TaxTMI 
TaxTMI 
2025 (10) TMI 1227
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.... the decision rendered therein shall apply mutatis mutandis to the other appeal. ITA No.3696/Mum/2025 Revenue's Appeal (A.Y. 2013-14) 3. In this appeal, the Revenue has raised the following grounds: - "1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the Supreme Court decision in the case of Sahney Steel & Press Works Limited vs. CIT [1997) 228 ITR 253 (SC) wherein it is held that subsidy is provided to assist the assessee in carrying on his trader business and it is revenue receipt. The sales tax incentives are based on purchase and sale of goods. The incentives are not in the nature of a lump sum amount paid by the Government. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in directing the AO to compute the disallowance by taking into account only those investments which have resulted into exempt income relying under judgement Hon'ble ITAT in the case of Vireet Investment Put. Ltd. (165 ITD 27) (Spl. Bench Delhi Tribunal). 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) is ju....
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.... receipts, as the receipts are revenue in nature and have arisen because of the day-to-day running of the business. In response, the assessee submitted that it made Capex Investments by setting up a new industrial unit at Anjar, Kutch District, after the devastating earthquake on 26.01.2001. It was further submitted that in order to redevelop and rehabilitate the said area, both the Central and State Governments announced VAT and Excise Kutch Incentive Schemes. The assessee submitted that due to its Capex Investments in the said area, it was qualified to enjoy the said incentive schemes. Accordingly, in its books of account, both VAT and Excise Kutch Incentives were shown under sales and other services. The assessee also placed reliance upon certain judicial pronouncements wherein it has been held that where the subsidy has been received for the development of industries in backward areas, the same constitutes capital receipts. 6. The Assessing Officer ("AO"), vide order dated 31.03.2016 passed under section 143(3) of the Act, disagreed with the submissions of the assessee and held that the sales tax incentive received by the assessee is directly linked to the assessee's busines....
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....of commercial production by way of refund of Central Excise and Exemption of Sales Tax which is not material keeping in view purposive test and the fact that the said incentives were given to encourage making capital investments in Kutch District in setting up new industry to redevelop the Kutch District post devastating earthquakes on 26.01.2001. We also note that Special Bench decision of the Mumbai-tribunal in the case of Reliance Industries Limited(supra) was upheld by Hon'ble Bombay High Court in CIT v. Reliance Industries Limited (2011) 339 ITR 632 (Bom.) by holding that no substantial question of law would arises as the object of the subsidy was to set up a new unit in a backward area to generate employment but aforesaid decision of Hon'ble Bombay High court has been set aside by Hon'ble Supreme Court in Civil Appeal Number 7769 of 2011 ( arising out of SLP (C) No. 9860 of 2010) dated 09.09.2011 and the matter is remitted back to Hon'ble Bombay High court to decide the question of law framed thereon in accordance with law. This revives the Special Bench decision of the tribunal in the case of Reliance Industries Limited(supra), which has already held that sub....
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....Such and similar issue has came up before different High Courts and Supreme Court on the numerous occasions. Reference to all those judgments would be un-necessary. However, the principle that has evolved is that, not the nomenclature of the subsidy or the fact that, the computation of the subsidy benefit is in terms of tax payable, would not be conclusive. What is to be examined in each case is the purpose for granting such subsidy. We may refer to the decision of the Supreme Court in case of CIT vs. Chaphalkar Brothers reported in 400 ITR 279. It was a case arising out of judgment of this Court in which, the dispute between assessee and the Revenue was with respect to subsidy granted to the multiplex cinema operators in the form of entertainment tax waiver. The subsidy was granted in view of the fact that, industry was highly capital intensive. The Revenue argued that, the subsidy was revenue in nature. This Court after referring to several decisions of the Supreme Court including the case of Ponni Sugars and Chemicals Ltd., reported in 306 ITR 392 and Sahney Steel and Press Works Ltd., reported in 228 ITR 253 held that, subsidy had not been granted for construction but only afte....
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....ar manner is irrelevant, as has been held in both Ponni Sugars and Sahney Steel." 8. In the present appeal also, as noted, the subsidy was granted under schemes framed by the State and the Central Government, to be given to the assesses who set up new industry in Kutch District. The scheme was envisaged to encourage investment which would in turn, provide fresh employment opportunity in the district which had suffered due to devastating earthquake. The computation of subsidy may be on the basis of sales tax or excise duty. Nevertheless, the purpose test would ensure that, the subsidy was capital in nature." 10. Therefore, respectfully following the aforesaid decision, we do not find any infirmity in the findings of the learned CIT(A) in treating the sales tax incentive received by the assessee as a capital receipt. Accordingly, ground no.1 raised in Revenue's appeal is dismissed. 11. The issue arising in ground no.2, raised in Revenue's appeal, pertains to the computation of disallowance under section 14A read with Rule 8D of the Income Tax Rules, 1962 ("the Rules") by only taking into account those investments which have resulted in exempt income. 12. The brief f....
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....challenged the deletion of disallowance made under Rule 8D(2)(ii) of the Rules. 15. We have considered the submissions of both sides and perused the material available on record. In the year under consideration, the assessee received an exempt income of Rs. 4,24,68,530. The AO, by invoking the provisions of section 14A read with Rule 8D of the Rules, made a disallowance of Rs. 1,30,62,321. From the perusal of the balance sheet of the assessee for the year ending 31/03/2013, forming part of the paper book on page 57, we find that the assessee had shareholder funds amounting to Rs. 1000.27 million and reserves and surplus amounting to Rs. 9603.40 million. It is an undisputed fact that during the year under consideration, the assessee made an investment in shares amounting to Rs. 376.94 crore. Therefore, we do not find any infirmity in the findings of the learned CIT(A) in deleting the disallowance made under Rule 8D(2)(ii) of the Rules by placing reliance upon the decision of the Hon'ble Jurisdictional High Court in CIT vs. Reliance Utilities & Power Ltd., reported in [2009] 313 ITR 340 (Bom.) and CIT vs. HDFC Bank Ltd., reported in [2014] 366 ITR 505 (Bom.). 16. Insofar as the....
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....aj.), held that such subsidy was towards capital stream, and therefore, is not taxable. The relevant findings of the Hon'ble Rajasthan High Court in Nitin Spinners Ltd. (supra) are reproduced as follows: - "2. The assessee is a textile manufacturer. For the relevant year i.e. 2013- 2014, it received the Technology Upgradation Fund, pursuant to a scheme drawn by the Union Textile Ministry. The payment of invasion of amounts by deferred repayment of interest, as it were. Under para 8 of the Technology Upgradation Fund programme (the amounts which were released under an agreement dated 12-7-2005) the amounts were to be treated as non-interest bearing term loans by the Bank and the repayment was to be worked out excluding the subsidy amount and the subsidy to be adjusted against the term loan account of the beneficiary after a lock in period of three years. The agreement pertinently provided as follows: "Para 8. to prevent mis-utilization of capital subsidy and to provide an incentive for repayment, the capital subsidy will be treated as a non interest bearing term loan by the Bank/Fis. The repayment schedule of the term loan however will be worked out excluding the s....
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....oss to a borrower since the countervailing concession is extended to the loan amount." 7. In view of the above, the view taken in Sahney Steel & Press Works Ltd., could not be applied in the present case, as in said case the subsidy was given for running the business. For determining whether subsidy payment was 'revenue receipt' or 'capital receipt', character of receipt in the hands of the assessee had to be determined with respect to the purpose for which subsidy is given by applying the purpose test, as held in Sahney Steel & Press Works Ltd. itself and reiterated in later judgment in CIT v. Ponni Sugars & Chemicals Ltd. & Ors. (2008) 306 ITR 392, referred to in the impugned order of the Tribunal." 6. This Court notices that the Punjab and Haryana High Court took into account the previous binding ruling of the Supreme Court in CIT v. Ponni Sugars & Chemicals Ltd. [2008] 174 Taxman 87/306 ITR 392 and Sahney Steel & Press Works Ltd. v. CIT [1997] 94 Taxman 368/228 ITR 253. In these circumstances, the Court is of the opinion that the amount was received as capital stream and therefore, not taxable. 7. A similar view was taken by the Calcut....
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....tal receipt, without appreciating the fact that the assessee has not proved that the application of the money received was for the purpose of acquiring a capital asset? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in directing the Assessing Officer to delete the disallowance made under section 14A r.w. Rule 8D to the Book profit relying on decision of Hon'ble special Bench decision of Hon'ble ITAT, Delhi in the case of ACIT vs. Vireet Investments Pvt. Ltd. (165 ITD 0027 Del SB] without appreciating the fact that the Department has filed further appeal in the case of Vireet Investments Pvt. Ltd. and that matter has not reached finality?" 27. Ground No. 1, raised in Revenue's appeal, pertains to the computation of disallowance under section 14A read with Rule 8D of the Income Tax Rules, 1962 ("the Rules") by only taking into account those investments which have resulted in exempt income. 28. Since a similar issue has already been decided in Revenue's appeal for the assessment year 2013-14 in a similar factual matrix, our findings/conclusions as rendered therein shall apply mutatis mutandis to the present c....