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2017 (4) TMI 44 - AT - Income TaxNature of sales tax incentive / Refund of sales tax - revenue receipt OR Capital subsidy - Held that:- In the present case, the incentive in the form of refund of sales tax is on account of setting up of new industrial unit with twin objective of balance development of regions and generation of employment. As per the scheme there are two modes of payment of Industrial Promotion Subsidy. The subsidy to the extent of 75% of the eligible investments as reduced by the benefit of electricity duty exemption and stamp duty exemption or to the extent of taxes paid to the State Government within a period of 7 years, whichever is lower. It is not the choice of the assessee to opt for either of the two modes. The beneficiary under the Scheme will receive the subsidy after comparative analysis of both the modes, whichever is lower. The assessee is eligible to claim the incentive subject to the compliance of certain conditions mentioned in the PSI 2007 scheme, subject to the maximum limit as specified in the scheme. Since the assessee is eligible to qualify in the latter part of the scheme, the assessee is receiving incentive/subsidy in the form of refund of sales tax from the State Government. As far as the purpose of subsidy is concerned, it is quite evident that it is for setting up of new Mega Project in the classified area. Hence, the decision of Coordinate Bench of the Tribunal in the case of Rasiklal M. Dhariwal (HUF) Vs. DCIT (2011 (3) TMI 1619 - ITAT PUNE ) would not apply in the facts and circumstances of the case. Thus, in the facts of the case and in the light of various decisions discussed above, we hold that the incentive received by the assessee under the PSI, 2007 scheme in the form of refund of sales tax is Capital receipt, not liable to tax.
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