TMI Blog2012 (9) TMI 1156X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 20 lakhs by the assessee from the Govt. of Maharashtra is a capital receipt not liable to be taxed, the learned CIT(A) ought to have examined the issue as to whether this amount should have been reduced from the cost of assets in terms of explanation 10 to section 43(1) of the Act for the purpose of calculating the depreciation under the Act. 2. Briefly stated the facts of the case are that the assessee is a registered partnership firm engaged in the business of manufacturing DPEB / HDPE fabrics through small scale industry undertaking (SSI Unit) situated at Village Met, Talwada District, Thane. The said factory was established in June 2000. The area in which the factory is located, has been notified by the Government of Maharashtra as backward zone and classified under D+ locality i.e., remote backward area for the purpose of Package Scheme of Incentive, 1993, issued by the Government of Maharashtra. This scheme was devised to encourage the entrepreneur to establish industries in backward areas so as to develop remote area and also to promote employment in those backward areas. Under the said scheme eligible certificate by District Industries Centre was to be obtained an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner under section 263 and the order passed by the Commissioner under section 263, required the assessee to file its objections. In response, the assessee filed a detail reply with regard to the nature of scheme under which subsidy was received and how the judgment of Sahani Steels and Press Works Ltd. (supra) is not applicable in case of the assessee. However, the Assessing Officer rejected the said contention solely on the ground that the same has been considered by the Commissioner. Accordingly, he treated the amount of ₹ 20,00,000, received as subsidy as revenue receipt and accordingly taxed the same. 4. Before the Commissioner (Appeals), the assessee made detail submission after referring to the Package Scheme of Incentive, 1993, and on other criteria for being eligible for granting of special capital incentive and that the subsidy was given for setting up of industries in the backward area and the same should be treated as capital receipt only. In support of this contention, the reliance was placed on the judgment of Hon'ble Supreme Court in CIT v/s Ponni Sugars and Chemicals Ltd., [2008] 306 ITR 392 (SC). The Commissioner (Appeals), after duly considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieve dispersal of industries outside the Bombay-Thane- Pune belt and to attract them to, the underdeveloped and developing 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 Scheme of Incentives. The Package Scheme of Incentives, introduced in 1964, was amended from time to time. The last amended Scheme, commonly known as the 1988 Scheme was operative from 1st October 1988 to 30th September, 1993. The question of revising the 1988 Scheme to rationalise the scope of incentives, various scales and mode of release of incentives to intensify and accelerate the process of dispersal of industries from the developed areas and for development of the under- developed regions of the State, particularly those farther away from the Bombay-Thane- Pune belt, had been under consideration of the Government. In the light of the experience gained in implementation of the earlier Schemes,, particularly the 1988 Scheme, and in the changed circumstance of the liberalised industrial policy of the Government of India, and with a view to achieving the objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applied while determining whether the subsidiary is in account of revenue account or capital subsidy. The relevant observation given in Ponni Sugars and Chemicals Ltd., by Their Lordships are reproduced herein below:- 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 Press Works Ltd. (supra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10 per cent 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 goods were also of capital nature as the object of granting refund of sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this Court by way of a special leave petition. It was held by this Court on the facts of that case and on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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