TMI Blog2017 (2) TMI 1456X X X X Extracts X X X X X X X X Extracts X X X X ..... ete the addition - Accordingly, the grounds raised by the revenue dismissed. - I.T.A. No. 602/Kol/2014 - - - Dated:- 3-2-2017 - Hon ble Sri N.V.Vasudevan, JM Shri Waseem Ahmed, AM For the Appellant: Shri Avinash Mishra, CIT(DR) For the Respondent: Shri A.K.Tulsiyan, FCA ORDER N.V.Vasudevan, This is an appeal by the Revenue against the order dated 31.01.2014 of CIT(A)-Central-I, Kolkata relating to A.Y.2010-11. 2. Grounds of appeal raised by the revenue read as follows :- 1. That on the facts and in the circumstances of the case, the Ld.CIT(A), Central-I, Kolkata has erred in deleting the addition of ₹ 7,48,27,500/- received as Industrial Promotion Assistance(IPA) by the assessee. 2. That on the facts and in the circumstances of the case, the Ld. CIT Appeal Central-I, Kolkata has erred in holding that the aim and object of the scheme was in the capital field and therefore the incentive in the form of the IPA was a capital receipt. 3. That on the facts and in the circumstances of the case, the Ld. CIT Appeal Central-I, Kolkata has erred in not appreciating the facts that the subsidy was paid to assist the assessee in carrying on it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subsidy in the form of reimbursement of sales tax up to 75% of payment clearly suggests that the intention of the scheme is to subsidies the cost of production and not to give any incentive of capital nature. Furthermore, the accounting treatment of the IPA by the assessee in its books of accounts also justifies the case of the revenue because the IPA subsidies of ₹ 7,48,27,500/- have been credited against the sale in the Profit Loss account. And it is only at the time of computation of total income it has been reduced from the Net profit. Moreover, none of the cases cited by the assessee in its submission fits into the facts circumstances of the case of the assessee because in most of the cases the business of the assessee are different than manufacturing of iron steel. Therefore, the amount of ₹ 7,48,27,500/ - received as Industrial Promotion Assistance(IPA) by the assessee is treated in the nature of revenue incentive/ subsidy and it is added to the total income for the A.Y. 20l0-11. 4. On appeal by the assessee the CIT(A) held that the receipt in question was a capital receipt not chargeable to tax. In Coming to the aforesaid conclusion the CIT(A) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the Objects of the scheme could be understood from the foreword of West Bengal Incentive Scheme, 2000 issued by the Commerce Industries Department, Government of West Bengal. For the sake of convenience, the same is reproduced hereunder:- WHEREAS in pursuance of a National Policy the sales tax related incentives have been withdrawn from 1st January 2000. And WHEREAS the State Government have considered it necessary and expedient to extend new types of incentives for promotion of industries in the state from the same date. Now, therefore, the Governor is pleased hereby, in supersession of the West Bengal Incentive Scheme 1999 sanctioned under Commerce Industries Department's Notification No. 580-CI/H/ dated 22.06.1999 and amended from time to time, to approve and sanction a New Incentive Scheme for large, medium and small scale Industrial units as under :- ......... 7.1. A careful perusal of the West Bengal Incentive Scheme 2000 show that the scheme was intended to accelerate industrial development of the state and the incentive was given for setting up of industries in West Bengal and for the purpose of determining the amount of subsidy to be given, sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally expanded units; (ii) minimum investment for new units and expansion of existing units; (iii) increase in free sugar sale quota. The benefit of the schemes had to be utilised only for repayment of Loans. The Department and the High Court had held that the receipts from the Government under the incentive schemes were in the nature of revenue. On appeal to the Supreme Court : Held accordingly, reversing the decision of the High Court, on this point, that the main eligibility condition in the schemes was that the incentive had to be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of an existing unit. The subsidy received by the assessee was not in the course of a trade but was of a capital nature . 7.2. We also find that the Hon'ble Calcutta High Court in the case of CIT vs Rasoi Ltd reported in (2011) 335 ITR 438 (Cal) had held as under:- If the object of a subsidy scheme is to enable the assessee to run the business more profitably the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme is to enable the assessee to set up a new unit or to expand the existi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons for treating the WBIPA as a revenue receipt. The counter submissions made by the appellant have also been carefully examined and considered. The issue that is to be decided is whether the WBIPA receipt is a revenue or a capital receipt. The A.O placed reliance on the following case laws: Sahney Steel Press Works Ltd. (1997) 228 ITR 253 (SC) CIT Vs. Chindwara Fuels 245 ITR 9 (Cal) East India Pharmaceutical Works Ltd. Vs. DCIT (ITA No.587 (Kol) 2006 The appellant placed reliance on the following case laws: CIT Vs. Ponni Sugars Chemicals Ltd. (SC) ACIT Vs. Rasoi Ltd. (ITA No. 1467 to 1469 (Cal) 2001 CIT Vs. KlarSehen P. Ltd. (G.A.N. 145106 dt. 12.5.08 (Calcutta High Court) Klar Sahen P. Ltd. Vs. ITO (ITA No. 2069 to 2071 (Kol) of 2004) EMCEE Pharmaceuticals (P) Ltd. V5. Dy. CIT (ITA No. 1941 (Kol)/2004) Mendine Pharmaceuticals (P) Ltd. (ITA No. 2403/Koh/2003) The department has been relying on the Hon'ble Supreme Court decision in the case of Sahney Steel and Press Works Ltd.(supra). The Calcutta High Court in the case of CIT vs. Chindwara Fuels (supra) has followed the Apex Court decision. This decision has also been followed by Hon'ble I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steel Press Work Ltd. (supra). The TAT decisions relied on by the appellant clearly distinguished this point and also other conditions and held the 'assistance' receipt is a capital receipt. The notable case among others is the case of 'Rasoi Ltd. '(supra) wherein the Hon'ble jurisdictional ITAT (Kolkata) has discussed the similar issue thread bear distinguishing the Sahney Steel Press works Ltd. case and held as a capital receipt. This decision has been followed in other cases dealt by Kolkata ITAT bench including the case of KIar Sehen P. Ltd. (supra) which was later upheld by the Kolkata High Court. It is very much relevant to reproduce the relevant extract from the ITAT ( - r in the case of Rasoi Ltd. Vs. DClTinITANo.1080/Cal/98dt.18.5.01: 7. So far as the present case before us is concerned, the notification No. 1460 - F.Y. dated 27th May 1994 recites the Resolution of the Govt. of West Bengal, Starting as follows: Whereas certain industries in the State have been passing through an acute financial crisis and it has been considered necessary to extend financial assistance to tide over such crisis for promotion of such industries, it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y operations of the assessee in any manner. Hence, we are of too view that the incentive received by the assessee, although dependent upon certain conditionalities, is actually gratuitous in nature and forms capital receipt in its hands. The incentive cannot again be considered as provided by the Govt. to the assessee to meet some of its revenue expenses. The above ratio laid down in terms of 'assistance in the form of fresh capital to tide over the financial crisis', 'enduring effect', 'promotion of industries' etc. has also been followed in the case of Klar Sehen P. Ltd. (supra) for treating the 'assistance' as a capital receipt. Subsequently the Kolkata High Court has also confirmed the decision in the case of Klar Sehen P. Ltd. as under: Further we have perused the order passed by the Tribunal. We have found that the Tribunal has extensively dealt with the matter including the facts, material and evidence placed before the Tribunal or adjudication. We do not find any reason to interfere with the order so passed by the learned Tribunal nor the order so passed by the learned Tribunal suffers from any legal infirmity nor we find any substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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