2015 (7) TMI 1349 - AT - Income Tax

Assessment u/s 153A - Disallowance of sales tax incentive - capital receipt or revenue receipt - CIT-A held that Sales Tax incentive availed for setting up of industrial undertaking claimed by assessee as capital receipt - HELD THAT - On identical facts and circumstances we have taken a view in a group of cases of M/s Narendra Vegetable Products Pvt. Ltd. 2015 (7) TMI 1298 - ITAT NAGPUR as held scheme of the State Government, the assessee is entitled for the exemption of the sales-tax incentive being a capital receipt in the hands of the assessee and that the claim being lawful in nature ought to have been entertained by the Assessing Officer while completing the assessment under section 153A of I.T. Act. - Decided in favour of the assessee.

Summary

Issues:
1. Sales tax incentive claimed as capital receipt.
2. Assessment of sales tax incentive as revenue receipt.
3. Liability for interest under section 234C of the IT Act.

Analysis:
1. The first issue revolves around the treatment of sales tax incentive availed by the assessee for setting up an industrial undertaking as a capital receipt. The learned CIT(A) had held that the incentive cannot be allowed as a deduction in the assessment under section 143(3) read with section 153A of the IT Act. However, the Appellate Tribunal, considering identical facts in a previous case, decided in favor of the assessee, stating that the sales tax incentive should indeed be treated as a capital receipt and not chargeable to tax. Consequently, ground numbers 1, 2, and 3 were decided in favor of the assessee.

2. The second issue pertains to the assessment of the sales tax incentive as a revenue receipt by the Assessing Officer, contrary to the claim of the assessee that it should be treated as a capital receipt. The Tribunal, aligning with its decision in a similar case, ruled in favor of the assessee, stating that the incentive should be considered a capital receipt and not subject to tax. As a result, all the appeals were allowed, indicating a favorable outcome for the assessee regarding the treatment of the sales tax incentive.

3. The final issue concerns the denial of liability by the assessee to be assessed interest under section 234C of the IT Act. The Tribunal did not delve into this issue specifically, mentioning that ground number 4, which was related to the charge of interest, was consequential and did not require adjudication at that moment. Consequently, the appeals were allowed without addressing the matter of interest liability, leaving it unadjudicated.

In conclusion, the Appellate Tribunal, in a consolidated order for seven appeals, decided in favor of the assessee regarding the treatment of sales tax incentive as a capital receipt, overturning the decisions of the CIT(A) and the Assessing Officer. The appeals were allowed, indicating a successful outcome for the assessee in this case.