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2025 (11) TMI 1489
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....rit in the said claim made by the appellant which is made for the very first time during the appellate proceedings. 1.1 That the CIT(A) erred on facts and in law in not appreciating that the sales tax subsidy/incentive amounting to Rs. 22.63 crores availed under the Package Scheme of Incentives (Maharashtra), 1993, ought to be treated as capital receipt not liable to tax under the provisions of the Income Tax Act, 1961 ('the Act'). 1.2 That the CIT(A) erred on facts and in law in not discussing the merits of the above claim and rejecting the same alleging that: a) the appellant had, in earlier years, shown the amount of subsidy/ incentive aş revenue receipt which was duly offered to tax; b) the amount/nature of subsidy/ incentive was nowhere accounted/shown by the appellant in the books of account of the appellant or the tax audit report; c) the appellant could have made the above claim by filing revised return of income under section 139(5) or return of income in response to notice issued under section 153A of the Act. 2. That the CIT(A) erred on facts and in law in confirming disallowance made by the assessing off....
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....15 framed u/s.153A of the Act at total income of Rs. 62115752/- after making the addition on account of bogus expenses of Rs. 10750651/- and disallowances u/s 14A of Rs. 36,66,777/-. 5. Consequently, appeal filed by the assessee against the revisionary order passed by the CIT under section 263 of the Act was dismissed by the Tribunal as infructuous vide order dated 30.06.2015 in ITA No.2519/Del/2012. 6. The assessment framed u/s 153A of the Act was challenged before the CIT(A) and an additional claim was made which read as under :- "That on the facts and circumstances of the case and in law, sales tax subsidy/ incentive amounting to Rs. 22.63 crores availed under the Package Scheme of Incentives (Maharashtra), 1993 ought to be treated as capital receipt not liable to tax under the provisions of Income Tax Act, 1961". 7. This additional ground was dismissed by the CIT(A) by observing that the same was not claimed before the AO. Aggrieved against the order of Ld. CIT(A) the assessee preferred appeal before the Tribunal being ITA No. 3990/Del/2016, wherein the Tribunal vide order dated 25.08.2023 quashed the assessment, inter alia, by observing as under: &nb....
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....learly indicate that the assessment in respect of AY 2006-07 had abated and therefore, learned ITAT had proceeded on an ex-facie erroneous premise that the assessment for the AY 2006-07 has not abated and had been reopened. 6. The assessment order as initially framed on 24.12.2009 had been set aside by the appellate order dated 28.06.2013. However, the CIT(A) initiated proceedings under Section 263 of the Act, which culminated into the order dated 20.03.2012 wherein the assessment order dated 24.12.2009 was set aside on certain issues and the AO was directed to pass fresh assessment order. In the meanwhile, a search was conducted in the premises of the Assessee under Section 132 of the Act. Pursuant to the said search, a notice dated 19.10.2012 was issued under Section 153A of the Act which culminated in an assessment order dated 13.03.2015. Thus, on the date of the search and the issuance of notice under Section 153A of the Act, the assessment proceedings were live and pending before the AO pursuant to the directions issued by the CIT(A) under Section 263 of the Act. By virtue of the notice under Section 153A of the Act, the said assessment proceedings abated. 7.....
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....63 crores availed under the Package Scheme of Incentives (Maharashtra), 1993. 11. Ld. counsel appearing on behalf of the assessee at the very outset submitted that the very issue came up for consideration before the Tribunal in assessee's own case for subsequent assessment years A.Y. 2008-09 & 2009-10 [ITA Nos. 3360 & 3361/Del/2016], wherein the Tribunal vide its common order dated 04.06.2024 has decided the issue of exemption of sales-tax subsidy as capital receipt. On the other hand, Ld. DR relied on the orders of authorities below. 12. We have heard rival submissions and perused the material available on record. The Tribunal vide order dated 04.06.2024 in assessee's own case for A.Y. 2008-09 and 2009-10 has adjudicated this issue, inter alia, by observing as under: "7. The issue is also common to AY 2008-09 and 2009-10. Admittedly the years involved are for abated assessment years. Since, revenue alleges that incriminating material was found in respect of the impugned years, the issue pending before the Hon'ble High Court doesn't operate against the assessee and the claim of assessee about maintainability of additional claim can be considered on meri....
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.... 13.1 What has uniformly emerged upon perusal of the case law cited by both sides is that the courts have applied the "purpose test" for concluding one way or the other as to whether the subsidy received should be treated one on capital or revenue account. The principles enunciated by the Supreme Court in Sahney Steel's case have been uniformly applied in all cases which followed decision 14. In the Sahney Steel case, the Supreme Court dealt with an incentive scheme forged by the Government of Andhra Pradesh. The incentives were given in the form of refund of sales tax on raw materials, machinery and finished goods, subsidy on power consumed for production exemption from payment of water rate on water drawn from sources which were not maintained at the cost of the government or any local body, refund of water rate in respect of water drawn from a government source or source maintained by any local body but returned after purification, limitation qua liability on account of assessment of land revenue or taxes on land use for the establishment of any industry and additional incentives to new industrial units set up in designated areas 14.1 Although the ....
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....orms part of the public funds of the State. If any subsidy is given the character of the subsidy in the hands of the recipient whether revenue or capital-will have to be determined by having regard to the purpose for which the subsidy is given If it is given by way of assistance to the assessee in carrying on of his trade of business, it has to be treated as trading receipt. The source of the fund is quite immaterial. For example, if the scheme was that the assessee will be given refund of sales tax on purchase of machinery as well as on raw materials to enable the assessee to acquire new plants and machinery for further expansion of its manufacturing capacity in a backward area, the entire subsidy must be held to be a capital receipts in the hands of the assessee. It will not be open to the revenue to contended that the refund of sales tax paid on raw materials or finished products must be treated as revenue receipts in the hand of the assessee. In both the cases, the Government is paying out of public funds to the assessee for definite purpose. If the purpose is to help the assessee to set up its business or complete a project as in Seaham Harbour Dock Company's Case(supra), ....
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....he scope of incentives, various scales and mode of release of incentives to intensify and accelerate the process of dispersal of industries from the developed areas and for development of the underdeveloped regions of the State, particularly those farther away from the Bombay-Thane Pune helt, had ben under consideration of the Government. In the light of the experience gained implementation of the earlier Schemes, particularly the 1988 Scheme, and in the changed circumstances of the liberalised industrial policy of the Government of Indi and with a view to achieving the objectives outlined above, the Government has decided to revise the 1988 Scheme and bring into force a New Scheme, viz, the Package Scheme of Incentives, 1993 (hereinafter referred to as "the 1993 Scheme") [Emphasis is ours] 17.1 A careful perusal of the preamble would show that the 1993 Scheme was forged to achieve three broad objectives. (1) First, to disperse industries outside the Bombay now Mumbai]-Thane- Pune belt and to attract new and expanded units to developing and underdeveloped areas of the State. (ii) Second, to rationalise incentives accorded by intensifying and accelerating the dispe....
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....tal. The fact that the eligibility certificate was to be issued by the agency implementing the scheme after the commencement of commercial production by the eligible unit appears to have been incorporated in the 1993 Scheme to ensure that the object and the purpose of the 1993 Scheme, which was to industrialise underdeveloped and developing areas was fulfilled. 22. Thus, in our opinion, the argument advanced on behalf of the appellant/revenue that a perusal of paragraphs 3.1 and 3.3 of the 1993 Scheme would show that the Incentives were tied in with production is untenable. The complete focus of the 1993 scheme was to achieve the object, as noticed above, engrafted in its preamble. 23 As noticed hereinabove, the respondent/assessee was entitled to avail of sales tax subsidy/incentive under two eligibility certificates dated 13.12.1994 and 15.10.1996 [as amended] for 14 years and 13 years & 11 months, respectively, subject to a maximum entitlement of 110% of capital investment made in setting up of the industrial units. 23.1 Investment in capital assets such as land, buildings, plant and machinery was only a measure adopted for calculating the sales tax su....
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.... Ltd by the Andhra Pradesh High Court, Wardex Pharmaceuticals (P.) Ltd v ACIT by the Madras High Court and lastly, a judgement of this court in Commissioner of Income Tax v Steel Authority of India Ltd. A close perusal of these judgements would show that they are distinguishable on facts. 27.1. In Rassi Steel, the court was called upon to decide whether the power subsidy received by the assessee under an incentive scheme framed by the State of Andhra Pradesh was a reveme receipt. The court concluded that the power subsidy received hy the assessee falbeit after the commencement of production) was based on actual power consumption and hence, had nothing to do with investment subsidy for establishing industries in backward areas. It is in this context that the court ruled that the power subsidy received was a trading receipt and, hence, taxable 27.2. The Wardex case concerned financial assistance received by an assessee from the Government of West Bengal under a scheme titled "West Bengal Industrial Promotion (Assistance to Industrial Units) Scheme, 1994" The scheme brought registered dealers within its sway who manufactured specified goods in West Bengal via SSI uni....
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....ed to the Assessing Officer." 12.1. No change in facts has been pointed out by either of the parties. Therefore, following Tribunal's order in assessee's own case for A.Y. 2008-09 & 2009-10 (supra) we direct the Assessing Officer to treat the sales tax subsidy received by the assessee as capital receipt and restore the matter to file of Assessing Officer for limited purpose of quantification of figures in very terms. 13. Ground no. 2 with its sub-grounds relate to disallowance u/s 14A of the Act. 14. Ld. counsel appearing on behalf of the assessee at the very outset submitted that the very issue in assessee's own case for A.Y. 2008-09 & 2009-10 [ITA Nos. 3360 & 3361 /Del/2016] has been adjudicated by the Tribunal vide order dated 04.06.2024 in assessee's favour. Ld. DR, on the other hand, relied on the orders of the authorities below. 15. We have heard rival submissions and perused the material available on record. The Tribunal vide order dated 04.06.2024 in assessee's own case for A.Y. 2008-09 and 2009-10 (supra) has adjudicated this issue, inter alia, by observing as under: "4.6 Giving thoughtful consideration to the facts and circumstances and submissions, i....