TMI Blog2003 (10) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... quantified for setting up a new Industrial Unit in the Specified Backward Area, being Patalganga at Raigad District pursuant to the eligibility certificate issued under the 1979 Scheme. The appellant submits that the said subsidy is of capital nature and is a grant which is not actually repayable by the appellant, but represents the incentives provided by the Government of Maharashtra with relation to the cost of the project." This appeal in which there were various other grounds also was consolidated with the appeal filed by the Department in ITA No. 4045/Bom/1991 and both the appeals were posted for hearing. At this stage, the CIT-3, Mumbai by letter dt. 27th Jan., 2003, addressed to the Hon'ble President, ITAT, made a request for constituting a Special Bench. The relevant portion of the letter is reproduced below: "Sub: Request for constitution of Special Bench-Appeal before the Tribunal in the case of M/s Reliance Industries Ltd.-Asst. yr. 1986-87 - reg. Ref: ITA No. 4045 and 3896/N/1991 Kindly refer to above. The Revenue's appeal in the case of Reliance Industries Ltd. for asst. yr. 1986-87 is pending before the Hon'ble ITAT, 'J' Bench, Mumbai. The main issue rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional sales-tax liability The assessee-company in its computation of income has claimed deduction on account of notional sales-tax liability of Rs. 14,70,40,220. The notional sales-tax liability is claimed in respect of sales on different goods and purchase of raw-material by PFY unit for 1985 being in the nature of subsidy. It has been claimed by the assessee that the subsidy is a capital receipt and not liable to tax. The Patalganga unit of the assessee is located in notified backward area. The sales-tax liability of the assessee has been exempted by the State Government. Under the Scheme of incentive, the assessee is not required to pay any sales-tax to the Government. The assessee has contended that nonpayment of sales-tax should be considered indirectly as subsidy by the Government, which is of capital nature. The claim of the assessee is that notional sales-tax liability should be deducted from income of the assessee being a capital receipt. The learned CIT(A) in his order for the asst. yr. 1984-85 has held that the assessee has already got remission by way of exemption from sales-tax and there is no ground for taking notional sales-tax liability as capital receipt and exem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reached the Tribunal in ITA No. 1418/Bom/1988 and ITA No. 7554/Bom/1989 respectively. In the order passed by the Tribunal for the asst. yr. 1984-85 on 27th April, 1994, this issue has been discussed in paras 20 to 34 of the Tribunal's order. In that year, the assessee had claimed deduction of Rs. 4,40,71,858 in respect of notional sales-tax liability as capital receipt. A perusal of these paragraphs shows the following factual position: A. The assessee set up a unit in Patalganga which is a notified backward area and became eligible for the incentives announced by the Government of Maharashtra. The unit commenced commercial production in November, 1982. B. The incentive was in the form of exemption from liability for payment of sales-tax for a period of 5 years commencing from 8th June, 1983 and ending on 7th June, 1988. C. The assessee's claim was that the quantum of the sales-tax liability could be claimed as deduction on the basis that it is a capital receipt or on the basis that it should be treated as liability under the sales-tax law, but since it was exempted from payment of sales-tax, the same should be treated as paid within the meaning of s. 43B so as to be adjuste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities was that the assessee did not separately charge sales-tax in the invoices, but the Tribunal held that this aspect was not relevant because it is not necessary to show in the sales invoices a separate charge for sales-tax. The Tribunal proceeded to record a finding that even before the exemption was granted to the assessee and the assessee was liable to pay sales-tax, it was not showing sales-tax as a separate charge in the invoices. The same position was noticed to have been continued subsequent to the exemption. In this connection, the Tribunal referred to r. 46A of the Bombay Sales-tax Rules which provided for bifurcation of the gross invoice figure into sales and the sales-tax chargeable thereon. This rule has been applied in order to get over the situation caused by the assessee not separately charging sales-tax in the invoice. The sales-tax is statutorily determined and charged. The Tribunal referred to the letter dt. 18th Dec, 1986, issued by the State Industrial and Investment Corporation of Maharashtra Dy. CIT vs. Reliance Industries Ltd. (SICOM), which is the implementing agency, permitting the assessee to adjust its price so as to include therein the sales-tax e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after reviewing earlier appellate orders. From this discussion it will be amply clear that the amount of notional liability determined bears the character of subsidy, the amount which otherwise would have been paid to the Sales-tax Department." 8. Before the Tribunal, the assessee had also raised an alternative contention to the effect that the sales-tax liability, ascertained and determined to be payable but not paid because of the exemption under s. 41 of the Bombay Sales-tax Act, should be treated as having been paid and adjusted against the amount of subsidy receivable from the State Government. This alternative contention was raised presumably to overcome the view, if one is taken, that the amount determined as sales-tax collected by the assessee and payable to the Government, would be a revenue receipt or a trading receipt on the basis of the judgment of the Supreme Court in Chowringee Sales Bureau (P) Ltd. vs. CIT 1973 CTR (SC) 44 : (1973) 87 ITR 542 (SC). This alternative contention took care of the situation which would result if such a view is taken. If the alternative contention is accepted, it would reduce the income by an identical amount to be deducted as liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, it appropriates Rs. 4 against subsidy. If the Revenue's stand is accepted then the assessee should be offering sum of Rs. 100 as taxable receipt. (c) Even after the exemption period when the circumstances or the manner in which the bills are raised continue the same way, the position is just like that given in (a) i.e., Rs. 96 being offered for taxation. 32.2. From the above it will be seen that before exemption, during exemption and after exemption, the assessee is offering an amount of Rs. 96 by way of taxable receipts." 11. The Tribunal then proceeded to consider the impact of the demand of sales-tax raised by SICOM on the ground that there was a violation of the terms and conditions upon which the eligibility certificate was granted, inasmuch as the assessee's production had crossed the limit of 10,000 tons and therefore it was liable to pay sales-tax in respect of the excess production which was sold during the period. Dealing with this aspect of the matter, the Tribunal noted that the assessee had charged the same price for its goods whether the sale was from the production below 10,000 tons or above the said limit, but still the SICOM had demanded the sales-tax and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r s. 256(2) of the Act to the High Court. A copy of the said order has been placed at pp. 200 to 214 of paper book No. 1. The question proposed by the CIT in this reference application was as under: "5. Whether on the facts and in the circumstances of the case the Tribunal was right in allowing assessee's claim for deduction of Rs. 4,40,71,858 in respect of notional sales-tax liability holding it as capital subsidy?" 14. It is now necessary for us to refer to the Tribunal's order for the asst. yr. 1985-86 passed on 25th July, 2002, in ITA No. 7554/Bom/1989. In this order, the Tribunal has elaborately dealt with the same question, as to whether the amount of Rs. 13,98,53,584 representing the amount exempted from payment of sales-tax to the Government of Maharashtra for setting up a new industrial unit in the specified backward area, of Patalganga in Raigad District, should be treated as capital receipt in the hands of the assessee and accordingly excluded from the assessee's total income chargeable to tax, from paras 48 to 118 of the order. A copy of this order has been filed at pp. 216 to 345 of the paper book No. 1. We have carefully gone through these paragraphs. In that year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e erroneous. (b) The assessee did not collect sales-tax separately, but collected it as price of the goods by charging a composite amount. The provisions of s. 37 r/w s. 46 of the Bombay Sales-tax Act provide that a dealer who did not pay sales-tax because of some exemption cannot collect any amount as sales-tax and if the dealer did collect the tax, it was liable to be forfeited. The fact that the assessee did not collect anything as sales-tax was lost sight of by the Tribunal in its order. (c) Since the sales-tax was not to be paid to the Government, it cannot be considered as deemed payment in view of s. 37 r/w s. 46 and this aspect was lost sight of by the earlier Tribunal. (d) The finding of the earlier Tribunal that sales-tax incentive was in the nature of a capital receipt was incorrect and no longer tenable in view of the judgment of the Supreme Court in Sahney Steel Press Works Ltd. Ors. vs. CIT (7997) 142 CTR (SC) 261 : (1997) 228 ITR 253 (SC). It was contended by the Department that in this case the contention of the assessee that the subsidy was of capital nature as the same had been given for the purpose of stimulating the setting up and expansion of industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the earlier incentive schemes were fine-tuned so as to make them more effective, employment oriented and to encourage employment-oriented units in backward areas. It was then submitted that the incentive schemes right from 1964 were geared to the following four objects: (1) Development of the backward regions of the State of Maharashtra. (2) Dispersal of the industries. (3) Promotion of the industries for employment oriented units. (4) Providing local employment to Scheduled Castes/Tribes. Two leading judgments of the House of Lords, taking different views on the question, were cited on behalf of the assessee before the Tribunal. These are -(i) The Seaham Harbour Dock Co. vs. Crook (16 Tax Cases 333) and (ii) Ostime vs. Pontipridd Rhondda Joint Water Boat (28 Tax Cases 261). It was pointed out that in the former case the purpose of the grants was the creation of employment and not to fill in or augment the profits of the recipient whereas in the latter case, the subsidies went to fill in the hole in the profits. In the former case the subsidy would be exempt, but not in the latter. The submission was that the assessee's case would be covered by Seaham Harbo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) CIT vs. Menezes Farmaco (1999) 153 CTR (Bom) 300 : (1999) 236 ITR 780 (Bom) and CIT vs. Govind Poy Oxygen Ltd. (1999) 157 CTR (Bom) 464 : (1999) 239 ITR 543 (Bom) in which both the Supreme Court judgments in the P.J. Chemicals Ltd. and Sahney Steel were considered and reconciled. 17. After noticing and considering the above arguments of both the sides in great detail, the Tribunal proceeded to record their conclusions from para 74 onwards. These conclusions, very briefly, are as follows: (1) No fresh material was brought before the Tribunal or in the orders of the Departmental authorities to displace the finding of the earlier Tribunal (asst. yr. 1984-85) that the assessee did not simply enjoy an exemption from payment of sales-tax and that it actually received, by way of an incentive or subsidy, the amount of sales-tax payable by it. The argument of the Revenue that the assessee did not collect any sales-tax in the first instance and had it done so, the sales-tax collected would have been forfeited, was held not to be of much force because r 46A of the Bombay Sales-tax Rules has been considered by the earlier Tribunal and it has been held that the rule took care of such a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated as revenue receipt. (4) The Tribunal held that in the judgment in the case of P.J. Chemicals, the Supreme Court had noticed the divergence of views between the various High Courts on the treatment to be given to the "10 per cent Central Outright grant or subsidy" and have also taken into consideration the two Circulars (No 142 and No. 190) issued by the CBDT It was finally held (by the Supreme Court) that the incentive granted at the prescribed percentage of fixed capital investment in backward districts was an incentive to encourage entrepreneurs to move to the backward areas to establish industries and was not a payment to meet any portion of the actual cost of fixed assets under s. 43(1) of the Act. The Tribunal did not accept the contention of the Revenue that the Supreme Court was not concerned with the question as to the revenue or capital nature of the incentive. It held that there was no dispute in P.J. Chemicals that the nature of the incentive in the hands of the assessee was otherwise capital and the only question that came to be considered was whether or not the subsidy could be considered as going to reduce the actual cost of the asset to the assessee. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the blue print stage itself. He could gradually increase his level of entitlement, after setting up the industry, as and when further investment in the fixed capital assets is made. Thus the Maharashtra Scheme, according to the Tribunal, should be considered as a fixed capital investment incentive whereas the Andhra Pradesh Scheme can be considered as an "operational subsidy". In para 115, the Tribunal summed up the major areas of difference between the Andhra Pradesh and Madhya Pradesh Schemes on the one hand and the Maharashtra Scheme on the other. According to the Tribunal the thrust of Maharashtra Scheme was the industrial development of the backward districts as well as generation of employment, direct nexus with investment in fixed capital assets and the entitlement of the industrial unit to claim eligibility for the incentive while still in the process of being set up. According to the Tribunal, the 1979 Scheme of Maharashtra was oriented towards and is subservient to the investment in fixed capital assets in the specified districts of the State. There was direct nexus between the incentive and the fixed capital investment. The Sales-tax incentive has been envisaged as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,56,48,643. Before the AO the assessee relied on the judgment of the Madhya Pradesh High Court in CIT vs. Dusad Industries in support of its claim that the aforesaid amount was capital in nature and cannot be assessed. The AO took the view that the incentive was not given for capital investment, that it was not in the form of a subsidy, that it was by way of addition to the profits, that any sales-tax collected by the assessee which it did not pay over to the Government was part of the assessee's trading receipts on the basis of the judgments of the Supreme Court in Chowringee Sales Bureau and Sinclair Murray Co. Ltd. vs. CIT 1974 CTR (SC) 283 : (1974) 97 ITR 615 (SC) and that as and when the sales-tax was paid over to the Government deduction under s. 43B would be allowed. The CIT(A) upheld the view taken by the AO. The assessee carried the matter in appeal before the Tribunal. Before the Tribunal it was contended on behalf of the assessee that the incentive was received for promotion of industries in backward area and therefore it should be held to be capital in nature in view of the judgments of the Madhya Pradesh High Court in Dusad Industries and Gadia Wires vs. CIT (1989) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ". 20. Considering the main reason for constituting the Special Bench, it has become necessary for us now to embark upon the somewhat embarrassing task of answering the question: Do the observations made in Bajaj Auto Ltd. vis-a-vis the order of the Tribunal in the present assessee's case for the asst. yr. 1985-86 amount to "virtually overruling" the decision? The enquiry cannot be avoided because, as we shall presently show, the question posed before us, though broadly worded without any reference to the order in the case of Bajaj Auto Ltd., is otherwise governed by the two earlier orders of the Tribunal in the assessee's own case for the asst. yrs. 1984-85 and 1985-86 and again, as we shall show presently, no fresh material or fact or a change in the legal position has been brought to our notice in the course of the arguments before us or in the orders of the Departmental authorities justifying our taking a different view of the matter. Judicial consensus in the field of IT law, as in other branches of law, has always been that if a Bench is of the view that an earlier order of a Bench of equal strength in the same assessee's case requires reconsideration in the light of a chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Supreme Court judgments in Union of India Ors. vs. Godfrey Philips India Ltd. (1986) 158 ITR 574 (SC) and Union of India Anr. vs. Raghubir Singh (1990) 87 CTR (SC) 186 : (1989) 178 ITR 548 (SC). In Union of India vs. Godfrey Philips, a Bench of three Hon'ble Judges of the Supreme Court found that a decision of the Supreme Court in Jeetram vs. State of Haryana (1980) 3 SCR 689 expressed its disagreement with the observations of the earlier judgment of the Supreme Court in Motilal Padampat Sugar Mills vs. State of Uttar Pradesh Ors. (1979) 118 ITR 326 (SC), a decision rendered by a Bench of equal strength and observed as follows: "We find it difficult to understand how a Bench of two judges in Jeetram's case, could possibly overturn or disagree with what was said by another Bench of two judges in Motilal Padampat Sugar Mills case. If the Bench of two judges in Jeetram's case found themselves unable to agree with the law laid down in Motilal Padampat Sugar Mill's case, they could have referred Jeetram's case to a larger Bench, but we do not think it was right on their part to express their disagreement with the enunciation of the law by a co-ordinate Bench of the same Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-equal strength. 21. Two aspects of the matter fall for consideration now. The first is whether the order in Bajaj Auto can be said to have "virtually overruled" the order in Reliance Industries Ltd. (RIL) for the asst. yr. 1985-86. In our opinion, there can be no question of a Bench "overruling" another Bench of equal strength. As the judgments of the Supreme Court referred to in the preceding paragraphs would show to permit a Bench to differ from or overrule another Bench of equal strength would be contrary to the established norms of the judicial system in our country. 22. The second aspect to be considered is whether the remarks of the Tribunal in Bajaj Auto Ltd. vis-a-vis the order in RIL were justified even on merits. Considerable reliance was placed on this order on behalf of the Department in the course of the arguments before us. We have already noticed that there were four broad remarks made in Bajaj Auto Ltd. vis-a-vis the order in RIL. Let us proceed to examine them seriatim. The first remark was in para 35 of the order in Bajaj Auto, where it was said that the Tribunal, while comparing the A.P. Scheme with the Maharashtra Scheme in its order in RIL, laid stress o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereas it varied depending on whether the unit was new or existing or a pioneer unit or resource based unit. The period of entitlement was also noticed to be directly connected to the gross fixed capital investment. The period of eligibility could be curtailed if the investment was likely to fall short of the sales-tax liability. The sixth and last point of difference was that under the Andhra Pradesh Scheme, the units were required to apply every year for the subsidy after being set up and going into production, whereas under the Maharashtra Scheme, an intending entrepreneur could apply for incentive immediately after taking the initial effective steps such as taking possession of the land, making an application to DGTD for registration, etc. and the implementing agency, which is the SICOM could process the application without waiting for the completion of the setting up of the unit and could issue a letter of intent/provisional eligibility certificate on completion of the final effective steps. The final eligibility certificate from SICOM and the letter of entitlement from the CST could however be granted only after commencement of production. 23. After listing out the 6 points ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the case of RIL, because what the Tribunal in Bajaj Auto Ltd. actually said was that the facts of Bajaj Auto Ltd. were different from the facts in Balarampur Chini Mills Ltd. Merely because the facts in Bajaj Auto Ltd. were different from the facts before the Calcutta High Court in Balarampur Chini Mills Ltd., which was relied on by the Tribunal in the case of RIL and in the absence of any express finding in Bajaj Auto Ltd. that the Tribunal in RIL's case erroneously relied on Balarampur Chini Mills Ltd. it cannot be said that Bajaj Auto Ltd. has "virtually overruled" the Tribunal's order in RIL. At best, it can only be a matter of debate whether the Tribunal by implication held that Balarampur Chini Mills was erroneously relied upon by the Tribunal in RIL's case. 25. The third remark appears in para 40 of the order in Bajaj Auto Ltd. It has been stated that the Circular No. 142 issued by CBDT, which has been relied on by the Tribunal in the case of RIL to hold that the incentive was a capital receipt, concerns only with those subsidies which are intended to contribute to capital outlay of the industrial unit and has no relevance to the facts of the "present case", meaning ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiated as under: "We have referred to these Board's Circulars because they indicate Revenue's understanding of the matter before various Court's pronouncements. Further, these Circulars have been referred to in some of the important judgments. Circular No. 142 has been reproduced and discussed in the judgment of Hon'ble Andhra Pradesh High Court in the case of CIT vs. Sahney Steel Press Works Ltd. (1985) 44 CTR (AP) 243 : (1985) 152 ITR 39 (AP) which has been finally affirmed by Hon'ble Supreme Court in (1997) 142 CTR (SC) 261 : (1997) 228 ITR 253 (SC). Circular No. 190 has been considered by, Hon'ble Supreme Court itself in their judgment in the case of CIT vs. P.J. Chemicals Ltd." Thus, after going through the relevant portions of the Tribunal's order in the case of RIL for the asst. yr. 1985-86, we are inclined to hold that the Tribunal did not rest its decision on the Circular No. 142. If anything, this circular was considered to indirectly support the assessee's case, which stood accepted on the basis of various other grounds, both of facts and of law. 26. The fourth and last remark of the Tribunal in Bajaj Auto Ltd. vis-a-vis the order of the Tribunal in the case of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case is revenue receipt in the hands of RIL. The salient features of the 1979 Scheme of the Government of Maharashtra were pointed out to the Tribunal on behalf of the Revenue. The contention on behalf of the assessee, inter alia, was that the Andhra Pradesh High Court and the Supreme Court in Sahney Steel were concerned with a Scheme different from the Government of Maharashtra Scheme of 1979 and therefore the judgment of the Supreme Court in Sahney Steel was not applicable to the case of RIL. It was pointed out that under the Scheme, the object was to more effectively serve the purpose of bringing about industrial growth in all parts of the State with particular attention to backward areas, that the subsidy was given at a specified percentage of the cost of fixed assets, such as land, building, plant and machinery, etc. and that the fact that the subsidy was granted after the industry was set up and went into regular production was not the operative or decisive factor in coming to the conclusion as to whether the receipt was revenue or capital. It was emphasized that the decisive factor was the object with which the incentive was given. It was in this connection that va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the refund of sales-tax paid on raw materials or finished products must be treated as revenue receipt in the hands of the assessee. In both the cases, the Government is paying out of public funds to the assessee for a definite purpose. If the purpose is to help the assessee to set up its business or complete a project as in Seaham Harbour Dock Co.'s case (1931) 16 Tax Cases 333 (HL), the monies must be treated as having been received for a capital purpose. But if the monies are given to the assessee for assisting him in carrying out the business operation and the money is given only after and conditional upon commencement of production such subsidies must be treated as assistance for the purpose of the trade." 28. The question for consideration is whether the Tribunal in the case of RIL had correctly appreciated and interpreted the ratio of the decision of the Supreme Court in Sahney Steel. On a careful reading of the order of the Tribunal in the case of RIL, it appears to us that the ratio of the judgment in Sahney Steel (SC) has been correctly interpreted and appreciated by the Bench. It may be recalled that the assessee before the Supreme Court received the amount as subsidy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea, the entire subsidy would be capital receipt. This example demonstrates the applicability of the first principle viz., that it is the object or purpose for which the subsidy is given that is determinative of its character in the assessee's hands. The object of the subsidy, in the example given, being for a capital purpose, the subsidy also fell to be considered as capital receipt. The first principle was emphasized again by the Supreme Court by referring to the judgment of the House of Lords in Seaham Harbour Dock Co.'s case and by giving that case as example, where the subsidy was given with the object of helping the assessee to set up its business or complete a project. Since this is a capital purpose, the subsidy was held to be capital. The third principle that the source of the fund was not determinative of the question was demonstrated by the Supreme Court in the same example. It noted that both in the case of refund of sales-tax paid on raw materials and finished products, the Government was paying out of public funds to the assessee for a definite purpose, viz., the expansion of its capacity. Thus the Supreme Court demonstrated the principle that it is the object of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d area, it will be capital, irrespective of the modality or the source of funds through or from which it is given and that if monies are given for assisting the assessee in carrying out the business operations only after, and conditional upon, the commencement of production, it would be revenue. It was only for the purpose of bringing out this distinction that the Tribunal had analysed the features of the Maharashtra Scheme of 1979 and had come to the conclusion that the subsidy given under the Scheme had a direct nexus with the fixed capital investment and that it could not be said that the subsidy was given with the object of assisting or lending a helping hand to the assessee in its business operations. The Tribunal also took the view that since the Madhya Pradesh Scheme was found by the Supreme Court in Sahney Steel to be more or less in the same genre as the Andhra Pradesh Scheme, it observed at p. 267 of the report, vis-a-vis the Madhya Pradesh Scheme and while overruling the judgment of the M.P. High Court in CIT vs. Dusad Industries, that mere setting up of the industry did not qualify an industrialist for getting any subsidy and that the subsidy was given as help not for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the order, the Tribunal noted as under: "In our view, the mere fact that the amount of incentive was allowed to the assessee after the purchase and installation of plant and not beforehand cannot deflect from the essential position of the Maharashtra Scheme, that the payment is by virtue of and to the extent of investment made in the fixed assets. It is a fact of life of the setting up of industries in the modern era that the cost of machinery and plant, etc., are generally defrayed by way of repayment of borrowings from out of the internal accruals of the industry during the course of its business operations. Even the assessee before us in its application dt. 16th Dec, 1980 submitted to SICOM that the aggregate cost of project estimated at. Rs. 66.21 crores was proposed to be met by the following means of finance: Share Capital and internal Cash Accruals 1.350 Rupee loans/Debentures 2.576 Foreign Currency Loan 2.695 ------- Total 6.621 ------- Sales-tax incentive which has been envisaged in the Maharashtra Scheme as an alternative to cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy over the fact that it was given after the commencement of production and conditional upon the same. That the Supreme Court itself recognised this position has been amply made dear in its observations made at pp. 262 263 of the report. 34. With great respect, we are therefore unable to share the opinion expressed in Bajaj Auto Ltd. that the Tribunal in its order in the case of RIL for the asst. yr. 1985-86 did not, correctly interpret the ratio laid down by the Supreme Court in Sahney Steel. 35. Coming to the facts of the case, they have all been adverted to in the Tribunal's orders, both for the asst. yrs. 1984-85 and 1985-86. When the assossee applied for the subsidy on 16th Dec, 1980, it did not have any industrial unit in the State of Maharashtra, but was running a synthetic textile mill at Naroda, Ahmedabad. It has been observed by the Tribunal that the assessee had taken possession of the land in June, 1980 in Patalganga Industrial area and spent Rs. 1.40 crores for that purpose. It had also obtained registration from the Ministry of Industry, Government of India, for the manufacture of polyester filament yarn with licenced annual capacity of 10,000 tons. The assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other question as to whether the Tribunal erroneously interpreted the judgment of the Supreme Court in Sahney Steel, the arguments of the Department were the same in the sense that even in the appeal before the Tribunal for the asst. yr. 1985-86, as we find from the order of the Tribunal, the arguments were focused upon the pivotal point that the ratio laid clown by the Supreme Court in Sahney Steel was that if the subsidy is received after and conditional upon the commencement of production, irrespective of the object for which the subsidy is given, it constitutes a revenue receipt in the assessee's hands. This argument has been rejected by the Tribunal in its order for the asst. yr. 1985-86 for reasons which we have already discussed in some detail and the same arguments have been pressed into service before us also. Additionally, the order of the Tribunal in Bajaj Auto Ltd. was also heavily relied upon. We have already expressed our inability to share the view expressed in Bajaj Auto Ltd that the Tribunal in the case of RIL for the asst. yr. 1985-86 erroneously interpreted or appreciated the ratio laid down in Sahney Steel. We have also given reasons for our view. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Supreme Court in Sahney Steel and in CIT vs. Rajaram Maize Products that since the subsidy is given for the purpose of meeting a part of the expenditure on power, it was revenue receipt in the assessee's hands. In both the cases, the object of the subsidy was not to encourage the setting up of factories or for industrialization of any particular area of the State. The object was to assist or lend a helping hand to the concerned assessees after they commenced production so that they tide over the initial difficulties in running the factories. The subsidy in both the cases was an operational subsidy. The facts in these two cases being different from the facts of the present case, they are not applicable. 37. In the paper book filed by the Department containing the above judgments, we noticed a judgment of the Madras High Court in CIT vs. Ponni Sugars Chemicals Ltd. (2003) 179 CTR (Mad) 477 : (2003) 260 ITR 605 (Mad). In this case, the assessee received two types of subsidies. One was under a Scheme of the Government framed with the object of augmenting indigenous sugar production and to provide incentives to new sugar factories and expansion products. The Scheme enabled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alling with the capital field or out of it. If the true character of the incentive here is to enable the assessee to meet the capital cost, then that true character must be given full recognition and the fact that the receipt was subsequent to the commencement of production (can) not be allowed to stand in the way of its proper treatment as a receipt in the capital field meant to meet a capital cost. The line separating "capital" from "revenue" is a line which is not fixed and unalterable, but one which shifts from time to time depending upon the peculiar facts of a given case. It is the sum total of all the relevant facts of a given case, which will determine the ultimate decision as to whether a particular item of receipt or expenditure is to be regarded as being in the capital or in the revenue field ..................... The purpose and object of the Scheme, therefore, is of vital significance and decided cases which turn upon the special facts cannot pre-determine the outcome of another case merely on the ground that post production receipts are normally regarded as trading receipts." The Madras High Court also referred to the judgment of the Supreme Court in Sahney Steel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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