TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 1552
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.... notified area, would qualify as capital receipt, not liable to tax. 12.1 That the AO/DRP erred on facts and in law in not appreciating that purpose for which the subsidy or incentive is given would define the character of receipt in the hands of the recipient and not mode of payment." 3. At the outset, we find that this appeal of the assessee has already been disposed of by this Tribunal vide order dated 16.09.2022. However, a miscellaneous application was preferred by the assessee stating that this Tribunal while adjudicating ground No. 12 with regard to taxability of sales tax subsidy received under Maharashtra Incentive Scheme and Uttar Pradesh Incentive Scheme, had only given a finding with regard to taxability of sales tax subsidy under Uttar Pradesh Scheme and no finding was given for Maharashtra Incentives Scheme. Accordingly, this Tribunal had disposed of the miscellaneous application of the assessee accepting the plea vide MA No. 285/Del/2022 dated 31.03.2023 specifically recalling the earlier order only for the limited purpose of adjudicating ground No. 12 in respect of subsidy received from Maharashtra Govt. 4. In view of the above, we have....
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....SI - 2001, assessee has applied for the Eligibility Certificate under Mega Project Category and the same was granted by the Directorate of Industries, Maharashtra State under the above mentioned PSI-2001 as amended vide G.R. No. IDL-1005/(CR-119)/IND-8, dt. 02nd June, 2005 for Mega Projects & MOU dated 06 September, 2005 entered into by the assessee with Govt. Maharashtra vide Eligibility Certificate No. 21 dated 16 November, 2006 ("EC") . The Eligibility Certificate entitles the company for the Industrial Promotion Subsidy as under: "to the extent of 75% of Gross Fixed Capital Investment (As defined in PSI-2001) made after 11th August, 2005 and not less than Rs. 250 Crores within a period of three years from the date of completion of final effective steps as defined in PSI-2001 for the expansion project or to the extent of taxes paid to the State Government on the increased turnover as a result of proposed additional FCI within a period of 7 years from the date of Commercial Production i.e. 12" August, 2005. whichever is lower. (As under the scheme, incentive was provided by way of refund of VAT hence it is obvious that incentive ....
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..... 2.2 A valid claim shall comprise of application in the prescribed format along with the necessary documents as may be stipulated therefore. 3. Sanction of IPS: ...... 3.2 The valid claim should be filed within 11 months of the close of the concerned financial year. The 1st such claim shall be filed within 11 months from the close of the financial year in which the Eligible Unit was issued Eligibility Certificate or its effective eligibility was established, whichever is later. However, valid claims in respect of such Eligible Units pertaining to the period prior to financial year 2008- 2009 shall be filed within 6 months from the date of this GR." viii. Accordingly, the assessee first pays the amount of tax in form of Value Added Tax (VAT) on its turnover and for claiming the subsidy, as prescribed in the aforementioned modalities, filed claim of refund of VAT paid by it subject to prescribed adjustment. The assessee has filed its first claim for the period from commencement of production after the approved expansion upto 31" March, 2007 i.e., upto the close of F.Y. 2006-07 in which the Eligibility Certificate was issued to the assesse....
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.... the scheme, incentives are given for mega projects wherein, it is specified that the quantum of incentives within the approved limit will be decided by the High Powered Committee under the Chairmanship of Chief Secretary, Govt of Maharashtra and the Infrastructure Committee under the Chairmanship of the Chief Minister of Maharashtra who will have the power to customize and offer special/ extra incentives for the prestigious mega project on a case to case basis. The assessee herein had signed a Memorandum of Understanding (MOU) with Govt of Maharashtra on 06.09.2005 which is enclosed in pages 4 to 6 of the Paper Book. In the said MOU, the assessee had agreed to make investment of Rs. 535 crores over and above investment made as on 1st August, 2005 towards further expansion of their existing project at Ranjangaon, Pune. It was also agreed by the assessee that it would manufacture additional products such as CD Writer, GSM, CDMA Handset and set up GSM R&D laboratory; the assessee would generate additional employment of 2000 persons by 2010 etc. The State Govt in turn would offer incentives to the assessee by way of exemption from electricity duty for 15 years; fixed capital inve....
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....fter commencement of the commercial production of the units and the method of determination of the said subsidy would be the payment of sales tax by the assessee to the Govt and thereafter seek refund thereon. He vehemently pleaded that since the subsidy is given after the commencement of the commercial production of the assessee it is only meant for meeting the working capital requirements of the assessee and accordingly constitutes revenue receipt chargeable to tax. Reliance in this regard placed by the ld. DR on the decision of the Hon'ble Supreme Court in the case of Sahney Steel and Press Works Ltd Vs. CIT reports in 228 ITR 253 (SC). In other words, the ld. DR argued that the subsidy given to the assessee was only for running the industry after commencement of production by the assessee and that the date of commencement of commercial production would be reckoning factor for deciding the nature of subsidy. We are unable to comprehend ourselves to accept this line of argument of the ld. DR in view of the fact that from the perusal of the Incentives Schemes of Govt. and the objectives and preamble thereon which are reproduced herein above, it is categorically clear that the ....
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....pra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished goods were also of capital nature as the object of granting refund of sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this Court by way of a special leave petition. It was held by this Court on the facts of that case and on the basis of the analyses of the Scheme therein that the subsidy given was on revenue account because it was given by way of Commnr. Of Income Tax, Madras vs M/S. Ponni Sugars & Chemicals Ltd on 16 September, 2008 assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was ....
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....eaham Harbour Dock Co. (supra) assessee was obliged to spend the money for extension of its docks. This aspect is very important. In the present case also, receipt of the subsidy was capital in nature as the assessee was obliged to utilize the subsidy only for repayment of term loans undertaken by the assessee for setting up new units/expansion of existing business. 17. Applying the above tests to the facts of the present case and keeping in mind the object behind the payment of the incentive subsidy we are satisfied that such payment received by the assessee under the Scheme was not in the course of a trade but was of capital nature. Accordingly the first question is answered in favour of the assessee and against the Department." 8. Further, we find that the ld. AR on the impugned issue has raised rightly placed reliance on the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Chaphalkar Brothers reported 33 taxmann.Com 431 which had been duly approved by the Hon'ble Supreme Court which reported in 88 taxmann.com 178. 9. Further, we also find that the very same Maharashtra Govt Incentive Scheme was subject matter of consideration by the decision o....