TMI Blog2014 (5) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxing the Sales Tax Subsidy amounting to ₹ 12,58,32,691/- received from Government of Gujarat as the revenue receipt and not capital receipt as done by the appellant. 3. The ld. AR for the assessee at the outset pointed out that the issue in the present appeal is covered against the assessee in view of the ratio laid down by the Tribunal in assessee's own case in earlier years. 4. The ld. DR for the revenue placed reliance on the orders of the authorities below. 5. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in relation to the treatment of the sales tax subsidy. During the year under consideration, the assessee had received sales tax subsidy of ₹ 12,58,32,695/-which was declared as capital receipts in the computation of income. The Assessing Officer show caused the assessee as to why the said receipts should not be treated as revenue receipts in the hands of the assessee in view of the ratio laid down by the jurisdictional High Court in CIT Vs Abhishek Industries Ltd. 286 ITR 1 (P H). Reply of the assessee before the Assessing Officer is incorporated at pages 2 to 4 of the assessment order. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctional High Court in CIT Vs. Abhishek Industries (supra) and the order of the Tribunal in assessee s own case relating to assessment year 2005-06 in ITA No.232/Chd/2011 order dated 25.11.2011. 6. The assessee is in appeal against the order of the CIT (Appeals). The learned A.R. for the assessee fairly pointed out that the issue of chargeability of sales tax subsidy was decided against the assessee in the preceding years following the ratio laid down in CIT Vs. Abhishek Industries (supra). However it was pointed out by the learned A.R. for the assessee that the legal position is uncertain and there are decisions of other High Courts and Jurisdictional Punjab Haryana High Court under which the sales tax subsidy has been held to be capital receipts. Our attention was drawn to the scheme dated 11.9.1995 placed at pages 56 to 77 of the Paper Book and it was pointed out by the learned A.R. for the assessee that the subsidy was given for establishing new premier/prestigious units in the State of Gujarat. Clause 5(ii,(iv) and (x) lays down criteria of the industry which qualifies for the said scheme It was further pointed out by the learned A.R. for the assessee that the sales t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in order to determine the character of subsidy in the hands of the recipient, purpose of the subsidy is to be considered and source of fund and mechanism of giving the subsidy was immaterial. The Hon'ble Court further held that where the scheme was principally aimed to cover capital outlay of the assessee for undertaking modernization of existing industry, it was capital in nature and it was not taxable in the hands of the assessee. The learned A.R. for the assessee pointed out that the scheme before the Hon'ble Gujarat High Court was for the modernization of existing unit. 7. Further contention of the learned A.R. for the assessee was that under the scheme formulated by the Government of Gujarat, there was no outflow of Government and the scheme was formulated to promote industrial growth in the State of Gujarat. The basic idea was to establish units in the State in order to provide employment to the local person for which the Government formulated the scheme under which the sales tax was collected by the assessee, which was not deposited in the accounts of the Government. This incentive was given after start of the unit but the same could not be stated to be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which in turn had considered the ratio laid down by the Hon'ble Apex Court in Napco Industries Ltd. Vs. CIT [319 ITR 208 (SC)]. The learned A.R. for the assessee further pointed out that the Special Bench of Mumbai Tribunal in DCIT Vs. Reliance Industries Ltd. [88 ITR 273 (SB)(Mum)] had considered the scheme of Maharashtra and held the incentives to be capital receipt. The scheme of the Government of Haryana was considered in DCIT Vs. Maruti Suzuki India Ltd. in ITA No.2188/Del/2010 and the Tribunal had held the receipt to be capital receipt. Further reliance was placed on Napco Industries Ltd. Vs. CIT (supra). 8. The learned A.R. for the assessee concluded by stating that the Tribunal in the orders relating to the earlier years had merely followed the ratio laid down by the Hon'ble Punjab Haryana High Court in CIT Vs. Abhishek Industries (supra) and had not considered the factum of the scheme of State of Gujarat. The learned A.R. for the assessee pointed out that ground No.3 raised was purely without prejudice to the ground No.2 raised by the assessee that the subsidy received by the assessee arose in the course of business and the same was to be held as business i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led by the Hon'ble Punjab Haryana High Court relating to assessment years 2003-04 2004-05 to the issues raised in the said appeal, on the receipt of the said judgment. The said directions were given by the Tribunal at the request of the assessee and after the report of the Assessing Officer that the questions of law raised in assessment years 2003-04 2004-05 before the Hon'ble Punjab Haryana High Court were identical to the issue raised in the assessment year 2005-06. 11. The contention of the learned A.R. for the assessee now before us, however, is that the issue is covered in favour of the assessee in view of the ratio laid down by the Hon'ble Supreme Court in Ponni Sugars Chemicals Ltd. Vs. CIT (supra) with regard to the taxability of incentives bestowed to new/extended sugar factory. It was pointed out by the learned A.R. for the assessee that the Hon'ble Apex Court in Ponni Sugars Chemicals Ltd. Vs. CIT (supra) following the earlier decision of the Hon'ble Supreme Court in Sahney Steel Press Works Ltd. (supra) had held that the subsidy received by the assessee was in the nature of capital receipt, since the object behind the same was set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Gujarat High Court in CIT Vs. Birla VXL (supra) wherein it is held that the subsidy granted under the scheme was for capital outlay of the unit. In the written submissions filed, the learned A.R. for the assessee has also pointed out that the scheme before the Hon'ble High Court was the Sales Tax Scheme predeceasing the scheme under consideration, which scheme is not before us. The learned A.R. for the assessee has failed to point out the contents of the earlier scheme of State of Gujarat and whether the scheme under consideration for the year under appeal is similar to the earlier scheme of State of Gujarat. In the absence of the same, we find no merit in the reliance placed upon the decision of the Hon'ble Gujarat High Court in CIT Vs. Birla VXL (supra) and the plea of the assessee that the facts of the case are squarely covered by the said decision. It may also be brought on record that the assessee itself in the preceding year i.e. assessment year 2005-06 had filed a declaration under section 158A(1) of the Act and it was pointed out that the issue was identical to the issue raised in assessment years 2003-04 and 200405, where the appeal of the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
