9911796707
TMI Blog2013 (8) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... Exemption/Subsidy received from Government of Gujarat as 'Income from other Sources". 4. That the appellant craves leave to add/amend/alter any grounds of appeal on or before the date of hearing. 3. The issue raised in the present appeal is in relation to the assessability of sales tax subsidy received from the Government of Gujarat amounting to Rs. 5,47,60,997/-. 4. The brief facts relating to the issue are that the assessee was engaged in the manufacturing of acrylic fabric and had production unit at Jhagadia, District Bharuch in Gujarat. The assessee was eligible for sales tax exemption for 12 years under the new Incentive Policy - Capital Investment Incentive to Premier/Prestigious Unit Scheme 1995- 2000. The sale tax subsidy of Rs. 5.47 crores received by the assessee were treated as capital receipt by the assessee in the revised return filed. The Assessing Officer asked the assessee to explain why the said sales tax subsidy should not be treated as revenue receipt in view of the judgment of the Jurisdictional High Court in CIT Vs. Abhishek Industries [286 ITR 1(P&H)]. The reply of the assessee is incorporated at pages 2 and 3 of the assessment order. The Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yojna. Another condition prescribed was that unit availing the incentives under the scheme to employ 85% of the local persons as its employees. Further it was provided under the scheme that the unit shall reinvest an amount equal to 50% of the sales tax incentives granted under the scheme in new projects in the State within 15 years after commencing commercial production. The learned A.R. for the assessee pointed out that the unit established by the assessee was prestigious unit and registration certificate was granted on 18.5.2002 and the date of start of commercial production was 6.3.1999. The learned A.R. for the assessee referred to the ratio laid down by the Jurisdictional High Court in CIT Vs. Abhishek Industries (supra) and pointed out that the same is not binding precedent as the policy of the State Government of Punjab was not before the Hon'ble High Court and the entire case before the Hon'ble High Court moved in the absence of the policy, documents of state or industrial policy. It is pointed out by the learned A.R. for the assessee that for deciding the issue the scheme needs to be brought on record. Reliance was placed on the ratio laid down by the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd timing of release of the amount under the scheme was irrelevant and even the source of such subsidy was irrelevant. The learned A.R. for the assessee further contended that the scheme of the Government of Gujarat which was being followed by the assessee was for a period of 12 years and the industrial policy formulated under the scheme had to be looked into to determine the purpose of the scheme. The learned A.R. for the assessee pointed out that both the decisions in Sahney Steel & Press Works Ltd. Vs. CIT (supra), Ponni Sugars & Chemicals Ltd. Vs. CIT (supra) did not differ that in order to determine the nature of subsidy the purpose for which it was given, was to be seen. Both the decisions of the Hon'ble Apex Court, however, differ on the issue of timing of release of the subsidy under the respective schemes. The learned A.R. for the assessee pointed out that under the scheme, the object of the scheme was to provide employment to the local persons and further 50% of the incentive was to flow back by way of investment in establishing new unit in the State of Gujarat itself, which was in addition to 2% of the amount to be donated to Gram Panchayat. It was further clarified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdictional High Court in the case of CIT Vs. Abhishek Industries Ltd. (supra). It was further pointed out that the treatment of subsidy by the assessee in its books of account was also determinative as the assessee was treating it as revenue receipt. In respect of utilization of the scheme it was claimed by the learned D.R. for the Revenue that the same had to be offset against the objectives of the scheme i.e. payment of wages to the employees. 10. We have heard the rival contentions and perused the record. The issue in the present appeal is against the treatment of incentives granted to the assessee under the premium/prestigious unit scheme 1995-2000 of Gujarat. Admittedly similar sales tax subsidy was received by the assessee in assessment years 2003-04 to 2005-06 and the same was held as revenue in nature. The Tribunal in ITA Nos.592 & 824/Chd/2007 relating to assessment years 2003-04 and 2004-05 vide order dated 31.1.2008, following the ratio laid down by the Hon'ble Punjab & Haryana High Court in CIT Vs. Abhishek Industries Ltd. (supra) had decided the issue against the assessee. The assessee is in appeal against the said order of the Tribunal and the matter is sub-judic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the present case, was clearly to provide incentives for establishment of new industry in the underdeveloped region of the State. As the intention was not to increase the profitability of the eligible unit, the said incentive received by the assessee was capital receipt not liable to tax. Further it was pointed out by the learned A.R. for the assessee that the facts of the present case are squarely covered by the recent decision of the Hon'ble Gujarat High Court in the case of CIT Vs. Birla VXL (supra), which while adjudicating the issue of taxability of subsidy granted under the scheme had held that the subsidy granted for the development of industries in underdeveloped areas was principally aimed to cover the capital outlay of the eligible unit and was capital receipt. Further reliance was placed on the ratio laid down in DCIT Vs. Maruti Suzuki India Ltd. (supra) and Shree Balaji Alloys Vs. CIT (supra). The learned A.R. for the assessee pointed out that the decision of the Hon'ble Punjab & Haryana High Court in CIT Vs. Abhishek Industries Ltd. (supra) was not applicable to the facts of the present case. It was further pointed out that the Hon'ble Punjab & Haryan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the assessee is revenue in nature. The ground Nos.1 and 2 raised by the assessee are thus dismissed.
13. The issue in ground No.3 raised by the assessee is against the order of the CIT (Appeals) in holding the sales tax subsid y received by the assessee as taxable under the head 'income from other sources'. The plea of the assessee in this regard was that if the contention of the Assessing Officer/CIT (Appeals) was to be accepted that the subsidy was in the nature of operational subsidy given to boost the profits of the assessee, the same should be bought to tax under the head business income. We are in conformity with the submission of the assessee that the subsidy received by the assessee held to be revenue receipt, being linked to the business activity, is taxable in the hands of the assessee as business income. Reversing the order of the CIT (Appeals) we direct the Assessing Officer to include the subsidy received by the assessee as income from business. The ground No.3 raised by the assessee is thus allowed.
14. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on this day of July, 2013. X X X X Extracts X X X X X X X X Extracts X X X X
|
