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TMI Blog2012 (12) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... no further details could be furnished by the assessee, the AO disallowed the said amounts by holding that the assessee could not prove that the said amounts formed part of the income in earlier years as required u/s 36(2) of the Act, and also held that the assessee did not file any evidence to prove that it had taken al l necessary steps to recover the disputed amounts. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the CIT(A). 4. The assessee before the CIT(A), filed copies of sale invoices of earlier years in respect of which 'bad debts' were claimed as additional evidences under rule 46A of the Act. The CIT(A) forwarded the said evidences to the AO for necessary verification. After considering the submissions of the assessee and the remand report submitted by the AO, the CIT(A) allowed the appeal of the assessee observing as under:- "2.3 I have duly considered the submissions of the appellant and the material available on record. The additional evidences f iled by the appellant clearly show that the debts in question are in the nature of short recovery/non-recovery of the sale proceeds of the sales made in the earl ier years. The said sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 7. The facts of the issue are that the assessee set up a new unit in the backward district of Wada in Maharashtra in the FY 2000-01. The unit was entitled to sales tax subsidy under the Maharashtra Govt. Scheme - "Package Scheme of Incentives, 1993" for dispersal of industries. SICOM granted eligibility certificate allowing the appellant to a total subsidy of Rs.27,81,76,700/- in the shape of non payment of sales tax. The sales tax receipts were shown as revenue receipts in the books of accounts. However, in the returns of income filed, the same were treated as capital receipts, exempt from tax following the decision of Special Bench of ITAT, Mumbai in the case of Reliance Industries Ltd. (88 ITD 273)(SB). The AO disallowed the claim of the assessee for the reasons that sales tax collected is a trading receipt as held in the cases of Chowringhee Sales Bureau Pvt. Ltd. (87 ITR 542)(SC), Sinclaire Murray & Co. Pvt. Ltd. (97 ITR 615) & Jonnala Narasimha Rao & Co. (200 ITR 558). It was observed that exemption of payment of sales tax after collection does not alter the nature of receipt. In all the earlier years similar receipts were offered for tax by the assessee itself. Aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Special Bench of ITAT, in the case of Reliance Industries Ltd. (supra). In that case also, the assessee has setup a unit in a notif ied backward area and became eligible for incentives in the form of exemption from payment of sales tax. The assessee's claim of sales tax receipts as capital receipts was rejected by the AO. The question which arose before the Tribunal was whether in deciding capital / revenue character of subsidy, the purpose and object of the scheme under which the subsidy was granted, was of more importance than the fact that the subsidy was received af ter commencement of production or conditional upon production. The Hon'ble Tribunal held that for determining the nature of subsidy, the object with which the subsidy was given, was decisive and it took primacy over the fact that it was given af ter commencement of production or conditional upon it. The Tribunal considered and distinguished the decisions of Hon'ble Supreme Court in the case of Chowringhee Sales Bureau Pvt. Ltd., Sinclaire Murray & Co. Pvt. Ltd & Jonnala Narasimha Rao & Co., relied upon by the AO. The subsequent decision of the Mumbai Tribunal in the case of Oceanic Farms Exports Pvt. Ltd. (supra) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88 ITD 273) wherein it has been held that sales tax subsidy is a capital receipt. In that case the Special bench has considered the decision of the Apex Court in the case of Sahney Steel & Press Works Ltd v CIT (228 ITR 253). This decision has been confirmed by the Bombay High Court in CIT v Reliance Industries Ltd 2010-TIOL-228-HC-MUMIT. Those decision were in respect of the incentive scheme of Government of Maharashtra 1979, while the in the instant case the subsidy is under a scheme formulated in 1993. We find that the Delhi tribunal in the case of Indorama Synthetics (I) Ltd v DCIT (2009) 31 DTR 42) has set aside a similar issue to the files of the AO to determine whether the scheme was identical with that considered by the special bench and if so treat the subsidy as a capital receipt. In the circumstances, we set aside the issue to the files of the AO to consider whether the present subsidy scheme enjoyed by the Assessee is identical with that of the scheme framed by the Government of Maharashtra in 1979, considered by the Special bench and the Bombay High Court in the case of reliance Industries supra and if so teat it as a capital receipt. In the result the appeal of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of credit notes on invoices raised on such stockists / customers. ii. Commissions such as project commission, wholesale commission etc., was passed on to the stockiest through whom the sale had been executed based on invoices to such third party customers at the difference between the billed rate and agreed rate. Credit note for commission were issued af ter deduction of tax at source. Thus, the same stockist acted in dual capacity - direct customers where the sales tax / VAT was paid on the sales made to stockists and the goods were sold on a principle to principle transaction. Secondly, the stockist procured the orders which were directly executed by the assessee company for which commission was paid to the stockist af ter making TDS. The discounts allowed to the stockists on direct sales made to them cannot be treated as commission. As a matter of fact, discount is not "paid" to the stockists. Discount is an abatement in the sale price. Legal distinction between "discount" and "commission" was explained by the Hon'ble Courts in the case of Ahmedabad Stamp Vendors Association and Kerala Stamp Vendors Association (supra) relied upon by the appellant. The issue was dealt in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The assessee sold stock to the stockists who in turn sold it to the customers. Stockists are allowed discount and commission separately. The assessee issued credit notes to the stockists giving discount on the sales price, on the basis of various scheme, in respect of quality, target, turnover etc., on the basis of the performance of the stockists. As found by the CIT(A), what is offered by the assessee to the stockists are nothing but discount because the assessee sells the goods to the stockists, who is turn sells the goods to the consumer. In the sale transaction between the assessee and the stockists there cannot be payment of commission to the purchaser himself. Brokerage or commission envisaged under section 194H is for the payment received by the person action on behalf of another for services rendered in the course of buying and selling of goods. Here stockists themselves are buying goods and it cannot be said that they are rendering any service in the course of such buying of goods which will render any payment to them as commission. In the circumstances, we concur with the conclusion and findings of the CIT(A) that what was offered to the stockists is nothing but disco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Before the CIT(A) the assessee contended that unit was considered as going concern by business transfer agreement dated 04.4.2005. In such a case, the value of the land cannot be separately valued under Section 50C. Even otherwise as there is no registered sale deed the provisions of Section 50C cannot be applied. After considering the submissions of the assessee, the CIT(A) allowed the appeal of the assessee holding as under:- "5.3 I have duly considered the submissions of the appellant and the facts brought on record by AO. The Sale deed dated 08/07/2005 through which the land was transferred to TWL was not registered. On this fact alone, I agree with the contention of the ld. AR that the provisions of section 50C do not apply in the instant case. These provisions apply only where a document is registered and it was found by AO that the consideration received or accrued was less than the value adopted or assessed by the registration authority. Sub-section(2) of Sect. 50C further provides that the value so adopted or assessed by the stamp valuation authority, if questioned, in an appeal or revision or reference before any other authority or Court, then reference has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration payable for the transfer of HED as a going concern is of a sum of Rs.1,00,000/- and assumption of liabilities under Articles 4.4.3 and 4.4.4 of the Business Transfer Agreement. Apart from this, there is no other consideration. In other words, in so far as the land and bui lding is concerned, there is no assignment of any value whatsoever in the Business Transfer Agreement. Therefore, the entire exercise of executing a sale deed dated 08/07/2005 and that too unregistered sale deed, does not make the Business Transfer Agreement to be the asset transfer agreement of individual assets. Explanation (2) of Section 2(42C) clarif ies that the determination of value of an asset for payment of stamp duty, registration fees or other similar taxes or fees, shall not be regarded as assignment of values to individual assets or liabilities. Considering the def inition of "slump sale" occurring in Section 2(42C) read with Explanation 2, it is evident that the transfer of HED to TWL by Business Transfer Agreement dated 04/04/2005 was a slump sale. In fact, the AO was also initially of the same view and therefore, he issued a show cause notice to the appellant seeking their objection ..... X X X X Extracts X X X X X X X X Extracts X X X X
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