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2015 (6) TMI 1195 - AT - Income TaxCharacterization of income - Sales Tax subsidy receipt - revenue receipt or capital receipt - HELD THAT:- Unit of assessee was set up as per scheme formulated by Government of West Bengal and assessee has been allowed remission of sales tax for 12 years upto 100% of gross fixed capital investment/asset of the approved project. The incentive scheme was available for location of the unit. No incentive is available to units located in group ‘A’. The unit of assessee is located in group ‘B’ (Hooghly). The subsidy would help the growth of industry and not to supplement profit. Subsidy is determined with reference to the fixed capital investment/asset and not profit. No working capital is considered in the scheme. The ld. DR says that the subsidy is given for 12 years after production and as such it is revenue in nature. The arguments of ld. DR cannot be accepted in view of the above facts because the scheme is made to encourage the promotion of industries/setting up in the State of West Bengal. The incentives are provided to approved projects only. The purpose of giving subsidy is thus, to promote and set up industries in State of West Bengal. The object/purpose of assistance under the subsidy scheme was to enable the assessee to set up new unit in State of West Bengal. Therefore, the receipt of the sales tax subsidy in the hands of assessee was capital in nature. The decisions relied on by ld. DR would not support the case of the revenue. Considering case of Ponni Sugars & Chemicals Ltd. [2008 (9) TMI 14 - SUPREME COURT] and sales tax subsidy received by the assessee is capital receipt in nature and are not subjected to tax. The additions made by the AO on account of receipt of sales tax subsidy are accordingly deleted in all the assessment years in appeals. - Decided in favour of the assessee
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