TMI Blog2020 (9) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... at the sales tax subsidy received by the assessee being a capital receipt is not taxable. This ground is allowed. - I.T.A. No. 249 to 253/Mum/2019 - - - Dated:- 16-9-2020 - Shri S. Rifaur Rahman, AM And Shri Ram Lal Negi, JM For the Appellant : Shri V. Vinod Kumar, DR For the Respondent : Shri Ronak Doshi, AR ORDER PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER: The present five appeals have been filed by the revenue against the order of Ld. Commissioner of Income Tax (Appeals) - 3 in short referred as Ld. CIT(A) , Mumbai dated 15.06.2018 22.06.2018 for Assessment Year (in short AY) 1999-2000 to 2003-04 respectively. 2. Since the issues raised in both the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. 3. Revenue has raised the only one ground in all the appeals which are as under:- Whether on facts and circumstances of the case and on law, the Ld. CIT(A), is justified in treating the sales tax subsidy received as per UP Govt. Scheme as capital receipts. 4. The brief facts relating to above ground are, during the year, assessee was engaged in the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional ground for the first time before tribunal regarding exclusion of the sales tax exemption of ₹ 1,14,51,012/- provided to the assessee by the UP. Government which was included in total sales in the computation of total income. The assessee had not claimed deduction on account of the said exemption either before the AO or before the C1T(A) and the amount was included in the sale figure of ₹ 928.36 crores. The assessee raised this issue for the first time before the tribunal after the order dated 23.10.2003 of the Mumbai Special Bench of the tribunal in case of DCIT Vs Reliance Industries Ltd. (supra) as per which sales tax exemption benefit was capital receipt, not taxable was delivered. The 13 Indian Rayon Industries Ltd case of the assessee is that the assessee could not have raised the ground before the AO or CIT(A) as the decision of the tribunal was available only after passing of the order by CIT(A), 2.13.5 We find that the principle relating to admission of additional ground being a legal ground for the first time before the tribunal is settled by the judgment of Hon ble Supreme Court in case of NTPC (supra) in which the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order dated 12.11.2014 u/s 143(3) r.w.s. 254 of the Act. In that order, AO held that the Sales tax incentive received by the assessee is a revenue receipt. 7. Aggrieved by the order of AO assessee preferred the appeal before Ld. CIT(A) and Ld. CIT(A) after considering the detail submission of assessee, allowed the ground of appeal with the following observations:- 4.4.2 The AO while passing the impugned order relied on the order dated 28.03.2013 passed pursuant to the order of the Hon ble ITAT for the AY 1998-99. I find that subsequent to the order passed by it for AY- 1999- 2000, the Hon ble ITAT in its order in appellant's own case for AY 1995- 96, in ITA No. 3938/Mum/2013 dtd. 18.04.2018 held that the sales tax subsidy received under the subsidy scheme of the government of Uttar Pradesh was in the nature of capital receipt. I also find that the AO, while passing the impugned order, did not have the benefit of the decision of the Hon'ble ITAT in appellant's own case for the AY 1995-96. Respectfully following the decision of the Hon ble ITAT, I allow the ground of appeal. Accordingly, I direct the AO to exclude the sales tax subsidy received under the scheme o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore product purchase from towns I district of U.P. which in turn would generate revenue and employment for people located in those towns and district. The learned Grasim Industries Limited Commissioner (Appeals) observed, the assessee availed the sales tax benefit at source by paying less sales tax at the time of purchase and sale of goods thereby indicating that the sales tax incentive was not granted for fixed capital asset and not related to acquiring capital asset. Thus, it was held that the incentive / subsidy received cannot be treated as capital receipt. Therefore, the learned Commissioner (Appeals) distinguished the Special Bench decision of the Tribunal, Mumbai, to the facts of the assessees case. The argument of learned Departmental Representative in sum and substance is, the assessee relied upon the Special Bench decision of the Tribunal, Mumbai, in Reliance Petroproducts Pvt. Ltd. (supra) which though was upheld by the Hon'ble Jurisdictional High Court Hon'ble Jurisdictional High Court but the 1Ion'ble Supreme Court reversed the decision of the Hon ble Jurisdictional High Court. Therefore, the decision id' the Special Bench in Reliance Industries Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the aforesaid facts, it is clear that the assessee has, complied to all the conditions of the subsidy scheme. Now, the issue before us is, the nature and character of the subsidy received by the assessee whether is revenue or capital. The learned Commissioner (Appeals) has held that the subsidy received as capital basically on the reasoning that the subsidy is intended for the purpose of enhancing the production which would result in more product purchase from the towns and districts of U.P. However, a perusal of the subsidy scheme does not bring out any such purport as the learned Commissioner (Appeals) tried to project. The Hon'ble Supreme Court in Ponni Sugars (supra) after analyzing various other decisions held that while determining the nature and character of subsidy the purposive test has to be applied. The Hon'ble Court held, if the object of the subsidy was to enable the assessee to make the business more profitable, then the receipt is on revenue account. Whereas, if the object of the assistance under the subsidy scheme was to enable the assessee to set-up a new unit or to expand the existing Grasim Industries Limited unit, then the receipt of the subsidy ..... 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