2017 (12) TMI 634 - HC - Income Tax

Sales tax subsidy - addition to the income of the Assessee by treating it as revenue receipt - Held that - With regard to the very same sales tax subsidy provided in the State of Haryana, pursuant to the Scheme in force in the said State during the AY in question, this Court, in Commissioner of Income Tax v. Johnson Matthey India (P) Limited 2015 (3) TMI 1305 - DELHI HIGH COURT allowed it as capital receipt - Thus issue answered the said issue in favour of the Assessee and against the Revenue.

Summary

Issues:
1. Custom duty on import of components for export purpose
2. Custom duty on inventory held in closing stock
3. Alleged excess consumption of raw material and components
4. Treatment of sales tax subsidy as revenue receipt

Analysis:

1. Custom duty on import of components for export purpose:
The appeal by the Revenue challenged the ITAT's order deleting the addition of custom duty on import of components for export purpose. The High Court, considering a previous decision for the same Assessee for AY 1999-2000, ruled in favor of the Assessee and against the Revenue. The Court's decision was influenced by the precedent set in a case involving Johnson Matthey India (P) Limited and supported by Supreme Court judgments.

2. Custom duty on inventory held in closing stock:
Similar to the first issue, the High Court upheld the ITAT's decision to delete the addition/disallowance related to custom duty on inventory held in closing stock. The Court's ruling was consistent with its interpretation in a previous case involving the same Assessee for AY 1999-2000, favoring the Assessee and going against the Revenue.

3. Alleged excess consumption of raw material and components:
The ITAT's deletion of the addition of alleged excess consumption of raw material and components was affirmed by the High Court in line with its decisions on the previous issues for the same Assessee. The Court's judgment favored the Assessee and went against the Revenue based on established legal principles and precedents.

4. Treatment of sales tax subsidy as revenue receipt:
Regarding the treatment of sales tax subsidy as revenue receipt, the High Court referred to a previous case involving Johnson Matthey India (P) Limited, where a similar issue was decided in favor of the Assessee and against the Revenue. The Court noted that the Revenue's reliance on another case was under appeal and stayed by the Supreme Court. Consequently, the High Court ruled in favor of the Assessee on this issue as well, aligning with its previous decisions and established legal principles.

In conclusion, the High Court disposed of the appeal in favor of the Assessee on all the issues raised, emphasizing consistency with previous decisions and established legal precedents.