9911796707
TMI Blog2018 (1) TMI 515X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case the learned ITAT is justified deleting the addition of Rs. 3,24,17,009/- made by the AO on account of disallowance of claim of VAT reimbursement. 4. Counsel for the appellant has taken us through the judgment of the Tribunal and contended that the Tribunal has seriously committed an error in allowing the appeal of the assessee and dismissing the appeal of the Department. 4.1 However, learned counsel for respondent has relied upon following decisions: 1. Commissioner of Income Tax, Madras vs. Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392 (SC), wherein it has been observed as under: 14. In our view, the controversy in hand can be resolved if we apply the test laid down in the judgment of this Court in the case of Sahney Steel and Press Works Ltd. (supra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant. 15. In the decision of House of Lords in the case of Seaham Harbour Dock Co. v. Crook (1931) 16 TC 333 the Harbour Dock Co. had applied for grants from the Unemployment Grants Committee from funds appropriated by Parliament. The said grants were paid as the work progressed the payments were made several times for some years. The Dock Co. had undertaken the work of extension of its docks. The extended dock was for relieving the unemployment. The main purpose was relief from unemployment. Therefore, the House of Lords held that the financial assistance given to the company for dock extension cannot be regarded as a trade receipt. It was found by the House of Lords that the assistance had nothing to do with the trading of the company because the work undertaken was dock extension. According to the House of Lords, the assistance in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvironment, having the potential of employment generation to achieve a social object. Such incentives, designed to achieve Public Purpose, can not, by any stretch of reasoning, be construed as production or operational incentives for the benefit of assesses alone. 27. Thus, looking to the purpose, of eradication of the social problem of unemployment in the State by acceleration of the industrial development and removing backwardness of the area that lagged behind in Industrial development, which is certainly a purpose in the Public Interest, the incentives provided by the Office Memorandum and statutory notifications issued in this behalf, to the Appellants-assesses, cannot be construed as mere Production and Trade Incentives, as held by the Tribunal. 28. Making of additional provision in the Scheme that incentives would become available to the industrial units, entitled thereto, from the date of commencement of the commercial production, and that these were not required for creation of New Assets cannot be viewed in isolation, to treat the incentives as production incentives, as held by the Tribunal, for the measure so taken, appears to have been intended to ensure that the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the state of Bihar and to create favorable environment to attract the investors of state and from abroad. The thrust of the policy was growth in the per capita income of the state and industrial growth as well as accelerated employment opportunities. Under this Industrial Incentive Policies-2006, there are provisions for granting pre-production incentive of subsidy/exemption from stamp duty and registration fee and post production incentive of grant/exemption for preparation of project reports, purchase of land/shed, technical know- how, captive power generation/diesel generating set, subsidy/incentive on Vat, exemption in luxury tax, electricity duty, conversion fee, market fee etc. 5.17 Under the said policy, one of subsidy/incentive available to the new units, which is under consideration before us, is the reimbursement to the extent of 80% against the admitted VAT amount deposited in the account of the Government for a period of 10 years. The maximum subsidy/incentive amount was restricted to 300% of the capital employed. Applying the purpose test, the objective and the purpose of providing the VAT subsidy (to the extent of 300% of capital employed) is clearly related to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash or kind to the assessee other than the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provisions of Explanation 10 to clause (1) of section 43." 5.20 In light of above amendment in the definition of income, any 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 is given to attract industrial investment or expansion, which is a otherwise a capital receipt under the pre-amended era, shall henceforth be treated as income chargeable to tax, except where it has been taken into account for determining the actual cost of assets in terms of Explanation 10 to section 43(1). This amendment is with effect from 1-4-2016 and is prospective in its application. In the instant case, as the assessment year under consideration is 2009-10, Section 2(24)(xviii) shall have no operation. 5.21 In light of above discussions and in the entirety of the facts and circumstances of the case, VAT s ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
