TMI Blog2022 (7) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of arriving at average value of investment We find merit in the submissions made on behalf of the assessee that the amount of investment which yielded exempt income alone should be taken into consideration for the purpose of arriving at average value of investment as envisaged under sub clause (iii) of sub-rule (2) of Rule 8D of the Rule. Accordingly, we restore the matter back to the file of Assessing Officer for the purpose of computing the amount of disallowance in the above mentioned manner. Nature of receipt - Taxability of the subsidy received by the respondent-assessee under the Package Scheme of Incentives, 2007 announced by the Government of Maharashtra - Revenue or capital receipt - HELD THAT:- As relying on case M/S. CHAPHALKAR BROTHERS PUNE [ 2017 (12) TMI 816 - SUPREME COURT] since the subsidy was granted actually as incentives for encouraging the dispersal of industries to the less developed areas of the State of Maharashtra, the subsidy cannot be treated as revenue receipt. As regards to the applicability of provisions of section 28(iv) of the Act, this envisages the value of entire benefit, whether convertible to money or not, which means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he limb of (2) of rule 8D of Income-tax Rules, 1962 (hereinafter referred to as the Rules) has no application to the facts of the present case having regard to the fact that in the year of investments, the CIT(A) gave a finding that the investments are made out of current account which does not bear any interest out of the funds lying in current account. The findings of the CIT(A) had attained finality as Revenue is not in further appeal before this Tribunal. As regards to the disallowance under rule 8D(2)(iii), it is submitted that for the purpose of computing the amount of disallowance under rule 8D(2)(iii), the value of average investments should be computed by adopting only investments which yielded the exempt income alone has to be considered. Thus, it was submitted that the matter may be restored to the file of AO for computation of amount of disallowance under limb (iii) of rule 8D(2) of the Rules. 6. On the other hand, ld. Sr.DR has expressed no serious objection to remand the matter to the file of AO for the purpose of computation of disallowance under limb of (iii) of rule 8D. 7. We have heard the rival contentions and perused the materials available on record. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al relates to the taxability of the subsidy received by the respondent-assessee under the Package Scheme of Incentives, 2007 announced by the Government of Maharashtra. We have gone through the nature of subsidy granted to the assessee by the Govt. of Maharashtra under Package Scheme of Incentives, 2007. A copy of the Scheme has been placed in paper book. The Preamble of the Scheme states that: The State has declared the new Industrial, Investment, Infrastructure Policy 2006 to ensure sustained Industrial growth through innovative initiatives for development of key potential sectors and further improving the conducive industrial climate in the State, for providing the global competitive edge to the State's industry. The policy envisages grant of fiscal incentives to achieve higher and sustainable economic growth with emphasis on balanced Regional Development and Employment generation through greater Private and Public Investment in industrial development. The Scheme talks of granting incentives subject to Eligibility 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court in CIT v. Ponni Sugars Chemicals Ltd. [2008] 174 Taxman 87/306 ITR 392 by holding that the relevant consideration should be the purpose of subsidy and not its source or mode or payment. When we apply such a test on the facts and circumstances of the case, it demonstrably emerges that the purpose of subsidy is industrial growth; it is linked with the setting up of industrial units; and the amount of subsidy is linked with the amount of investment made in the eligible unit. Simply because the subsidy has been disbursed in the form of refund of VAT and CST, it will not alter the purpose of granting the subsidy, which is nothing but establishment of new industrial units in less developed areas of the State. The authorities below have been swayed 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 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t persons come forward to construct Multiplex Theatre Complexes, the idea being that exemption from entertainment duty for a period of three years and partial remission for a period of two years should go towards helping the industry to set up such highly capital intensive entertainment centers. This being the case, it is difficult to accept Mr. Narasimha's argument that it is only the immediate object and not the larger object which must be kept in mind in that the subsidy scheme kicks in only post construction, that is when cinema tickets are actually sold. We hasten to add that the object of the scheme is only one -there is no larger or immediate object. That the object is carried out in a particular manner is irrelevant, as has been held in both Ponni Sugar and Sahney Steel. 23. Mr. Ganesh, learned Senior Counsel, also sought to rely upon a judgment of the Jammu and Kashmir High Court in Shree Balaji Alloys v. CIT [2011] 9 taxmann.com 255/198 Taxman 122/ 333 ITR 335. While considering the scheme of refund of 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing four years, we are of the view that West Bengal cases must follow the judgment that has been just delivered in the Maharashtra case. 14. Applying the ratio of the decisions of the Hon ble Supreme Court referred to above, to the facts of the present case, since the subsidy was granted actually as incentives for encouraging the dispersal of industries to the less developed areas of the State of Maharashtra, the subsidy cannot be treated as revenue receipt. As regards to the applicability of provisions of section 28(iv) of the Act, this envisages the value of entire benefit, whether convertible to money or not, which means the benefits have to be in the kind, the monetary benefits are not covered by the said provisions of the Act as in the catena of 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). 15. In the light of the above legal position, we do not f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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