2014 (12) TMI 933

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..... ion. The assessee challenges order dated 02.08.2013 passed by the Income Tax Appellate Tribunal, Chandigarh Bench, `A' Chandigarh (for short "the Tribunal") and orders passed by the CIT (Appeals) and the Assessing Officer by raising the following substantial question of law:- "Whether on the facts and in the circumstances of the case, the Tribunal erred in law in not holding that incentives/subsidies in the form of exemption from sales tax received by the appellant constituted capital receipt not liable to tax under the provisions of the Act?" Counsel for the assessee states that though in 286 ITR 1 (P&H) Commissioner of Income Tax Versus Abhishek Industries Limited, sales tax subsidy has been held to be a revenue receipt but the Hon .....

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..... hether the subsidy is a revenue or a capital receipt? The Tribunal has affirmed orders passed by the CIT (Appeals) and the Assessing Officer holding that the sales tax subsidy received by the assessee is a revenue receipt by primarily relying upon a judgment of this Court in Abhishek Industries Limited's case (supra). It is true that in Abhishek Industries Limited's case (supra) a Division Bench of this Court has held that sales tax subsidy is a revenue receipt but a perusal of the judgment in Ponni Sugars and Chemicals Limited's case (supra), reveals that the Supreme Court has held that whether a subsidy is a revenue or a capital receipt would depend upon the nature and purpose of a subsidy. A relevant extract from the judgmen .....

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..... anics & Pharmaceuticals Limited versus The Commissioner of Income Tax, Central Circle, Ludhiana and another. After considering the judgments in Abhishek Industries Limited's case (supra) and Ponni Sugars and Chemicals Limited's case (supra), the order passed by the Income Tax Appellate Tribunal was set aside and the matter was restored to the Tribunal for re-determining the question whether sales tax subsidy is a revenue or a capital receipt by reference to the nature and purpose of the subsidy. Consequently, we allow this appeal, set aside order passed by the Income Tax Appellate Tribunal and restore the appeals to the Tribunal to adjudicate the nature and purpose of the sales tax subsidy and thereafter record an opinion whether i .....

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