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TMI Blog2018 (5) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... y for alleged non-deduction of TDS on reimbursement of octroi expenses. 2. The learned CIT(A) erred in facts in making an observation that the appellant has not demonstrated the bifurcation between octroi charges and transport charges from any bill of transporter. The learned CIT(A) ought to have appreciated that the bills of the Saraswati Transport Company submitted by the appellant mention the said two elements separately. 3. The learned CIT(A) erred in law and on facts in sustaining the disallowance of amortization of expenses incurred on account of increase in share capital of the company in AY 2008-09 amounting to Rs. 23,300/-. 4. The issue in grounds of appeal No.1 and 2 raised by the assessee is against disallowance of Rs. 1,97,738/- paid to Saraswati Transport Company for non-deduction of TDS on reimbursement of octroi expenses. 5. Briefly, in the facts of the case, the assessee was engaged in the manufacturing and sale of automatic parking systems. The assessee during the year under consideration had furnished the return of income declaring Nil income. The case of assessee was picked up for scrutiny. The first issue which was taken up by the Assessing Officer was l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve;-vis the same. The learned Authorized Representative for the assessee also referred to form No.16A issued to Saraswati Transport Company placed at page 49 of Paper Book, under which the TDS was deducted only out of transport charges and not out of octroi charges, since it was reimbursement of expenses. 9. The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below. 10. We have heard the rival contentions and perused the record. The limited issue which arises in the present appeal is whether the assessee was in default in not deducting TDS out of payments made to Saraswati Transport Company on account of reimbursement of expenses of octroi charges. The assessee had utilized services of Saraswati Transport Company and had paid transport charges to the said concern. There is no default in deduction of tax at source out of aforesaid transport charges paid to said concern. However, the assessee was held to be in default in not deducting tax at source out of octroi payments. The assessee before us has filed necessary evidence in this regard that in each of the bills raised by the said concern Saraswati Transport Company, separately the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Incentive, 2007 of the Govt. of Maharashtra, which is placed at pages 44 to 72 of Paper Book. He also referred to the letter of provisional sanction of Industrial Promotion Subsidy Scheme dated 31.08.2012, placed at page 43 of Paper Book. He stressed that the assessee was eligible to get the said subsidy under PSI Scheme of 2007 and the said receipt in the hands of assessee was a capital receipt. He further stated that the issue stands covered by the order of Tribunal in the case of Innoventive Industries Ltd. Vs. DCIT in ITA Nos.601/PN/2013 and 215/PN/2014, relating to assessment years 2009-10 and 2010-11, order dated 24.03.2017. He also referred to the decision of the Hon'ble Supreme Court in CIT Vs. Shree Balaji Alloys (2017) 287 CTR 459 (SC). 14. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. 15. We have heard the rival contentions and perused the record. The only issue which arises in the present appeal is the treatment of subsidy of Rs. 26,37,000/- received by the assessee from Govt. of Maharashtra. The assessee explained that under the Package Scheme of Incentive, 2007, the Govt. of Mahar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce from the State Government. The relevant extract of the Preamble of PSI, 2007 reads as under : "PREAMBLE In order to encourage the dispersal of industries to the less developed areas of the State, Government has been giving a Package of Incentives to New / Expansion Units set up in the developing region of the State since 1964 under a Scheme popularly known as the Package Schemes of Incentives. The Package Scheme of Incentives, introduced in 1964, was amended from time to time. The last amended Scheme, commonly known as the 2001 Scheme is operative from the 1st April, 2001 to 31st March, 2007. The State has declared the new Industrial, Investment, Infrastructure Policy 2006 to ensure sustained industrial growth through innovative initiatives for development of key potential sectors and further improving the conducive industrial climate in the State, for providing the global competitive edge to the State's industry. The policy envisages grant of fiscal incentives to achieve higher and sustainable economic growth with emphasis on balanced Regional Development and Employment Generation through Greater Private and Public Investment in industrial development. The Package ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the period of 7 years from the date of commencement of commercial production. 2.2 100% exemption from payment of Stamp Duty. 2.3 Industrial Promotion Subsidy (IPS) equivalent to 75% of "ELIGIBLE INVESTMENTS (as defined in PSI 2007 )" made w.e.f 28th March, 2007 and made within such a period stipulated in the Package Scheme of Incentives 2007. The IPS will however be limited to 75% of ADAPL's eligible investments less the amount of benefits availed at Sr.No.2.1 & 2.2 as per the period prescribed therein or to the extent of taxes paid to the State Government within a period of 7 years whichever is lower. 3. The IPS mentioned at 2.3 will be admissible only after the company employs 500 number of persons on regular basis within one year from the date of commencement of commercial production at the proposed project and at least 75% of these employees are local persons." 19. A bare perusal of the Preamble to PSI, 2007 shows that the incentives are offered by the State Government to the entrepreneurs for making investment and setting up of new industries in the lesser developed areas of the State of Maharashtra. The scheme envisages grant of fiscal incentives to achieve highe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in classified Area C of the State of Maharashtra and upon providing employment to more than 500 persons, as specified under the scheme. 21. One of the objection raised by the CIT(A) in rejecting the claim of assessee is that the assessee has failed to complied with only one of the two criterias laid down under the PSI, 2007 for claiming benefit of Industrial Promotion Subsidy, i.e. employment criteria. The other condition of minimum investment is not fulfilled. According to Memorandum of Understanding, the assessee was required to invest approximately Rs. 117 cores and offer employment to 510 persons. A perusal of the eligibility certificate dated 17-03-2009 at page 112 of the paper book shows that as against expected investment of Rs. 117 crores the assessee had made investment of Rs. 94.53 crores between 28-03-2007 to 05-12-2008. The assessee had started commercial production on 01-12-2008. The total period of investment available with the assessee is from 28-03-2007 to 27-03-2012. Thus, there was still time available with the assessee to make further investment. The assessee vide letters dated 28-03-2007 and 31-11-2011 had requested the Government to consider the level of inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion (from 01.12.2008 to 30.11.2015). (2) 100% exemption from payment of Stamp Duty. (3) Industrial Promotion Subsidy (IPS) equivalent to 75% of your Eligible Investments i.e.Rs.11700.00 lacs to be made w.e.f. 28.03.2007. 1. Limited to 75% of your eligible investments less the amount of benefits availed at Sr. 1 & 2 above as per the period prescribed therein OR 2. To the extent of taxes paid to the State Government within a period of 7 years, whichever is lower. The afore stated incentives shall be sanctioned and released upon submission of land use conversion to industrial purpose permission and building plan approvals from competent authority on or before 02.03.2010." It is evident from the eligibility certificate issued by Directorate of Industries, Government of Maharashtra that the assessee has received benefit of subsidy for Mega Project after qualifying all the conditions set out in PSI, 2007. 23. The Hon'ble Supreme Court of India in the case of Ponni Sugars and Chemicals Ltd. (supra) has laid down certain principles to determine the nature of subsidy, they are : (a) The object of subsidy scheme - If the scheme was to enable the assessee to run the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steel (supra) and Ponni Sugars (supra), therefore, reveals that the apex Court had applied the above quoted dictum to determine the purpose, which the two schemes had intended to achieve by the incentive subsidies, permissible under the schemes in question in those cases. It was, therefore, in the context of respective subsidy incentive schemes in the two cases, that the subsidy in Sahney Steel (supra) was held to be revenue receipt whereas the subsidy in Ponni Sugars & Chemicals Ltd. (supra) was held as capital receipt. 17) We are supported in taking this view by the observations made by the Hori'ble Supreme Court of India in a later decision reported as Mepco Industries Ltd. vs. CIT & Anr. (2009) 227 CTR (SC) 313 : (2009) 31 DTR (SC) 305 : 2009 (7) SCC 564, where the above dictum was reiterated as follows: "........Sahney Steel & Press Works Ltd. Etc. (supra) was a case which dealt with production subsidy, Ponni Sugars & Chemicals Ltd. (supra) dealt with subsidy linked to loan repayment whereas the present case deals with a subsidy for setting up an industry in the backward area. Therefore, in each case, one has to examine the nature of the subsidy. The judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r concessions for the State of Jammu and Kashmir has not been correctly appreciated by the Appellate Tribunal, we proceed to examine the true intent and purpose underlying the Policy and the Concessions contemplated by the Office Memorandum of June 14, 2002 and statutory notifications issued in this behalf. 22) Perusal of the Office Memorandum dated 14.06.2002 indicating New Industrial Policy and other concessions for the State of Jammu and Kashmir, makes it explicit that the concessions were issued to achieve twin objects viz. (i) Acceleration of industrial development in the State of Jammu and Kashmir, which had been found lagging behind in such development and (ii) Generation of employment in the State of Jammu and Kashmir. Amendment introduced to the Office Memorandum vide Notification of November 28, 2003 of the Government of India, Ministry of Commerce and Industry (Department of Industrial Policy and Promotion) eloquently demonstrates the Central Government's intention in extending the incentives. The Government's objective, as conveyed by Hon'ble the Prime Minister at Srinagar on April 19, 2003, was, for creation of one lac employment and self employment oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 incentives were made available only to the bonafide Industrial Units so that larger Public Interest of dealing with unemployment in the State, as intended, in terms of the Office Memorandum, was achieved. 29) The other factors, which had weighed with the Tribunal in determining the incentives as Production Incentives may not be decisive to determine the ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be a ground to hold that subsidy receipt was on revenue account. The relevant extract of the findings of the Hon'ble Jurisdictional High Court are as under : "5. Since the object of subsidy was to promote construction of multiplex theatre complexes, in our opinion, receipt of subsidy would be on capital account. The fact that the subsidy was not meant for repaying the loan taken for construction of multiplexes cannot be a ground to hold that subsidy receipt was on revenue account, because, if the object of the scheme was to promote cinema houses by constructing multiplex theatres, then irrespective of the fact that the multiplexes have been constructed out of own funds or borrowed funds, the receipt of subsidy would be on capital account. In the light of the aforesaid objects of the Scheme framed by the State Government, the decision of the Income Tax Appellate Tribunal that the amount of subsidy received by the assessee is on capital account cannot be faulted. Accordingly, both the appeals are dismissed with no order as to costs." 27. The Ld. Departmental Representative has placed reliance on the decision of Coordinate Bench of the Tribunal in the case of Rasiklal M. Dh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the State Government. As far as the purpose of subsidy is concerned, it is quite evident that it is for setting up of new Mega Project in the classified area. Hence, the decision of Coordinate Bench of the Tribunal in the case of Rasiklal M. Dhariwal (HUF) Vs. DCIT (supra) would not apply in the facts and circumstances of the case. 28. Thus, in the facts of the case and in the light of various decisions discussed above, we hold that the incentive received by the assessee under the PSI, 2007 scheme in the form of refund of sales tax is Capital receipt, not liable to tax." 17. The issue arising before us is identical to the issue before the Tribunal in Innoventive Industries Ltd. Vs. DCIT (supra) and the assessee had received incentive / subsidy from the State Government for setting up the project in the classified area. Hence, we hold that subsidy received by the assessee under PSI, 2007 is capital receipt in the hands of assessee. Accordingly, we delete the addition of Rs. 26,37,000/-. The grounds of appeal raised by the assessee are thus, allowed. 18. In the result, appeal of assessee relating to assessment year 2010-11 is partly allowed and the appeal relating to assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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