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2016 (6) TMI 1023 - GUJARAT HIGH COURT

2016 (6) TMI 1023 - GUJARAT HIGH COURT - TMI - Deduction under Section 80 HHC on export profits arrived at on the basis of the export turnover and the total turnover exclusive of Excise duty and Sales-tax - Held that:- Issue is squarely covered by the decision of the Apex Court in the case of Commissioner of Income Tax v. Lakshmi Machine Works reported in [2007 (4) TMI 202 - SUPREME Court ] - Sales-tax incentive - revenue or capital receipt - Held that:- he issues involved in these appeals a .....

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siness, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking special modernization of its existing industry . Therefore, the questions of law posed for our consideration in these appeals are answered in favour of the assessee - TAX APPEAL NO. 226 of 2010 With TAX APPEAL NO. 1214 of 2005 With TAX APPEAL NO. 504 of 2012 With TAX APPEAL NO. 345 of 2014 - Dated:- 8-6-2016 - MR. KS JHAVERI AND MR. G.R.U .....

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as under:- Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT (A) and thereby holding that amount of Sales-tax incentive received by the assessee is a capital receipt? 3. The questions of law framed at the time of admitting Tax Appeal No.1214 of 2005 reads as under:- 1. Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT (A) to compute deduction u/s.80 HHC on export profits arrived at on the basis of the .....

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Tribunal is right in holding that the interest u/s. 234D of the Act is leviable only from A.Y.2004-05 and accordingly deleting the levy of interest u/s. 234D of the Act 5. The question of law framed at the time of admitting Tax Appeal No.345 of 2014 reads as under:- 2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT(A) and hereby holding that amount of Sales-tax Incentive of ₹ 1,17,45,309/- .....

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ssued as to Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT (A) and in directing the Assessing Officer to consider the Sales-tax exemption benefit of ₹ 5,45,81,171/- as capital receipts is concerned, Mr.Mehta contended that in view of the decision of the Calcutta and Punjab High Court, the Tribunal has committed an error in reversing the view taken by CIT (Appeals) so far as Tax Appeal No.226 of 2010 is concerned, wherein the CIT (A), after .....

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of refund of sales-tax received after commencement of production cannot be treated as capital receipt. 8. On the other hand, Mr.Soparkar, learned counsel appearing for the respondent contended that so far as Tax Appeal No.226 of 2010 is concerned, after discussing the evidence on record, the Tribunal has followed earlier decision and discussed the issue in detail in para 54 and 55 of its decision, which reads as under:- 54. Per contra, the learned D.R. Supported the orders passed by the Assessi .....

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of the assessee in not reducing the cost of assets by the amount of subsidy for working out the Written Down Value was indicative of the fact that the impugned receipts were not in the nature of capital receipts. 55. We have heard both the parties and considered their rival submissions. Perusal of the scheme extending the aforesaid incentives to prestigious units announced by Government of Gujarat on 26/07/91 makes it amply clear that the scheme was announced to attract investment in core secto .....

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s clear that the object of both the scheme was to ensure development of backward areas or for development of core sector industries in the State or for generating the employment. Perusal of both the schemes shows that the incentives extended to the eligible units were, inter alia, through exemption from payment of Sales Tax. Thus, the object of both the schemes was to attract capital investment to ensure development of backward areas and the modality or mechanism chosen to attract such investmen .....

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the present case. In the case of Commissioner of Income-tax v. Birla VXL Ltd. (supra), this Court has observed as under:- 12. It can thus be straightaway seen that the benefit, though computed in terms of the Sales Tax liability in the hands of the recipient, the same was not mean to give any benefit on day-to-day functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by the assessee in undertaking spe .....

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merges that the subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various investments in land under use, new construction, pl .....

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hat the character of the subsidy in the hands of the recipient whether revenue or capital will have to be determined, having regard to the purpose for which the subsidy is given. The source of fund is quite immaterial. If the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes. But, if monies are given to the assessee for assisting him in carrying out the business operations and given after the satis .....

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puted in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. Fixed capital investment has been defined as to include various investments in land under use, new construction, plant and machinery etc. The entitle .....

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