TaxTMI 
TaxTMI 
2020 (6) TMI 100
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....665/- and claimed deduction in the computation of taxable income treating it as capital receipt. Assessment was made u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the "Act") on 22.03.2013 at assessed income of Rs. 2,51,90,665/-. Thereafter the assessment was revised by Ld. PCIT-I, Kolkata and consequently he gave direction to the A. O. vide order u/s. 263 of the Act dated 19.03.2015 to pass a fresh assessment order after considering his observation. As per direction of Ld. PCIT -I. Kolkata the A.O passed the order u/s. 263/143(3) on 12.11.2015 assessing the income at Rs. 4,50,78,115/- by making addition of Rs. 1,96,77,00/-the subsidy from the Govt. of W.B. & unpaid liability of Gratuity of Rs. 2. 10,450/-. During the course of re-assessment the AO found that the assessee credited in P&L Account an amount of Rs. 2,33,51,560/- received from West Bengal Industrial Development Corporation (in short 'WBDIC') as Industrial Promotion Assistance ( in short, 'IPA'). According to AO, in the original return the assessee treated it as revenue receipt but in the revised return the assessee changed tact and claimed deduction of this amount in the computation of taxable inc....
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....ial Promotion Assistance received by the assessee is to be treated as a capital receipt. Aggrieved, revenue has preferred this appeal before us. 4. We have heard both the parties and perused the records. We note that the assessee company received Industrial Promotion Assistance ( IPA) amounting to Rs. 2,33,51,560/- from the Govt. of West Bengal under West Bengal Incentive Scheme 2000(WBIS-2000). In the assessment order passed pursuant to the interference by the ld. PCIT, the AO noted after verification from the website of West Bengal Industrial Development Corporation (WBIDC) that the assessee received the incentive from WBIDC (West Bengal Industrial Development Corporation Ltd) under the category of Mega Projects of WBIS-2000 for the F.Ys 2007-08, 2008-09, 2009-10 & 2010-11. The AO noted that the assessee has credited in its P & L account only Rs. 233.52 Lakhs from WBIDC on 22-09-2009 under WBIS-2000, out of which sum of Rs. 39.35 Lakhs was given under SCIS (State Capital Investment Scheme) and remaining Rs. 196.77 Lakhs was given as IPA (Industrial Promotion Assistance). Thus, according to the AO only amount of Rs. 39.35 lakhs can be treated as capital subsidy as it was specific....
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....s. 1,96,77,000/- as capital receipt in nature. Therefore, he does not want us to interfere with the impugned order of the learned CIT(A). 7. After hearing both the parties and after carefully going through the records, we note that the assessee company had received an amount of Rs. 1,96,77,000/- from Govt. of West Bengal under the West Bengal Incentive Scheme 2000 (WBIS-2000) for establishing industry in the state of West Bengal particularly in Bankura District. The State Government has approved a package of Incentive for the assessee (M/s. Sova Ispat Ltd.) vide letter no. PPI/MP/0761/2003-14/2000(12) dt. 24.09.2003 issued by the Managing Director, WBIDC approving the following package: "'The State Government has approved the following package for SovaIspat Ltd, bankura. The unit is proposed to be set up with an investment of Rs. 279 crore for the purpose of setting up of a unit for manufacturing of Sponge Iron, Rolled Products, Ferro Alloys etc in West Bengal. Package: a) Industrial Promotion Assistance equivalent to upto @75% of the Sales tax paid in previous year on sales of financial goods subject to a maximum of 100% of the fixed capital investment for a maximum peri....
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.... the scheme is that a unit in the large/medium/small scale sector having registration certificate issued by the Directorate of Industries and Eligibility Certificate by the W.B.I.D.C.L (West Bengal Industrial Development Corporation Ltd. In the case of assessee, the assessee has set up a new unit in the Bankura District of West Bengal area marked as Group 'C ' in the scheme (supra). The assessee has been classified as a Mega Project. Mega Project is referred in clause 18 (page 13) of West Bengal Incentive Scheme, 2000, which reads as under:- "18. Mega Projects: Notwithstanding anything contained anywhere in the scheme the State Govt. may consider granting special package of incentive under this scheme to a Mega Project having due regard to the characteristics of the project, case by case basis, in the following areas: i) Size of investment ii) Special nature of the industry iii) Employment potentiality, iv) Down-stream effect of the industry, v) Ancillarisation effect of the industry, vi) Export Potentiality" Further, the term "Mega Unit" as been defined in clause 3 (xiii) on page 2 of the West Bengal Incentive Scheme, 2000 is reproduced as under: "Mega Unit" mea....
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....e taken up for adjudication and the decision rendered thereon would apply with equal force to Asst Year 2009-10 also except with variance in figures. The brief facts of this issue is that the ld AO observed that assessee had received Industrial Promotion Assistance provided to one of its unit at Durgapur under West Bengal Incentive Scheme, 2000 to the tune of Rs. 2,55,27,120/- which was claimed by it as a capital receipt by way of a separate letter dated 8.12.2010 during assessment proceedings. It was submitted that the 2000 Scheme was formulated by the West Bengal State Government for the promotion of industry in the State. It was applicable in respect of units to be set up and also to expansion projects of existing units having investment in fixed assets. Industrial projects in the large and medium sectors were eligible for the incentives under the scheme provided such projects were covered by a detailed feasibility report/project report and the project had been approved and sanctioned by the financial institutions/banks. It was found that the subsidy was in the form of relaxation of the tax was more for encouragement to entrepreneurs to establish/ expand industrial unit in the....
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....d circumstances of the instant case. In that case, the assessee sought to make a claim for deduction by a letter without revising the return. It is submitted that the instant case is not one of any claim for deduction. The assessee's contention is that industrial promotion assistance of Rs. 4, 01,64,232/- is a capital receipt and cannot form part of the taxable income. It is settled law that the subject cannot be taxed unless the charging provision clearly imposes the obligation. Even if an assessee includes a capital receipt in his return, that would not preclude him from claiming that such receipt is not taxable. There cannot be any estoppel against the statute. If in law an item is not taxable, no amount of admission or misapprehension can make it taxable. It is always open to an assessee to take the plea that the figure though shown in the return is not taxable in law. Such taxability cannot be decided on the basis of any admission. Reliance in this behalf is placed on the decisions of the Hon 'ble Supreme Court in CIT v Ajax Products Ltd., (1965) 55 ITR 741 (SC) and those of the Hon 'ble Calcutta High Court in CIT v BhaskarMitter, (1974) 73 Taxman 437 (Cal) and M....
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....the 2000 Scheme. The expansion undertaken by the assessee involved increase in manufacturing capacity of cement from 0.6 million tonnes per annum to 1.6 million tonnes per annum and was practically a new unit. The assessee was duly registered under the 2000 Scheme with the Directorate of Industries, West Bengal. In the registration certificate dated April 29, 2005, it was stipulated that the assessee would be eligible or industrial promotion assistance only after the total investment crossed the limit of Rs. 25 crores and on starting commercial production. 5.7 WBIDC issued an eligibility certificate dated August 30, 2005 to the assessee for incentives under the 2000 Scheme as a Mega Project. The said certificate recorded the fact that the assessee had made arrangements for financing the project satisfactory to WBIDC. The said certificate was valid for a period of two years from the date of issue. If effective steps for establishment of the project were not taken within the said period, the validity period of the certificate was not to be extended unless an order was passed in that behalf after considering the merits of the case and subject to other condition stipulated in the 2....
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....ty of the year of claim. The period for which such assistance was available was twelve years if commercial production commenced within June 30, 2005 and ten years if commercial production commenced between July 1, 2005 to December 31, 2005. The assessee commenced commercial production in December, 2005 and as such was entitled to the assistance for 10 years. It is submitted that it is evident from the provisions of the 2000 scheme and the registration and eligibility certificate granted to the assessee that the object for which the assistance was granted was clearly to enable the setting up of a new unit or expansion of an existing unit and the assistance was on capital account. The assistance was granted because of capital investment in establishing new units or expanding existing units Projects with investment of Rs. 25 crore and above were classified as mega projects. The unit could not be disposed of or closed and had to remain in production for the specified period. In case of default, the benefit allowed under the 2000 scheme was to become immediately recoverable. If loans were not repaid by due date, the entire loan/balance loan was to become due on the date of default and a....
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....e asset though it may not be possible to exactly quantify the amount directly or indirectly used for acquiring the asset. For the purpose of applying the proviso, also it has to be found that the asset was acquired by directly or indirectly using the subsidy. It is apparent from the provisions of the 2000 Scheme and the certificate of registration and eligibility certificate that the assistance was to be made ITA No.available after the commencement of commercial production without any financial cap and was to be adjusted against the sales tax liability of the year of claim. The industrial promotion assistance was clearly not used directly or indirectly to acquire the assets nor any part of the cost of the assets was met directly or indirectly from the industrial promotion assistance. We find that the issue under dispute is squarely covered by the decision of this tribunal in assessee's own case for Asst Year 2007-08 in ITA No. 683 & 581 /Kol/2011 dated 8.12.2014 wherein the grounds raised by the assessee as well as by the revenue were as under:- Assessee Ground No. 1 That on the facts and circumstances of the case, the learned CIT(Appeals) though holding that sales-tax in....
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....epreciation. It is also a fact that revenue during scrutiny assessments of the assessee for AY s 2002-03 to 2006-07 added the subsidy amount as revenue receipt but Tribunal has considered the receipt as 'capital', accepting the contention of the assessee. Even Hon'ble Supreme Court in the case of PJ. Chemicals. Ltd. (supra) has considered this issue and held that where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the actual cost. Therefore, the said amount of subsidy cannot be deducted from the actual cost under sec. 43(1) for the purpose allowing depreciation. It is further held that if Government subsidy is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as a percentage of such cost, it does not partake the character of payment intended either directly or indirectly to meet the "actual cost".....
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....o thereto do not dilute the finding of the Hon'ble Supreme Court in the case of P. J. Chemicals Ltd.(supra) that asset-wise subsidy alone can be reduced from the actual cost. The above Explanation and the proviso therein to explain the law. They are not bringing any new law different from the law considered by Hon'ble Supreme Court in the above cases. 9. In view of the above facts and circumstances of the case and legal position explained by Hon'ble Supreme Court in the case of P.J. Chemicals Ltd. (supra), we are of the vie that subsidy receipt should not be reduced from the actual cost of fixed assets for computing depreciation under the provisions of the Act. Accordingly, this issue of revenue's appeal is dismissed and that of the assessee is allowed". Respectfully following the aforesaid decision of this tribunal supra , we hold that the IPA received by the assessee would have to be construed as a Capital Receipt and the same need not be reduced from the cost of assets in terms of Explanation 10 to Section 43(1) of the Act. Accordingly, the grounds raised by the revenue are dismissed and grounds raised by the assessee are allowed. 11. We note that similar is....
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....sidy scheme was to be enable the assessee to set up a new unit in the areas as specified group B or C as the WBIS 2000, we are of the opinion that the subsidy was on capital account. The AO erred in relying on the decision of the Hon'ble supreme Court in Sahaney Steel (supra) wherein the facts were different and distinguishable. In that case (Sahaney Steel) the Tribunal had disallowed the claim of the assessee and the Hon'ble Supreme court in Sahaney Steel's case after analysis of the scheme therein held that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses and it was not for acquiring the capital asset or bringing into existence any new asset and consequently the contention raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahaney Steel could not be regarded as anything but a revenue receipt and the Apex Court was pleased to confirm the Tribunal's action. However, the case in hand before us is different as discussed above. The object of the subsidy in ....