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TMI Blog2011 (5) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... A. No.258 of 2001 - - - Dated:- 19-5-2011 - Mr. Justice Bhaskar Bhattacharya, Mr. Justice Sambuddha Chakrabarti, JJ. For the Appellant: Md. Nizamuddin. For the Respondent: Mr. N. K. Poddar, Mr. Dilip Kumar Kadel, Mr. Vineet Tibrewal. Bhaskar Bhattacharya, J.: This appeal under Section 260A of the Income-tax Act is at the instance of the Revenue and is directed against the order dated 18th May, 2001 passed by the Income-tax Appellate Tribunal, E Bench, Calcutta in ITA No. 1080(Cal) of 1998 relating to the Assessment Year 1995-96 allowing an appeal preferred by the assessee. Being dissatisfied, the Revenue has come up with the present appeal. The only question that fell for determination before the Commissioner of Income-tax (Appeals) as well as the Tribunal below was whether the subsidy granted by the Government of West Bengal in favour of the assessee to the extent of Rs.5,34,86,887/- should be treated to be a capital receipt or not. The Assessing Officer opined that the assessee received the abovementioned amount as industrial promotion assistance from the Government of West Bengal during the year under consideration, and in its accounts, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he circumstances of the case Income Tax Appellate Tribunal was justified in law in not appreciating and not considering that the subsidy received by the assessee being a non-refundable grant earned through exercise of business is therefore taxable business income and is a revenue receipt and not a capital receipt. iv) Whether on the facts and in the circumstances of the case conclusion arrived at by the Income Tax Appellate Tribunal in allowing the appeal of the assessee by deleting the addition made by the Assessing Officer towards subsidy received by the assessee amounting to Rs.5,34,18,887/- is perverse. Mr. Nizamuddin, the learned counsel appearing on behalf of the Revenue, has laboriously attacked the order passed by the Tribunal below and has contended that the Tribunal below totally misconstrued the decision of the Supreme Court in the case of Sahney Steel and Press Works Ltd. (Supra), and consequently, illegally reversed the decision of the CIT (Appeals). According to Mr. Nizamuddin, the following three factors are vital for the purpose of deciding whether a subsidy received by an assessee comes within the purview of revenue receipt or not: (i) Whether the ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Steel and Press Works Ltd. (Supra). In this connection, Mr. Poddar relies upon the objects and reasons behind the publication of the Notification of the Governor of West Bengal, both the original and the amended one, by which the original object of the subsidy as well as the amended object of the subsidy with retrospective effect was disclosed and according to him, the said object would show that the purpose was for helping the penurious industries with capitals. Mr. Poddar further contends that at any rate, the Tribunal having taken a quite reasonable view which is in conformity with the subsequent decision of the Supreme Court in the case of Ponni Sugars and Chemicals Ltd. (Supra), and the same cannot be said to be a perverse judgment to be interfered with under Section 260A of the Act. Mr. Poddar, thus, prays for dismissal of the appeal. Therefore, the only question that arises for determination in this appeal is whether the Tribunal below was justified in holding that the subsidy received by the assessee was in the nature of capital receipt and consequently, was excluded from the operation of taxation under the Income-tax Act. In order to appreciate the aforesaid question, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me as would appear from sub-section (2) of Section 1 that the same was given effect to from 1st April, 1994 and initially, was in force only one year from that date and thus, the benefit was then available to the assessee only for that year which is the Assessment Year we are concerned with. From the objects and the reasons of the aforesaid scheme as well as the entitlement as indicated in Section 3 mentioned above, it is clear that the Government has decided to grant the subsidy by way of financial assistance to tide over the period of crisis for promotion of the industries mentioned in the scheme which have the manufacturing units in West Bengal and which are in need of financial assistance for expansion of their capacities, modernization, and improving their marketing capabilities and such subside for the financial year in question was only for that year and was equivalent to ninety per centum of the amount of sales tax paid by the Industry concerned, for any quarter under the Sales Tax Act in respect of sales of such goods. We find that the principles laid down in the case of Saheney Steel and Press Works Ltd (supra), relied upon by Mr. Nizamuddin has been explained by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit or to expand the existing unit the receipt of the subsidy was on capital account. Therefore, the Court proceeded, it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant. In the case before us, the object of the subsidy is for expansion of their capacities, modernization, and improving their marketing capabilities and thus, those are for the assistance on capital account. Similarly, merely because the amount of subsidy was equivalent to 90% of the sales tax paid by the beneficiary does not imply that the same was in the form of refund of sale tax paid. As pointed out by the Supreme Court in the case of Senairam Doongarmall Vs. Commissioner of Income-tax, Assam, reported in AIR 1961 SC 1579, it is the quality of the payment that is decisive of the character of the payment and not the method of the payment or its measure, and makes it fall within capital or revenue. Thus, in the case before us, the amount paid as subsidy was really capital in nature. In the case of CIT-1, Ludhiana Vs. Adarsh Kumar Goel, reported in (2006) 156 Taxman 257 (Punjab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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