TMI Blog2024 (1) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee from the purchasers towards sale of goods is revenue receipt. Hence no deduction from revenue receipts in the name of subsidy was permissible. Allowing such claim of the assessee would result in unauthorised collection and retention of trade tax and also unauthorised deduction from taxable income which is statutorily and constitutionally not permissible. As per the own case of respondent/assessee, the amount of tax component in respect to the assessment years as mentioned in the substantial questions of law afore-quoted, is the tax component which was included by him in the sales turnover of the goods as a sale price of the goods. Once it is admitted case of the respondent/assessee that the amount realized by him from purchaser was the sale price of the goods, there does not arise any question of tax component included in the sale price to be of a capital nature, irrespective of the issue as to whether the respondent/assessee could have recovered it from purchasers or not. Exemption pre-supposes liability to tax. It is not a right but it is granted subject to statutory provision. The Legislature in it wisdom by enacting Section 4A of the U.P. Act, 1948 has exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Khaitan, Sr. Adv. Sri Sanjoy Bhowmik, Adv. Smt. Swapna Das, Adv. 1. Heard Sri Tilak Mitra, learned standing counsel for the appellant/revenue, Sri Amit Sharma, learned standing counsel for the appellant/revenue and Sri J.P. Khaitan, learned senior counsel assisted by Sri Sanjoy Bhowmik and Smt. Swapna Das, learned advocates for the respondent/assessee. 2. The above noted Income Tax Appeal No. 233 of 2010 relating to assessment year 2002-03 was admitted by this Court by an order dated 22.06.2007, on the following substantial question of law : Whether in the facts and circumstances of the case the Income Tax Appellate Tribunal was justified in law in treating the sales tax subsidy of Rs. 5,51,59,449/- as capital receipt though the subsidy has been granted to the assessee only after commencement of production? 3. The above noted Income Tax Appeal No. 158 of 2010 relating to assessment years 2001-02, 2003-04, 2004-05 and 2005-06 was admitted by this Court by an order dated 25.08.2010, on the following substantial question of law : Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is correct in treating the sums of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee unauthorisedly charged trade tax by including it in sale price. Thus the trade tax was included in the sales turnover. The assessee attempted to claim the aforesaid trade tax component, as capital subsidy which is totally unauthorised and its nature is purely revenue receipt. 8. Learned counsel for the appellant has carried us to the impugned order of the Tribunal and submitted that Section 4A of the UP Trade Tax Act, 1948 and the notification no. 780 dated 31.3.1995 issued therein has object of increasing the production of any goods or for promoting development of any industry in the State and to achieve that object the aforesaid notification was issued to declare that the turnover of sales in respect of manufactured goods by a manufacturer holding an exemption certificate shall be conditionally exempt. Since the object is to promote industry and, as such, the tax component which form part of the sales price, although not separately shown as tax in sales invoices; is necessarily a capital subsidy. Therefore, the amount claimed by the assessee as capital receipt was liable to be deducted from the total sales turnover disclosed by the assessee and the CIT (Appeals) and the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction and in any other case from the date following the expiration of six months from the date of starting production, and subject to such conditions as may be specified, be exempt from trade tax on sale of goods whether wholly or partly or be liable to tax at such reduced rate as it may fix: Provided that in respect of goods manufactured in a new unit having a fixed capital investment of five crore rupees or more or in an existing unit which may make fixed capital investment of five crore rupees or more in expansion, diversification, modernisation and backward integration or in any one of them, within such period not exceeding five years as may be specified in the notification, the exemption from or reduction in the rate of tax may be granted. (4) For the removal of doubts, it is hereby declared that where an eligibility certificate has been cancelled or amended under sub-section (3), the dealer shall be liable to pay tax on his turnover of the period during which the facility of exemption or reduction under this section is not admissible to him. Section 8-A. Registration of dealers and realisation of tax by dealers (2) (a) No person w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m whom such dealer had actually realised such amount or part, or to his legal representatives; and to no other person: Provided that no such claim shall be entertained after the expiry of three years from the date of the order of assessment or one year from the date of the final order on appeal, revision or reference, if any, in respect thereof, whichever is later. Explanation : The expression final order on appeal, revision or reference, includes an order passed by the Supreme Court under article 32, article 132, article 133, article 136 or article 137 or by the High Court under article 226 or article 227 of the Constitution. Income Tax Act, 1961 2. Definitions. (24) income includes [(xviii) assistance in the form of subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement (by whatever name called) by the Central Government or a State Government or any authority or body or agency in cash or kind to the assessee ;] [other than,- (a) the subsidy or grant or reimbursement which is taken into account for determination of the actual cost of the asset in accordance with the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent it is not due as tax, be held by the State Government in trust for the person from whom it was realised by the dealer or his legal representatives, and the deposit shall discharge such dealer of the liability in respect thereof to the extent of the deposit. The amount so deposited by the dealer is to be refunded to the person on claim being made from whom such dealer had actually realised such amount or part or to his legal representatives and to no other person. 12. There is no statutory provision authorising an assessee to realise trade tax under the Act either in the name of trade tax or by any other name and to retain it instead of depositing it with the Government. When Section 4A exempt tax on turnover of sales of a dealer covered by an eligibility certificate issued under Section 4A, then to the extent of exemption, no trade tax could be recovered. Exemption from tax is freedom of liability from tax on turnover of sales under Section 4A of the U.P. Act, 1948. Hence in the absence of liability to pay trade tax on turnover of sales to the extent provided in the eligibility certificate issued to the assessee under Section 4A of the U.P. Act, 1948, neither tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the U.P. Act, 1948 has not authorised the respondent/assessee either to collect the tax component on exempted sales or to retain it and to grant it as state subsidy. 15. Apart from above, once admittedly the amount as shown in the invoices is the sale price of the goods sold by the respondent/assessee to purchasers, it is revenue receipt. Bifurcation made by the respondent/assessee to claim deduction in the name of capital receipt representing the trade tax component on exempted sales, is a self devised mechanism and not permitted under law. Such a receipt is not of capital nature but being part of sale price of the goods, is certainly revenue receipt. The Income Tax Appellate Tribunal has committed a manifest error law in passing the impugned order to hold the aforesaid part of the sale price to be subsidy or capital receipt. In fact, the ITAT has totally misdirected it and passed the impugned orders without even having reference to the relevant provision of the U.P. Act, 1948, the nature of exemption granted to the respondent/assessee under the notification dated 780 dated 31.3.1995 and the nature of receipts of the assessee which, according to own case of the assessee, was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of it or its equivalent, irrespective of form is repayment of refund of sales tax. This would be contrary to Constitution . Any agreement for which refund being contrary to public policy was void under S.23 of the contract Act. The constitutional requirements of levy of tax being for the welfare of the society and not for a specific individual the agreement or promise made by the Government was in contravention of public purpose thus violative of public policy. No legal relationship could have arisen by operation of promissory estoppel as it was contrary both to the Constitution and the law. Realisation of tax through Sate mechanism for sake of paying it to private person directly or indirectly is impermissible under constitutional scheme. The law does not permit it nor equity can countenance it. The scheme of scheme of refund of sales tax was thus incapable of being enforced in a Court of law. 17. From bare perusal of Section 4A, 8A(2) and 29A of the U.P. Act, 1948 and the law laid down by the Hon ble Supreme Court in Amrit Banaspati Co. Ltd. (supra) it is evident that the exemption from trade tax on turnover of sales was allowable to a class of entrepreneurs from burden o ..... 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