TMI Blog2018 (1) TMI 1615X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of substantial justice. CIT(Appeals), who is having co-terminus powers to that of the Assessing Officer, has already examined this issue in detail in the light of the material available on record including the scheme of the West Bengal Government under which the amount of sales tax subsidy in question was received by the assessee and after having satisfied himself on merit, he has allowed the claim of the assessee for exclusion of sales tax subsidy by treating the same as capital receipt not chargeable to tax. As this issue is squarely covered in favour of the assessee by the decision of the Hon ble Calcutta High Court in the case of Rasoi Limited [ 2011 (5) TMI 23 - CALCUTTA HIGH COURT ] and since the ld. CIT(Appeals) has given relief to the assessee on this issue by relying on the said decision of the Hon ble jurisdictional High Court, we are of the view that no cause of justice is going to be served by sending the matter back to the Assessing Officer for examination - uphold the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee for exclusion of sales tax subsidy by treating the same as capital receipt not liable to tax and dismiss this appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the appellant in the present appeal that the amount of incentive of ₹ 14,91,51,889/- received in the form of sales tax remission from the West Bengal Government under the West Bengal Incentive Scheme, 1999 is a capital receipt not liable to tax was admittedly not made in the return of income filed u/s 139(1) as well as u/s 139(5). In the course of proceedings u/s 143(3) before the appellant however made this claim by filing a letter and thereafter submitted supporting documents From the assessment order I find that the AO rejected the claim of the appellant primarily on the ground that such 'claim was not made by the appellant in the return of income and therefore there was no question of allowing deduction In respect of subsidy received by the appellant from the State Government by way of sales tax remission. In view of the judicial decisions and the ratio laid down by the Supreme Court in the case of Jute Corporation of India Ltd Vs CIT (187 ITR 688) National Thermal Power Co. Ltd Vs CIT (229 ITR 383) and Calcutta, Bombay Delhi High Courts in Mayank Poddar (HUF) vs. WTO (262 CTR 633), CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd, (252 CTR 151), CIT vs. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: Section 4 of the WBIS provide the applicability of the 1995Scheme and it says that it shall generally be applicable to all large, medium cottage and small scale projects and tourism units in large/medium sector to be set up and also to expansion projects of existing units on or after the 1st April, 1999. The units may be in the private sector, co-operative sector, Joint sector as also companies/undertakings owned or managed by the State Government. Section 6 of the Scheme provide the 'Eligibility Criteria for incentives under the 1999-Scheme' and section 7 provides 'Classification of Developed areas and Backward areas' in three groups viz. Group A, Group B and Group C The appellant's project falls under Group B. Section 8, 9, 10 and 11 provide for various types of incentives and subsidies which are 'State Capital Investment Subsidy', 'Sales Tax'. 'Waiver of Electricity Duty' and 'Subsidy for conversion of piped coal gas' etc. From the above, it was observed that the Scheme-1999 was announced for promotion of industries in the State of West Bengal with various incentives and subsidies as mentioned above As per Scheme, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to allow incentive to the entrepreneurs to establish the new industries or expand the existing industries in backward area for overall economic development of the State of West Bengal. On going through the West Bengal Incentive Scheme, it is observed that the subsidy was not allowed to assist the appellant company in carrying on its trade or business or carrying out the business operation. The unit which was set up by the appellant company, is located in the backward area of Village-Haldia. District-Midnapur in the State of West Bengal. As per the Incentive Scheme. 1999, the appellant's unit falls under Group-B of classification of areas. Accordingly. the appellant company had received incentive in the form of sales tax remission and other incentives specified for group-B location. Since, the incentive has not been allowed to the appellant-company for facilitating its business or trade, the amount received by the appellant on account of sales tax remission, would be capital in nature. 5.6. The Supreme Court in the case of CIT vs Ponni Sugars Chemicals Ltd. (306 ITR 392) applying the principles laid down in the earlier decision In the case of Sahney Steel Press Work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On appeal before the Hon'ble High Court the revenue contended that for determining the nature of subsidy, the three factors are required to be seen-(i) whether the benefit of incentive/subsidy was available only to new units or expanded units without any intention to supplement the trade receipts or it was in the nature of a help with an intention to supplement the trade receipts of an existing undertaking, (ii) whether the benefit is given before the start of production or after the start of production, (iii) whether the scheme, by which benefit is given, permits the beneficiary to utilize the money according to its wish or whether it restricts or put any limit on the utilization of the amount In this case, the assessee has, by virtue of the scheme, got back the sales-tax payable by it to the State Government and thus. the same should be treated as revenue receipt as held by the Supreme Court in the case of Sahney Steel Press works Ltd (supra) The assessee contended that the object of the scheme was helping the industries with capitals In the case of Sahney Steel Press Works Ltd (supra), the question was whether the grant of subsidy had fallen within the purview of Sec. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed u/s 143(3) of the Act on 29/12/2006 at an assessed income of ₹ 1,82,06,720/- which. Inter alia. Included addition of ₹ 41,49,365/- as sales tax remission treating it is a regular income Instead of capital receipt as claimed by the assessee Before the AO, the assessee explained that the said remission of sales-tax has been granted by the Government of West Bengal under West Bengal Incentive Scheme for promotion of industrialization of the backward areas if the State The incentive was given for setting up or expansion of the existing units and. therefore it was in capital field and hence not includible as revenue receipt However, the contention of the assessee was not accepted by the AO and relying on the decision of Supreme Court In the case of Sahney Steel Press Works Ltd (supra). The AO held that the amount received by the assessee on account of sales tax remission was revenue In nature and added the same In the income of the assessee. On appeal, the CIT(A) deleted the said addition. On appeal by the Department, the ITAT, Kolkata following the decision of its coordinate bench In the case of Maithan Alloys Ltd Vs. DCIT (ITA Nos. 996 to 1001 of 2006) and ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourts: - DCIT vs. Inox Leisure Ltd. (351 ITR 314) (Guj) - CIT vs. Reliance Industries Ltd. (339 ITR 632) (Bom) - Shree Balaji Alloys vs. CIT (333 ITR 335) (J K) - CIT vs. Chaphalkar Bros. (215 Taxman 145) (Bom) 5.14. Respectfully following the principles laid down in the judicial pronouncements of the Supreme Court, jurisdictional Calcutta High Court, other High Courts and the jurisdictional ITAT, Kolkata as discussed above. I have no hesitation in holding that the incentive of ₹ 14,91,51,889/- received by the appellant company in the form of sales tax remission under West Bengal Incentive Scheme 1999 is capital In nature. I therefore hold that the said receipt was not assessable as income of the appellant. The AO is accordingly directed to exclude the sales tax incentive of ₹ 14,91,51,889/- while assessing the total income of the appellant . Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal. 5. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the solitary issue involved in this appeal of the Revenue relating to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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