TMI Blog2013 (8) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1961 (in short 'the Act'). 2. The grounds of appeal raised by the assessee read as under: 1. That the Order passed by the Ld.CIT(A) is contrary to law and facts of the case 2. That the Ld. CIT (A) has erred in law and on facts while taxing the Sales Tax Subsidy amounting to ₹ 5,47,60,9977- received from Government of Gujarat as the revenue receipt and not capital receipt as done by the appellant. 3. Without prejudice to the ground no.2, the Ld.CIT(A) has erred in law and on facts while taxing ₹ 5,47,60,9977- on account of Sales Tax 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 ₹ 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 y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State of Gujarat. Clause 5(ii,(iv) and (x) lays down criteria of the industry which qualifies for the said scheme It was further pointed out by the learned A.R. for the assessee that the sales tax subsidy available to a unit established in Gujarat varies on account of the amount of investment and also the area where it was located. Certain conditions of the said scheme as per the learned A.R. for the assessee were not there in any other scheme. One such condition was wherein the assessee had to contribute 2% of the sales tax incentives availed and 3% of deferred amount to Gokul Gram 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 le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sales tax was collected by the assessee, which was not deposited in the accounts of the Government. This incentive was given after start of the unit but the same could not be stated to be for running the unit, as per the learned counsel. The learned A.R. for the assessee placed reliance on the ratio laid down by the Hon'ble Supreme Court in Ponni Sugars Chemicals Ltd. Vs. CIT [306 ITR 392 (SC)] and pointed out that the purpose of the scheme was a policy enactment for the State and in order to determine the nature of subsidy granted, the purpose of the scheme was determining factor and 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was purely without prejudice to the ground No.2 raised by the assessee that the subsidy received by the assessee arose in the course of business and the same was to be held as business income in the hands of the assessee. Reliance was placed on the ratio laid down by the Chandigarh Bench of the Tribunal in the case of Abhishek Industries Vs. JCIT in ITA No.321/Chd/2009 relating to assessment year 2004-05 order dated 27.9.2011. 9. The learned D.R. for the Revenue pointed out that the issue raised vide ground No.2 in the present appeal is squarely covered by the ratio laid down by the Jurisdictional 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Sahney Steel Press Works Ltd. (supra) had held that the subsidy received by the assessee was in the nature of capital receipt, since the object behind the same was setting up of new unit/expansion of existing business. Further reliance was placed on the decision of the Calcutta High Court in CIT Vs. Rasoi Ltd. (supra) pointing out that the taxability of the receipts given by way of subsidy, essentially boils down to the purpose for which the subsidy was granted. The contention of the assessee was that the purpose of granting exemption from sales tax for a fixed period of time, in the facts 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 158A(1) of the Act and it was pointed out that the issue was identical to the issue raised in assessment years 2003-04 and 200405, where the appeal of the assessee was pending before the Hon'ble High Court. Request was made before us to apply the decision of the Hon'ble High Court in assessment years 2003-04 and 2004-05 to the issue raised in assessment year 2005-06. In view of the above said facts and circumstances and respectfully following the earlier order of the Tribunal in assessee s own case, we confirm the order of the CIT (Appeals) in holding that the sales tax subsidy received 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 ..... 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