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TMI Blog2016 (5) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... at the same was in form of refund of sales tax paid and exigible to tax. Hence one time subsidy received from the State Government under the scheme of industrial promotion for expansion of its facilities and for modernization purposes is capital receipt and cannot be brought into tax net. Depreciation on moulds - Held that:- We are of the view that the issue requires fresh consideration by the AO. There is no basis to come to a conclusion that rolling mills used in iron and steel industry are also in the nature of moulds but are in a rolling form. As to whether they are materially same or different cannot be decided without technical and expert evidence. It is also seen that moulds used in rubber and plastic manufacture are entitled to higher depreciation of 30%. A different treatment for moulds used in iron ingot manufacture cannot be allowed on the basis of such general observations as done by the CIT(A). Therefore we set aside the order of the CIT(A) on this issue and direct the AO to examine the claim of the Assessee in the light of the observations made above. - I.T.A No. 1517/Kol/2013 - - - Dated:- 6-4-2016 - Sri N.V.Vasudevan, JM Shri Waseem Ahmed, AM For The Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as capital subsidy not chargeable to tax and not revenue receipt which is chargeable to tax. The Assessee pointed out that as per the said scheme the investment subsidy equal to 15% of the Fixed Capital Investment made for setting up New Industrial Unit at back ward area in the district of Burdwan, before commencement of production is allowed. The Assessee pointed out that the Assessee submitted the eligibility certificate dated 31.01.2003, final sanction letter copy of West Bengal Government Incentive Scheme 2000, certificate of Registration under the above scheme, and other allied documents to justify that subsidy in question was capital in nature. The Assessee pointed out that the basic scheme of Govt. of West Bengal, Commerce Industries Department, Group H, Notification No. 91/CI/4F- 54/2000 dtd 13.02.2001 is as follows: Whereas in pursuance of a national policy the Sales Tax related incentive have been withdrawn from 1st January 2000, and whereas the State Government have considered it necessary and expedient to extend new type of incentives for promotion of' industries in the state from the same date. The West Bengal Incentive Scheme 2000(hereinafter referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kward areas of the state. Both these activities relates to capital field and cannot be considered to be linked up with the day-to-day operation of the assessee in any manner. Incentive/subsidy of the Government was sanctioned by the State Govt. before, commencement of commercial production and the quantum of subsidy was determined on investment made by the appellant on land, building, plant machinery. Hence incentive received by the assessee though dependent upon certain conditionalities is actually gratuitous in nature and form capital receipt in the assessee's hands. The Assessee relied on the following two cases of the Apex Court, in support of its claims that the subsidy in question was capital receipt not chargeable to tax:- (a)PJ Chemicals Ltd (1994) 210 ITR 830 (SC) wherein the .Apex Court held that where the Govt subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries the specified percentage which is the percentage, of fixed capital cost which is the basis of determining the subsidy being only a measure adopted under the scheme to qualifying the financial aid is not payment directly or indirectly to' meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial unit before commencement 'of the production. However, the' A.O. treated the same as revenue receipt as against claim of the appellant as capital receipt. After careful consideration of the facts and circumstances of the case, I find merit in the argument, by the appellant. The subsidy was granted by the Govt. of West Bengal before commencement of the production which was for the purpose of fixed capital investment. Therefore, the receipt are certainly in the nature of capital receipt. The facts of the judgment relied upon by the A.O. in the case of Sahney Steel Press Works Ltd. and others 228 ITR 253 (SC) are different from the facts of the present case. Under these circumstances and also f9ollowing the ratio of the judgements of Hon ble Supreme Court in the case of E.J.Chemicals Ltd. (1994) 210 ITR 830(SC) and Senairam, Durgamall 1961 42 ITR 392(SC) and also the judgement of Hon ble ITAT Kolkata in the case of Rasoi Ltd. Vs DCIT SPL. Range-12, Kolkata I.T.No.1080/CAL/98 as cited by the appellant, the appeal on this ground is allowed. 7. Aggrieved by the order of CIT(A) revenue has raised ground nos. 1 and 2 before the Tribunal. 8. We have heard the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax. Hence one time subsidy received from the State Government under the scheme of industrial promotion for expansion of its facilities and for modernization purposes is capital receipt and cannot be brought into tax net. 11. Keeping in mind the principles laid down in the aforesaid decisions referred to by the learned counsel for the Assessee, we shall now see the objects of the Scheme under which the Assessee received subsidy in the present case. The object and purpose of the scheme has already been set out in the earlier paragraphs. It is clear from the reading of the objective of the scheme is to was to enable the assessee to set up a new unit. The object of the Scheme in the present case was to promotion of' industries in the state of West Bengal. It was available to a New Unit which has been defined under the scheme to mean an industrial unit in the large medium/small scale sector having investment in capital assets which is established and commissioned by the entrepreneur for the manufacture of goods in West Bengal, for the first time on or after the 1st January, 2000 and is registered with the Directorate of Industries/Directorate Cottage Small Scal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved by the order of CIT(A) the revenue has raised ground no.3 before the Tribunal. 16. We have heard the rival submissions. The learned DR brought to our notice that as per Appendix I to the Rules mould used in rubber and plastic manufacture alone are entitled to depreciation at 30% as per part-A III (3)(vii) to Appendix-I. According to him the assessee is in the business of manufacturing of iron ingots and therefore the assessee cannot get 30% depreciation. The learned counsel for the assessee on the other hand submitted that in part A-III(8)(vii) rolling mills in iron and steel industry are entitled to depreciation at 80%. According to him rolling mills used in iron and steel industry are also in the nature of moulds but are in a rolling form and therefore the conclusion of the CIT(A) was correct. According to him therefore the conclusion of CIT(A) that the assessee was entitled to claim depreciation at 80% as against which it had claimed only 30% is correct and has to be upheld. 17. We have considered the rival submissions. We are of the view that the issue requires fresh consideration by the AO. There is no basis to come to a conclusion that rolling mills used in iron a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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