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2016 (8) TMI 645 - AT - Income TaxSubsidy amount received - revenue or capital receipt - Held that:- The assistance was not for setting up new unit but the object of the scheme necessarily was to revive the sick units which could only be done by modernization and putting further infrastructure in the form of investment in plant and machinery. The Hon’ble Supreme Court in the case of CIT vs. Ponni Sugar Mills and Chemicals Ltd. (2008 (9) TMI 14 - SUPREME COURT ) after considering the case law of Sahney Steels (1997 (9) TMI 3 - SUPREME Court ) has held that while determining the nature of subsidy the purpose test has to be applied. The Hon’ble Supreme Court has also held in this case that the amount received as subsidy for making repayment of term loans has also to be treated as a capital receipt. The Hon’ble Court has further held that it is the object for which subsidy assistance is given which determines the nature of the subsidy. In the present case receipt of subsidy was capital in nature as the assessee was obliged to utilize the subsidy amount only for making investment in fixed assets and for making repayment of term loans. In a recent decision the Hon’ble Supreme Court has also dismissed an appeal of Revenue in the case of Sh. Balaji Alloys & Ors. Vs. CIT (2011 (1) TMI 394 - Jammu and Kashmir High Court ), wherein the Hon’ble Court relied on its earlier judgment in the case of CIT vs. Ponni Sugars & Chemicals (supra). Therefore, keeping in view the facts and circumstances of the present case and relying on the judgments of Hon’le Supreme Court we hold that the subsidy amount received by assessee was indeed a capital receipt. Grant in aid for making and driving silage pits for cattle - Held that:- The silage pits were to be constructed on the land provided by respective societies and the assessee was only a facilitator for the construction of silage pits. The scheme for construction of silage pits in various parts is placed at (PB page 21 to 27). The scheme was formed to ensure availability of green fodder in kandi area of Dist. Hoshiarpur. We further find that it has not been disputed by authorities below that silage pits had not been constructed by the selected societies. We further find that assessee was not having any beneficiary interest in the amount received as it was acting as a facilitator only. The assessee has implemented the scheme of Govt. for the welfare of the small farmers located in the kandi area of Dist. Hoshiarpur and Gurdaspur. At (PB page 30-31) is placed a copy of ledger account of assessee wherein it has declared an amount of ₹ 61.50 lacs as having received from the Govt. for making payments to various societies, who had constructed the silage pits. As per this ledger account the assessee had received ₹ 61.50 lacs and had spent the same amount by making cheque payments to various societies for constitution of silage pits. Therefore, the assessee had not derived any benefit from this grant and therefore, the finding of the authorities below is not correct and is not justified. In view of the above facts and circumstances we delete the addition confirmed by learned CIT(A) on this account. Penalty levied u/s 271(1 )(c) - Held that:- Assessee had not furnished inaccurate particulars as it had declared the amount received as subsidy in its balance sheet and it was only the nature of subsidy which was disputed by the Assessing Officer and therefore, he had rightly held the penalty was not imposable. While arriving at the conclusion of deleting the penalty, the learned CIT(A) has relied upon the case law decided by Hon’ble Punjab & Haryana High Court in the case of Gurdaspur Cooperative Sugar Mills (2013 (3) TMI 175 - PUNJAB AND HARYANA HIGH COURT) where under similar facts and circumstances, the Hon’ble Punjab & Haryana High Court had deleted the penalty. In view of the above facts and circumstances, we did not find any infirmity in the order of learned CIT(A), therefore, the appeal filed by Revenue is dismissed.
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