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TMI Blog2014 (8) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... on providing incentives for investment of industrial sector to achieve effective, meaningful and speedy development of the state - the assessee’s retention out of the sales tax collected on sale of finished products from expanded unit is part of capital receipt under the subsidy scheme of the Govt. of Haryana. The subsidy viewed from the angle of provisions of section 25A of the Haryana General Sales Tax Act read with Industrial policy 1999 of the Govt. of Haryana, are part of capital receipt given by the State Govt. for the purpose of meeting the objective of Industrial Policy 1999 to attract investment and to ensure growth of the existing industries so that they can generate employment in industrial and allied sector by 20% It was held that the entire package of incentive and concession should be read as focusing and providing incentive for investment of industrial sector to achieve effective, meaningful and speedy development of the State – the AO is directed to allow the claimed sale tax subsidy receipt received by the assessee during the year as capital receipt for the assessment – Decided in favour of assessee. - ITA No. 952/Del/2011 - - - Dated:- 12-8-2014 - R S Syal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) has also upheld the same. 4. At the outset of hearing the Ld. AR pointed out that the issue raised is now fully covered by the decision of Delhi Bench of the Tribunal in the case of Maruti Suzuki India Ltd. Vs. ACIT, ITA No. 1927/D/2010 and others (Asstt. year 2005-06) order dated 19.8.2011. He submitted that similar scheme of the Govt. of Haryana was involved in the case of Maruti Suzuki India Limited (supra).The Ld. AR also referred page No. 3 to 12 of the first appellate order wherein the policy of the Govt. of Haryana regarding the sales tax subsidy and the scheme framed there under has been referred to. He submitted that the appellant had filed application for grant for tax concession in accordance with Rule 28 C. In the application it had been mentioned that the assessee is a new industrial unit which has made fixed capital investment and shall be allowed a tax concession. The assessee also disclosed the amount of tax likely to be converted into capital subsidy. The purpose and intent for grant of subsidy is to encourage investment in certain areas of Haryana. Only on fulfillment of the prescribed conditions, an entity is entitled to claim the tax concession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mencement of the production hence it was assistance for the purpose of trade. Thus it was rightly held as revenue receipt. He cited following decisions in support :- 1. CIT vs. Reliance Industries Ltd. Civil Appeal No. 7769 of 2011 (SC) 2. CIT vs. Abhishak Industries Ltd. 2006 156 taxman 257 (P H) 3. M/s. Mepco Industries Ltd. vs. Commissioner of Income Tax (2009) 185 Taxman 405 (SC) 4. L.G. Electronics India Pvt. Ltd. vs. ACIT ITA No. 1404 Delhi 2007, asstt. year 2002-03 order dated 26.2.2010 5. M/s. Johnson Matthey India Pvt. Ltd. vs. State of Haryana and others CWP No. 12075 of 2007 decision dated 27th November, 2007 (P H) 6. In the rejoinder Ld. AR submitted that the Hon'ble Supreme Court in the case of Ponni Shugar and Chemicals Ltd. (supra) while discussing the nature of the concerned subsidy scheme has observed one more aspect needs to be mentioned that in Sahney Steel Press Works Ltd. the Hon'ble Supreme Court found that the assessee was free to use the money in its business entirely as it liked. It was not obliged to spend the money for a particular purpose. In the case of Seaham Harbour Dock Co. the assessee was obliged to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of this development in the state. It is evident from the scheme as well as the Haryana State Industrial Policy of 1999. 8. Having gone through the orders of the authorities and material available on record. We find that the assessee was awarded an entitlement certificate under Rule 28C of the Haryana General Sales Tax Rules, 1975. This certificate entitled the assessee to a tax concession for a period of ten years. The sales tax subsidy as per the assessee was granted by Haryana Government to the assessee under the initiative of Government to promote investment in certain areas of Haryana. The assessee claimed that since it had establish its manufacturing unit in Manesar (Haryana), it became eligible for the said incentive as capital receipt which during the year was ₹ 2,00,64,000/-. The sales tax concession is available to such industrial unit which duly fulfills the prescribed conditions shown under Rule 28C of Haryana General Sales Tax Rules, 1975 Section 25A of the Haryana General Sales Tax Act deals with deferment of tax and provides that the State Government may defer payment of tax by specified class of industries in the interest of industrial development of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund/relief is due to him. The AO should have therefore adjudicated upon the claim of the assessee that was made during the assessment proceedings, notwithstanding the fact that there was no revised return forthcoming from the assessee. In fact when the claim of the assesee was based on the decision of the Hon'ble Supreme Court in the case of Ponni Sugars, the AO should have discussed the issue and decided. Therefore, we do not find any infirmity in the order of the CIT(A) insofar as he proceeded to deal with the same and made these observations. Now, coming to the merits of the matter, the assessee has undertaken an expansion in terms of Rule 28C of General Sales Tax Rules 1975. The objective of the grant of subsidy by way of sales tax concession was to give assistance to the assessee for establishing a new industrial unit or for substantial expansion of an existing industrial unit. The objective of the grant of the said subsidy was again made clear by the Industrial Po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e equivalent to half the interest for two years on approved expenditure met out of loans. Even though the payment was equivalent to half the interest amount payable on the loan (interest subsidy) still the House of Lords, held that money received by the company was not in the course of trade but was of capital nature. The judgment of the House of Lords shown that the source of payment or the form in which the subsidy is paid or the mechanism through which it is paid is immaterial and that what is relevant is the purpose for payment of assistance. Ordinarily, such payments would have been on revenue account but since the purpose of the payment was to curtail / bliterate unemployment and since the purpose was dock extension the House of Lords held that the payment made was of capital nature. One more aspect needs to be mentioned. In Sahney Steel and Press Works Ltd. this court found that the assesee was free to use the money in its business entirely as it liked. It was not obliged to spend the money for a particular purpose. In the case of Seaham Harbour Dock Co. the assesee was obliged to spend the money for extension of its docks. This aspect is very important. In the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Maruti Suzuki India Ltd. the assessee had received sales tax subsidy of ₹ 16,04,04,733/- during the asstt. year 2005-06. According to the assesee the said receipt represented to be capital in nature. Therefore it should be excluded from the taxable income. Before the Ld. CIT(A) the subsequent decision of Hon'ble Supreme Court in the case of CIT vs. Ponni Sugars and Chemical Ltd. (supra) was cited and the Ld. CIT(A) following the ratio of the said decision of Hon'ble Supreme Court decided the issue in favour of the assesee which was questioned by the revenue before the Tribunal. It was argued that their lordship of Hon'ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd. (supra) have again reiterated that the purpose for which the subsidy is given is only relevant for determining its nature. The purpose of subsidy was to promote industrial development in the State by promoting an establishment of new industrial unit or substantial expansion of existing industrial units. Almost similar are the facts in the present case before us as well as similar are the industrial policy 1999 issued by the department of industries, Govt. of Haryana and the rele ..... X X X X Extracts X X X X X X X X Extracts X X X X
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