2024 (4) TMI 1176 - HC - Income Tax

Addition of Advertisement Marketing and Promotion AMP and subsidy - HELD THAT - While Appelant would seek to draw sustenance from the decision rendered by the Court in Bhushan Steels Strips Ltd 2017 (7) TMI 501 - DELHI HIGH COURT we prima facie are of the opinion that the said decision would clearly be distinguishable since in that particular case the issue of subsidy and the same being revenue in character appears to have rested upon the fact that the units there had already been set up. As we read the provisions of the Industrial Promotion Assistance IPA Scheme as framed by the State of West Bengal the receipt of subsidies was clearly linked to a total investment exceeding INR 25, 00, 00, 000/- being made and would have become payable on commencement of commercial production. It therefore appears to be clearly linked to the establishment of new units and capital expenditure which would be incurred in connection therewith. Insofar as the issue of AMP is concerned since both sides seek an opportunity to address submissions in greater detail let these appeals be re-notified on 16.05.2024.

Summary

Issues:
1. Interpretation of Section 14A(2) of the Income Tax Act, 1961, interest on receivables, and ICC sponsorship.
2. Pricing support issue based on ITAT decision for AY 2006-07.
3. Advertisement, Marketing, and Promotion (AMP) issue.
4. Subsidy issue from the Government of West Bengal and Maharashtra.

Analysis:
1. The High Court noted that issues related to Section 14A(2) of the Income Tax Act, interest on receivables, and ICC sponsorship were concluded by ITAT findings and did not raise substantial questions of law.
2. Regarding pricing support, the Court mentioned that the ITAT considered its decision for AY 2006-07, which had been dismissed by the Court in ITA 474/2017.
3. The remaining issues were AMP and subsidy. The AMP issue was common in all appeals, while the subsidy issue arose in specific appeals.
4. The ITAT observed that the subsidy received from the Government of West Bengal for new projects was capital in nature and not taxable as revenue receipts. The Court differentiated this case from a previous decision based on the purpose and nature of the subsidy.
5. The Court considered the purpose of the subsidy under the West Bengal Incentive Scheme and linked it to capital investment exceeding a certain amount for new units, indicating its capital nature.
6. The Court distinguished a previous decision related to subsidy character based on the establishment of units, highlighting the specific conditions of the IPA Scheme in West Bengal.
7. The Court deferred detailed submissions on the AMP issue to a later date for further consideration.