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2017 (4) TMI 916 - ITAT DELHI

2017 (4) TMI 916 - ITAT DELHI - TMI - Revision u/s 263 - assessment order treating the subsidy from the Government of Maharashtra as capital receipt is erroneous and prejudicial to the interest of the Revenue - Held that:- Now subsidy given by the Central Government or a State Government or any authority etc. for any purpose, except where it is taken into account for determination of the actual cost of the asset under Explanation 10 section 43(1), has become chargeable to tax. Even if a subsidy .....

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the subsidy received by the assessee from the Government of Maharashtra is a capital receipt and accordingly not chargeable to tax. - It is a settled legal position that if two views are possible on a particular point and the Assessing Officer has taken one of such possible views, it is not open to the CIT to treat the assessment order erroneous and prejudicial to the interest of the Revenue and impose the other possible view as against the one canvassed by the Assessing Officer. The discus .....

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e, and Shri Gaurav Jain and Ms Bhavita Kumar, Advocates For The Deptt. : Shri Naveen Chandra, CIT, DR ORDER PER R.S. SYAL, VP: This appeal by the assessee is directed against the order dated 30.03.2015 passed by the CIT u/s 263 of the Income-tax Act, 1961 (hereinafter also called the Act ) in relation to the assessment year 2008-09. 2. Briefly stated, the facts of the case are that a return declaring total income of ₹ 337.00 crore and odd was filed by the assessee on 25.9.2008. Assessment .....

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f the Act, came to hold that such subsidy received from the Government of Maharashtra was a revenue receipt and hence chargeable to tax. Characterizing the assessment order as erroneous and prejudicial to the interests of the Revenue, he revised the assessment order and directed the Assessing Officer to include the amount of such subsidy in the total income. The assessee is aggrieved against this order. 3. We have heard the rival submissions and perused the relevant material on record. The short .....

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d regional growth, diversion of industry to less developed areas of the State and increase in employment. The Government formulated a scheme for providing refund of VAT to new units/units undertaking expansion within the State of Maharashtra. The relevant text of Industrial Policy of Maharashtra, 2001 is available on page 138 of the paper book. The objective of the Scheme as given in its para 2.0, reads as under:- In the phase of second generation economic reforms, the objective of Maharashtra I .....

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eme was notified by the Government Resolution dated 31.03.2001 as Maharashtra PSI Scheme 2001. A copy of such Notification is available from page 153 onwards of the paper book. The said Package Scheme of Incentives, 2001 was amended vide Government Resolution dated 02.06.2005, whose copy is available from page 187 onwards of the paper book. The introduction part of this Resolution dated 2nd June, 2005 elaborates that Incentive Scheme 2001 is in existence and special incentives to the medium and .....

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ent is available from page 194 of the paper book. Under this MoU, the assessee undertook to make additional investment of around ₹ 535 crore over and above the investment made as on 11th August, 2005, towards further expansion of the existing project at Ranjangaon, Pune and also to generate additional employment of 2000 persons by 2010. The State Government, in turn, offered the following incentives to the assessee:- 2.2.1. Exemption from payment of Electricity duty for 15 years. 2.2.2. In .....

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dy, the Government would deduct the amount of benefits availed at 2.2.1 above over a period of 7 years. The modalities of paying the subsidy amount will be determined shortly. 6. On going through the relevant clauses of the Incentive Scheme and MoU, it emerges that the assessee agreed to make additional investment in the Maharashtra State and also undertook to give additional employment and, as a quid pro quo, the Government agreed to allow exemption from payment of electricity duty and subsidy .....

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revenue receipt largely depends on the purpose of the grant and not the mode of its discharge. The relevant consideration in this regard is, therefore, the purpose test. If the purpose or object of a Scheme is the setting up new industry or its expansion, then, the subsidy so received assumes the character of a capital receipt irrespective of the form in which it is disbursed. The Hon'ble Supreme Court in the case of CIT vs. Ponni Sugars and Chemicals Ltd. (2008) 306 ITR 392 (SC), has laid d .....

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idy received for setting up of or expansion of industry falls in the realm of Capital receipt which is not chargeable to tax. 7. Adverting to the facts of the instant case, we find that the assessee received the extant subsidy for accelerating flow of investment in industry in the State of Maharashtra i.e., for expansion of the industry. The subsidy resulting from such industrial expansion is ex consequenti governed by the judgment of the Hon'ble Supreme Court in the case of Ponni Sugars and .....

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e Tribunal in Everest Industries Ltd. vs. ACIT (ITA No.814/Mum/2007), vide its order dated 04.12.2009, has held such subsidy to be capital in nature. A copy of such order has been placed from page 570 onwards of the paper book. Similar view has been taken by the Pune Bench of the Tribunal in the case of Rohit Exhaust Pvt. Ltd. vs. ACIT in ITA No.1880/Pn/2013. A copy of such order dated 31.03.2015 is also available from page 608 of the paper book. The Delhi Bench of the Tribunal in Indo Rama Synt .....

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without reduction of such subsidy. To deal with such a situation, the Finance Act, 2015, w.e.f. 1-4-2016, has enlarged the definition of income given u/s 2(24) by inserting sub-clause (xviii), which reads as under:- (xviii) assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee other than th .....

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