2022 (6) TMI 1066 - AT - Income Tax

Nature of subsidy receipts - capital or revenue receipts - subsidy received on account of excise duty refund (excise roll back) - Subsidy receipt in pursuance of the incentives announced and sanctioned vide Government of India, Ministry of Commerce and Industry and Central Excise Notification - HELD THAT - Giving thoughtful consideration to the matter on record it can be observed that in assessee s own case for assessment year 2013-14 a Coordinate bench decision in M/s. Crystal Crop Protection Pvt. Ltd. 2019 (12) TMI 980 - ITAT DELHI as relied which in turn had further relied the judgment of Hon ble Jammu and Kashmir High Court in CIT vs. Shree Balaji Alloys 2011 (1) TMI 394 - JAMMU AND KASHMIR HIGH COURT which has been further sustained with Hon ble Apex Court 2011 (11) TMI 712 - SC ORDER - The cumulative effect of same is that excise duty subsidy and interest subsidies given in pursuant of new industrial policy were held to be capital receipts. No distinction, as attempted by Ld. AO, can be drawn on the basis that as earlier income was subject to benefit of weighed deduction @ 100% of the profits derived from undertaking which no more was available, that would change the nature of receipt to revenue instead of Capital. - Decided against revenue.

Summary

Issues:
1. Nature of subsidy received by the assessee - capital or revenue receipt?

Analysis:
The appeal was filed by the Revenue against an order passed by the Commissioner of Income Tax (Appeals) regarding the assessment order for the assessment year 2015-16. The main issue revolved around determining whether the subsidy received by the assessee on account of excise duty refund was a capital or revenue receipt. The Assessing Officer (AO) had argued that the subsidy should be treated as a revenue receipt based on the intention of reducing tax liability by treating it as capital. However, the Commissioner of Income Tax (Appeals) held that the subsidy was a capital receipt.

The Revenue contended that the Commissioner of Income Tax (Appeals) erred in following a judgment of the High Court of Jammu & Kashmir, which was distinguished by the AO. On the other hand, the assessee's counsel relied on previous judgments to support the contention that the subsidy should be considered a capital receipt. The Tribunal considered the assessee's own case for the assessment year 2013-14 and a Coordinate bench decision, which relied on the judgment of the High Court of Jammu & Kashmir, holding excise duty subsidy as capital receipts.

After thorough consideration, the Tribunal found that the subsidy received by the assessee should be treated as a capital receipt based on previous judgments and the nature of the subsidies provided under the new industrial policy. The Tribunal dismissed the Revenue's appeal, citing the findings in the assessee's own case for the assessment year 2013-14. The judgment emphasized that the change in the availability of weighted deduction did not alter the nature of the receipt from capital to revenue. Consequently, the appeal of the Revenue was dismissed, and the order was pronounced on 15th June 2022.