TMI Blog2016 (7) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment rendered by the Bombay High Court in CIT v. Reliance Industries Ltd. (2009 (4) TMI 516 - Bombay High Court ) would govern the issue on hand. Since the object of the subsidy in the form of sales tax incentive was to set up a new unit in a backward area so that employment could be generated, it is a capital receipt and not revenue receipt. Hence, the Revenue authorities committed serious error in holding it as revenue receipt. - Decided in favour of assessee. - Special Civil Application No. 2677 of 2005 - - - Dated:- 29-7-2016 - K. S. Jhaveri And G. R. Udhwani, JJ. For the Petitioner : Manish J. Shah, Advocate For the Respondents : Sudhir M. Mehta, Advocate JUDGMENT K. S. Jhaveri, J. 1. By way of this p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner, submitted that the petitioner had invested more than ₹ 100 crores in a new industrial unit, according to the new industrial policy/scheme of the State Government dated October 16, 1990. The said unit fulfilled all the criteria mentioned in the Scheme. Under the Scheme, the petitioner was entitled to choose between sales tax exemption and sales tax deferment. The petitioner chose sales tax exemption. Pursuant to the implementation of the Scheme, the petitioner began to retain sales tax from the assessment year 1995-96, being the first year of the total period of 8 years, for which the petitioner was entitled to retain under the Scheme. It was submitted that the said receipt of sales tax was a payment of subsidy by the State Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [2013] 32 taxmann.com 330 (Guj) wherein similar principle has been laid down. 5. Mr. Sudhir Mehta, learned standing counsel for the Revenue, submitted that the petitioner has not complied with the requirement of Explanation 10 to section 43(1) of the Act, which itself shows that the petitioner did not consider it as subsidy and considered it as revenue receipt. Sales tax incentives were available to the assessee after the company had begun production. No incentives were available prior to setting up of industrial unit. It was also submitted that the assessee had made divergent claims before the Assessing Officer and the Commissioner of Income-tax (Appeals), which proves that the claim made by the assessee is not sustainable. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng up of industries in the backward area. 8. In our opinion, the judgment rendered by the Bombay High Court in CIT v. Reliance Industries Ltd. (supra) would govern the issue on hand. Since the object of the subsidy in the form of sales tax incentive was to set up a new unit in a backward area so that employment could be generated, it is a capital receipt and not revenue receipt. Hence, the Revenue authorities committed serious error in holding it as revenue receipt. 9. For the foregoing reasons, the petition is allowed. The impugned order dated November 17, 2004 passed by the Commissioner of Income-tax-I, Surat, under section 264 of the Act is quashed and set aside and it is held that subsidy in the form of sales tax incentive is a ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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