deduction from taxable income which is statutorily and constitutionally not permissible. 13. As per the own case of respondent/assessee, the amount of tax component in respect to the assessment years as mentioned in the substantial questions of law afore-quoted, is the tax component which was included by him in the sales turnover of the ....
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.... passed the impugned orders without even having reference to the relevant provision of the U.P. Act, 1948, the nature of exemption granted to the respondent/assessee under the notification dated 780 dated 31.3.1995 and the nature of receipts of the assessee which, according to own case of the assessee, was the part of the sale price. 16. In the case of Amrit Banaspati Co. Ltd. & Anr. v. State of Punjab & Anr., the Hon'ble Supreme Court explained exemption from sales tax, realisation of tax and its refund and held as under: "10. Exemption from tax to encourage industrialisation should not be confused with refund of tax. They are two different legal and distinct concepts. An exemption is a concession allowed to a class or individual from general burden for valid and justifiable reason. For instance tax holiday or concession to new or expanding industries is well known, to be one of the methods to grant incentive to encourage industrialisation. Avowed objective is to enable the industry to stand up and compete in the market. Sales tax is an indirect tax which is ultimately passed on to the consumer. If an industry is exempt from tax the ultimate beneficiary is the consumer. The ind....