2022 (4) TMI 1460 - ITAT MUMBAI

Nature of receipt - sales tax/entry tax exemption i.e subsidy, incentive, etc, by whatever name called, received by the assessee - revenue or capital receipt - HELD THAT:- Assessee had furnished all the requisite documents to justify its claim of exemption that the subsidy received by it are capital receipts not chargeable to tax, before the ld. AO as well as before the ld. CIT(A) and that both the lower authorities had examined the very same documents and had arrived at their respective conscious conclusions. Hence the argument advanced by the ld. Special Counsel for the Revenue that both the lower authorities had not followed the directions of this Tribunal in the first round of proceedings wherein this Tribunal had directed the ld. AO to make thorough examination of the various subsidy / incentive schemes and decide its taxability. is completely devoid of merits. Since the matter has been already examined by both the lower authorities and respective conclusions drawn thereon by them , though contrary to each other, we hold that there is no need for these appeals to be remitted back to the file of ld. AO for denovo adjudication, as prayed by the ld. Special Counsel for the Revenue.

First, in the nature of higher free sale sugar quota and second, in allowing the manufacturer to collect Excise duty on sale price on the free sale sugar in excess of the normal quota, but to pay to the Government only the Excise duty payable on the price of levy sugar. The Hon’ble Supreme Court PONNI SUGARS & CHEMICALS LTD. [2008 (9) TMI 14 - SUPREME COURT] in para 14 of its decision had held that “character of receipt of subsidy has to be determined with respect to the purpose for which the subsidy is given. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial.” In fact, the Hon’ble Supreme Court while rendering this decision had duly considered its earlier decision in the case of Sahney Steel and Press Works Ltd [1997 (9) TMI 3 - SUPREME COURT] and had absolutely no quarrel with that judgement. Rather, it concurred with the decision rendered in Sahney Steel and Press Works Ltd., case.

We hold that the provisions of Explanation 10 to Section 43(1) of the Act would not be applicable in the facts and circumstances of the case and accordingly, the alternative ground raised by the Revenue is hereby dismissed.

We hold that subsidy / incentive received in the instant case by the assessee for all the years under consideration would have to be construed only as a capital receipt not chargeable to tax and the ld. CIT(A) had rightly granted relief to the assessee in this regard by applying the purpose test. Hence, we do not find any infirmity in the order of the ld. CIT(A) for all the years under consideration. Accordingly, the original grounds as well as the additional grounds raised by the Revenue are dismissed.