9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (2) TMI 1456 - AT - Income TaxSubsidy receipt - Addition on receipts of Industrial Promotion Assistance(IPA) - revenue or capital receipts - whether sum received by the assessee as Industrial Promotion Assistance under the West Bengal Incentive Scheme 2000 for establishing the industry in the state of West Bengal which is disbursable by way of sales tax paid is a capital receipt not chargeable to tax? - HELD THAT - As decided in S M/S. BUDGE BUDGE REFINERIES LTD. 2016 (10) TMI 1307 - ITAT KOLKATA - Keeping in view the objects of the West Bengal Incentive Scheme 2000 and various judicial precedents relied upon hereinabove we hold that the subsidy is to be treated as capital receipt not chargeable to tax in the hands of the assessee and not in the years under appeal Sole purpose behind the grant of assistance is to tide over the financial crisis and promotion of industries and that both these activities are related to capital field and cannot be linked up with day to day operations of the appellant in any manner. Respectfully treat WBIPA as a capital receipt and direct the A.O to delete the addition - Accordingly the grounds raised by the revenue dismissed.
Issues Involved:
1. Whether the sum of ?7,48,27,500/- received as Industrial Promotion Assistance (IPA) under the West Bengal Incentive Scheme 2000 is a capital receipt not chargeable to tax. 2. Whether the CIT(A) erred in deleting the addition of the IPA amount by the Assessing Officer (AO). 3. Whether the CIT(A) correctly interpreted the nature of the subsidy as a capital receipt. 4. Whether the accounting treatment of the IPA by the assessee supports the revenue's claim. 5. Whether the CIT(A)'s order is erroneous and prejudicial to law. Detailed Analysis: 1. Nature of the IPA Receipt: The primary issue is whether the ?7,48,27,500/- received by the assessee as IPA under the West Bengal Incentive Scheme 2000 is a capital receipt not chargeable to tax. The AO contended that the IPA is revenue in nature, arguing that the subsidy was intended to assist the assessee in carrying on its trade or business, thus constituting a revenue receipt. The AO's reasoning included the fact that the IPA was credited against sales in the Profit & Loss account and only reduced from the net profit during the computation of total income. 2. CIT(A) Deleting the Addition: The CIT(A) held that the IPA was a capital receipt not chargeable to tax, relying on several judicial pronouncements, including the decision of the Hon’ble Calcutta High Court in CIT vs Rasoi Ltd., which held that sales tax subsidy received from the Government of West Bengal was a capital receipt. The CIT(A) concluded that the subsidy was intended for the establishment and promotion of industries in West Bengal, thus qualifying as a capital receipt. 3. Interpretation of the Subsidy: The CIT(A) interpreted the subsidy as a capital receipt based on the purpose test. The purpose test, as established in CIT vs Ponni Sugars & Chemicals Ltd., determines the nature of the subsidy based on its objective. If the subsidy aims to assist in setting up a new unit or expanding an existing unit, it is considered a capital receipt. The CIT(A) found that the West Bengal Incentive Scheme 2000 aimed to promote industrial development, thus supporting the capital nature of the subsidy. 4. Accounting Treatment: The AO argued that the accounting treatment of the IPA by the assessee, where it was credited against sales in the Profit & Loss account, indicated its revenue nature. However, the CIT(A) and the Tribunal found that the accounting treatment alone does not determine the nature of the receipt. The purpose and objective of the subsidy, as outlined in the incentive scheme, were more critical in determining its nature. 5. Erroneous and Prejudicial Order: The revenue contended that the CIT(A)'s order was erroneous and prejudicial to law. However, the Tribunal upheld the CIT(A)'s decision, finding no merit in the revenue's appeal. The Tribunal referred to its previous decision in a similar case (DCIT vs M/s. Budge Budge Refineries Ltd.), where it was held that the subsidy under the West Bengal Incentive Scheme 2000 was a capital receipt not chargeable to tax. Conclusion: The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision that the ?7,48,27,500/- received as IPA was a capital receipt not chargeable to tax. The Tribunal's decision was based on the purpose of the subsidy, which was to promote industrial development in West Bengal, and the consistent judicial precedents supporting the capital nature of such subsidies. The appeal of the revenue was dismissed, and the order was pronounced in court on 03.02.2017.
|
