TMI Blog2011 (11) TMI 731X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 2,83,05,017 for AY 1993-94 granted by the Government of Gujarat is a capital receipt or a revenue receipt. 3. The brief facts governing the issue are that the assessee claimed the impugned amounts of sales-tax which has been included in the sales figure for the years under consideration and had been granted exemption by the state Government under its Industrial policy for encouraging development, expansion and modernization of industries in backward areas of Gujarat State, to be treated as a capital receipt and therefore it should be excluded from income. The matter travelled upto the Tribunal . The Tribunal restored the matter to the file of the assessing officer to decide the same afresh in the light of decision of the Special Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the sales-tax exemption granted to the assessee was capital receipt not liable to tax since the same was received under the incentive scheme of the State government with the object of encouraging the development and expansion of industries in backward areas. The ITAT had restored the matter to the file of the assessing officer to give effect to the judgment of the ITAT, Mumbai Special Bench in the case of DCIT vs RIL 88 ITD 273 (Mum). The main plank of difference of opinion maintained by the assessing officer is that the scheme of Gujarat Government did not have the features as that of the scheme brought out by the Maharashtra government. The reliance placed by the assessee on the judgment of the Supreme Court in the case of Ponni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment in the earthquake affected district. The purpose is to generate employment in the said district. We find that under identical set of facts, the ITAT, Rajkot Bench in the case of Ajanta Manufacturing Ltd ITA No.793/RJT/2010 order dated 23-09-2010 has decided the issue in favour of the assessee by holding as under: 17. The Hon ble Supreme Court in the case of Sahney Steel and Ponny Sugar has laid down the principle that the character of the subsidy whether revenue or capital in the hands of the recipient will have to be determined by having regard to the purpose or which subsidy is given. Thus, the said decision though relied by the revenue, actually supports the case of the assessee. 18. The A.O. himself has in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im. We therefore hold that making of claim in the assessment proceedings and not through a return of income is not fatal on the facts of the case. 19. In the course of hearing on the first day, one of us had pointed out to the ld.A.R. that the ITAT Ahmedabad camping at Baroda has decided issue as regard nature of incentives. The ld.A.R. obtained the decision through professional contacts and dealt with it in the course of second hearing. The decision dtd 24- 3-2010 is in the case of M/s Zincollied (India), (ITRA No.999, 2467 3426 of 2008). The ld.A.R. distinguished the facts of the case before the Ahmedabad Bench and the facts in the case before us. The relevant scheme in the aforesaid case was scheme notified by Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and by the case laws cited before us. Even the decision of Sahney Steel cited by the revenue before us effectively supports the case of the assessee. We were also informed by the ld.A.R. Shri Mahesh Sarda by submitting copy of the decision dtd 15-4-2009 of High Court of Bombay by which, the Hon ble High Court has affirmed the Special Bench decision in the case of Reliance Industries Ltd. Our specific attention was invited to para 4 of the order. So far as question (B) is concerned, the Tribunal relied upon the ITAT Mumbai Bench J (Special Bench) decision in the case of assessee itself in Deputy Commissioner of Income-tax v. Reliance Industries Ltd. = (2003 TIOL 14 ITAT MUM SB) we may gainfully reproduce the followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business operations. The object of the subsidy was to encourage the setting up of industries in the backward area. Thus it can clearly be seen that a finding has been recorded that the object of the subsidy was to encourage the setting up of industries in the backward area by generating employment therein. In our opinion, in answering the issue, the test as laid down by the Supreme court in Commissioner of Income-tax v. Ponni Sugars and Chemicals Ltd (2008) 306 ITR (SC) = (2008) TIOL 174 SC IT) will have to be considered. The Supreme court has held that the test of the character of the receipt of a subsidy in the hands of the assessee under a scheme has to be determined with respect to the purpose for which the subsidy ..... X X X X Extracts X X X X X X X X Extracts X X X X
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