TMI Blog2022 (5) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the fact that the subsidy was granted post commencement and is in the nature of refund of VAT and CST and overlooked the purpose of its granting, which is nothing but momentum in industrial pace in less developed parts of the State. Testing the factual panorama on the touchstone of the ratio laid down by the Hon'ble Supreme Court in the above referred cases, we are of the considered opinion that the subsidy is a capital receipt and not chargeable to tax. At this stage, it is relevant to mention that we are concerned with the A.Y. 2014-15. The Finance Act, 2015 has inserted clause (xviii) to section 2(24) w.e.f. 1-04-2016 providing that the assistance in the form of subsidy or grant of cash incentives etc., other than the subsidy which has been taken into consideration in determining the actual cost of the asset in terms of Explanation 10 to section 43(1), shall be considered as an item of income chargeable to tax. Since the amended provision of section 2(24)(xviii) is not applicable to the year under consideration, the sequitur is that the subsidy received by the assessee would not form part of its total income. Since the subsidy was granted actually as incentives fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above assessment of order, an appeal was filed before the ld. CIT(A), who vide impugned order held that the subsidy in the form of octroi refund received under the Package Scheme of Incentives, 2007 announced by the Government of Maharashtra is capital in nature as the subsidy was granted as incentives to encourage the dispersal of Industries to the less developed area of the State placing reliance on the decision of the Hon ble Supreme Court in the case of CIT vs. Ponni Sugars Chemicals Ltd., 306 ITR 392 (SC). Further, the ld. CIT(A) held that the provisions of section 28(iv) have no application to the monetary benefits received by the respondent-assessee placing reliance on the following decisions :- (i) CIT vs. Indokem Ltd., 132 ITR 125 (Bombay High Court). (ii) CIT vs. Alchemic Pvt. Ltd., 130 ITR 168 (Gujarat High Court). (iii) Ravinder Singh vs. CIT, 205 ITR 353 (Delhi High Court). (iv) CIT vs. New India Industries Ltd., 204 ITR 208 (Gujarat). (v) CIT vs. Mafatlal Gangabhai and Company Pvt. Ltd., 219 ITR 644 (SC). 5. Being aggrieved by the above decision of the ld. CIT(A), the Revenue is in appeal before us. 6. The ld. Sr. DR contended that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity Criteria in favour of the Eligible Units. The definition clause in the Scheme provides that An Eligibility Certificate under the 2007 Scheme will be issued by the Implementing Agency after ascertaining that the eligible unit has complied with the provisions of the Scheme and has commenced its commercial production. clause 5 of the Scheme states that New projects, which are set up in these categories in different parts of the State, will be eligible for Industrial Promotion Subsidy. The quantum of subsidy will be linked to the Fixed Capital Investment. Payment of IPS every year will be equal to 25% of any Relevant Taxes paid by the eligible unit to the State or to the any of its departments or agencies. Modalities for sanction and disbursement of IPS 2007 have been given by the Govt. of Maharashtra which state that the Industrial Promotion Subsidy in respect of Mega projects under PSI 2001 and 2007 means an amount equal to the percentage of Eligible Investments which has been agreed to as a part of the customised Package, or the amount of tax payable under Maharashtra VAT 2002 and CST Act 1956 by the eligible Mega Projects in respect of sale of finished products eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panorama on the touchstone of the ratio laid down by the Hon'ble Supreme Court in the above referred cases, we are of the considered opinion that the subsidy of Rs.4,58,41,000/- is a capital receipt and not chargeable to tax. 9. At this stage, it is relevant to mention that we are concerned with the A.Y. 2014-15. The Finance Act, 2015 has inserted clause (xviii) to section 2(24) w.e.f. 1-04-2016 providing that the assistance in the form of subsidy or grant of cash incentives etc., other than the subsidy which has been taken into consideration in determining the actual cost of the asset in terms of Explanation 10 to section 43(1), shall be considered as an item of income chargeable to tax. Since the amended provision of section 2(24)(xviii) is not applicable to the year under consideration, the sequitur is that the subsidy received by the assessee would not form part of its total income. 10. Similarly, the Hon ble Supreme Court in the case of CIT vs. Chaphalkar Brothers Pune, 400 ITR 297 (SC) after referring to its earlier decision in the case of Ponni Sugars Chemicals Ltd. (supra) held as under :- 21. What is important from the ratio of this judgment is the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excise duty and interest subsidy in that case, it was held that the scheme was capital in nature, despite the fact that the incentives were not available unless and until commercial production has started, and that the incentives in the form of excise duty or interest subsidy were not given to the assessee expressly for the purpose of purchasing capital assets or for the purpose of purchasing machinery. 24. After setting out both the Supreme Court judgments referred to hereinabove, the High Court found that the concessions were issued in order to achieve the twin objects of acceleration of industrial development in the State of Jammu and Kashmir and generation of employment in the said State. Thus considered, it was obvious that the incentives would have to be held capital and not revenue. Mr. Ganesh, learned Senior Counsel, pointed out that by an order dated 19.04.2016, this Court stated that the issue raised in those appeals was covered, inter alia, by the judgment in Ponni Sugars Chemicals Ltd. case (supra) and the appeals were, therefore, dismissed. 25. We have no hesitation in holding that the finding of the Jammu and Kashmir High Court on the facts of the incentiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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