2024 (5) TMI 1245 - HC - Income Tax

Nature of receipt - sales tax incentive received - capital or revenue receipt - Government of West Bengal brought West Bengal Incentive Scheme 2000 for promoting industrialisation in backward areas and to allure entrepreneurs to set up large medium cottage and small scale projects - main aim and purpose of the Scheme was promotion of industries in the State of West Bengal and for that purpose it provided incentives - HELD THAT - The scheme under which the subsidy was received was for promotion of industrialization in the state of West Bengal. In the respondent assessee s own case for the assessment years 2007-08 and 2008-09 the controversy as to whether the subsidy received is a capital receipt or a revenue receipt; came for consideration in the case of Budge Budge Refineries Limited 2022 (2) TMI 533 - CALCUTTA HIGH COURT and the Court dismissed the appeal of the revenue and held that the amount received is capital subsidy and Section 41 (1) of the Income Tax Act 1961 could not be invoked. Appellant has completely failed to distinguish the aforesaid judgment of the coordinate Bench of this Court in the respondent assessee s own case relating to the same Scheme with respect to assessment years 2007-08 and 2008-09. Thus issue in decided in favour of the respondent assessee and against the appellant revenue and it is held that the subsidy received by the respondent assessee under the Scheme-2000 was capital receipt.

Summary

Issues:
Whether the sales tax incentive provided under the West Bengal Incentive Scheme, 2000 is a capital receipt or a revenue receipt.

Detailed Analysis:

Facts:
The case revolves around the West Bengal Incentive Scheme, 2000, aimed at promoting industrialization in the state. The respondent received Industrial Promotion Assistance (IPA) under the scheme, which was 75% of the Sales Tax paid subject to a maximum of 100% of the fixed capital investment. The IPA was related to fixed capital investment and was available until reaching the financial cap. The respondent received subsidies for the assessment years 2009-10, 2010-11, and 2011-12, which were claimed to be capital receipts.

Submissions:
The appellant argued that the subsidy was a revenue receipt as per the law laid down in a previous case. On the other hand, the respondent contended that the subsidy was of a capital nature, citing a judgment related to the same scheme and the respondent.

Discussion & Finding:
The court considered the purpose of the scheme and previous judgments related to the same scheme. It noted that in a previous case involving the respondent, the court had held the subsidy to be a capital receipt. The court found no distinction presented by the appellant to overturn the previous judgment. The court agreed with the findings of the Income Tax Appellate Tribunal (ITAT) and held that the subsidy received was a capital receipt. Consequently, the substantial question of law was answered in favor of the respondent, and the appeal was dismissed.

This judgment clarifies the nature of the subsidy received under the West Bengal Incentive Scheme, 2000, establishing it as a capital receipt rather than a revenue receipt. The court's decision was based on the scheme's objective, previous judgments, and the specific circumstances of the case.