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2022 (2) TMI 533 - HC - Income TaxSubsidy granted in terms of the West Bengal Incentive Scheme 2000 - Taxation in the assessment years under consideration -Tribunal dismissed the appeal of the revenue holding, that the subsidy cannot be the subject matter of taxation in the years under appeal as the same got released/sanctioned only in the financial year 2009-2010 - HELD THAT:- Subsidy is immaterial and the main eligibility condition of the scheme has to be looked into and if the same is taken note of it is evidently clear from the scheme that the subsidy was for the purpose of encouraging establishment of large, medium and small scale industrial units in the State of West Bengal. As pointed out by the Hob’ble Supreme Court the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit and, therefore, the receipt of the subsidy was on capital account. The test to be applied is the object for which the subsidy/assistance is given under the incentive scheme and the form or mechanism through which the subsidy is given would be irrelevant. The decision in Ponni Sugars and Chemicals Ltd. [2008 (9) TMI 14 - SUPREME COURT] was taken note of and this court has granted relief to the assessee in Rasoi Ltd.[2011 (5) TMI 23 - CALCUTTA HIGH COURT]. Subsequently in the case of Principal Commissioner of Income Tax-I, Kolkata Vs. Shyam Steel Industries Ltd. [2018 (5) TMI 702 - CALCUTTA HIGH COURT] following the decision in Ponni Sugars and Chemicals Ltd. it was pointed out that the scheme in the said case being available only to new units and units which have undergone an expansion, the real purpose of the incentive has to be seen as capital subsidy and has to be recorded as such, as capital receipt and not a revenue receipt. That apart we also take note of the communication sent by the Joint Secretary to the Government of West Bengal, Commerce and Industries Department to the Managing Director, West Bengal Industrial Development Corporation dated 23rd March, 2007 wherein it has been stated that the State Government has approved the package for the assessee for setting up an Edible Oil Refinery Plant and Captive Power Generation unit and the reimbursement of 75% of the sales tax paid has been termed as Industrial Promotion Assistance. Thus, we have no hesitation to hold that the Tribunal had rightly rejected the appeal filed by the revenue and granted relief to the assessee. Invoking Section 41(1) - Tribunal rightly held that the said provision could be invoked only when assessee had claimed deduction in earlier year at the time of creation of liability and if the said liability ceases to exist then the provision of Section 41(1) of the Act could not be invoked. Taking note of the facts of the assessee’s case the Tribunal has held assessee has not claimed any deduction in the earlier year towards the sales tax portion of the subsidy and hence the provision of Section 41(1) of the Act cannot be invoked in the facts of the assessee’s case. The findings rendered by the Tribunal clearly point out the correct legal position. - Decided against revenue.
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