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TMI Blog2016 (6) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... the capital subsidy received under the Bihar Incentive package is not to be deducted from WDV of the plant and machinery ? 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that subsidy received by the way of reimbursement of commercial Tax (VAT) is not a revenue receipt ? 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in directing the AO to delete the addition made to book profits on account of excess depreciation and subsidy received by the way of reimbursement of commercial Tax (VAT) ?" 3. The brief facts of the case are that the assessee company is engaged in the business of manufacturing of sugar, alcohol, biscuit and wind energy. The assessee company also own sugarcane farms in which the sugar cane is grown and which is consumed by the sugar mills of the assessee company. 4. The A.O. observed that the assessee company has received capital subsidy of Rs. 4,11,43,000/- being 10% of investment in machineries and equipments and subsidy of Rs. 2,26,70,311/- by way of reimbursement of Excise duty under Bihar Incentive Package - 2006 for undertaking expansion of its capacity from 8500 TCD t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the material on this ground of appeal. A reading of the incentive package resolution of the Bihar Government dated 12.09.2006 indicates that the object of the said scheme is for the development of sugar industry in the state and establishment of new sugar Mills, establishment of co-industries based on sugarcane and to supplement the efforts in expanding capacity of present Sugar Mills, and in order to solve the problem of additional financial load faced by the investors and in order to minimize the burden on them the surplus funds so generated by the State Incentive policy could be used for repayment of term loan taken from Central Financial Institutions and Banks so that these projects could become viable. Para 2 of the said resolution further states that under the new Industrial Policy of the State, under the provisions of attracting capital investment for technical development and expansion of capacity of the sugar factory as well as for the establishment of new sugar mills, approval of a 'Planned Sugar Industry Incentive Package' was discussed so that the Entrepreneurs of the private sector could be attracted for the establishment of sugar industry and other industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , such subsidy cannot be reduced from the value of asset (WDV). Applying these ratio to the facts of the assessee's case, after noting that the revenue has not brought on record that the subsidy received by the assessee is directly or indirectly resulted in acquisition of any asset, we are of the considered opinion that the capital subsidy of Rs. 4,11,43,000/- received by the assessee company under 'Bihar Incentive Package 2006' for undertaking expansion of its capacity from 8500 TCD to 10000 TCD cannot be deducted from WDV of plant and machinery. Since the Ld.CIT(A) has correctly appreciated the facts and the position of law aforementioned for reversing the order of the AO, we do not find any infirmity in the decision of the Ld.CIT(A) on this count and thus the same is upheld. Resultantly, Ground No.1 is dismissed. ***** ***** 3.3 We have heard both the sides and perused the material on record. It is not disputed that the subsidy scheme formulated by the Government of Bihar is for the purpose of attracting capital investment and to encourage setting up the industry/expand the existing unit. It is pertinent to mention that the character of a subsidy in the hands of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 dated 28th February, 2014, the Tribunal followed the decision in assessee company's own case for the assessment year 2008-09 in ITA No. 772/Mum/2012 dated 31st January, 2014. Similarly , for the assessment year 2010-11 in ITA No. 2221/Mum/2014 dated 12th April, 2016, the Tribunal again followed its decision for the assessment year 2008-09 and 2009-10 in ITA no 772/Mum/2012 dated 31-01-2014 and ITA no. 2221/Mum/2014 dated 12- 04-2016 and dismissed the appeal of the Revenue. 5. We have observed that the ground No. 1 in the instant appeal is identical to the ground raised in the appeal for assessment years 2008-09 and 2009-10 which was also allowed by learned CIT(A) in the instant assessment year following the afore-stated decisions of the Tribunal in assessee company's own case for the assessment year 2008-09 and 2009-10, hence, Respectfully following the decisions of the co-ordinate benches of this Tribunal in assessee company's own case as set out above, we hold that the capital subsidy received under the Bihar Incentive Package 2006 is not required to be deducted from WDV of plant and machinery and we dismiss ground no 1 raised by the Revenue. We order accordingly. 6. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of excise duty went on to reduce the cost of the assessee and the payment of excise duty forms part of P&L Account, the payment of which had to be treated as revenue receipt/revenue expense. Accordingly, the AO treated the impugned amount as revenue receipt and thereby made an addition of Rs. 2,26,70,311/- to the total income of the assessee. On appeal, the Ld.CIT(A) deleted the impugned addition as the incentive scheme was formulated by the Government of Bihar for attracting capital incentive and to encourage setting up the industry/expand the unit. The Ld.CIT(A) in his order, relied on various decisions where it has been held that when the subsidy scheme is to enable the assessee in setting up the new unit or to expand the existing unit, then the receipt of the subsidy is on capital account. Aggrieved by the impugned decision the revenue has raised this granted in the appeal before us. 3.2 Before us, the Ld. DR has contended that the reimbursement of the excise duty has to be treated as revenue receipt by relying on the order of the AO. On the other hand, the Ld.Senior Counsel for the assessee has argued that the Ld.CIT(A) has correctly deleted the impugned addition by treatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. If the object of the subsidy scheme is to enable the tax-payer in setting up the new unit or to expand the existing unit, then the receipt of the subsidy is to be treated on capital account. We have observed that the learned CIT(A) has also allowed the claim of the assessee company in treating reimbursement of commercial taxes(VAT) based upon the decision of the Tribunal for earlier years with respect to the reimbursement of excise duty holding that the subsidy received by the assessee by way of reimbursement of commercial taxes(VAT) is for setting up of a new unit/expansion of existing unit and is a capital receipt not exigible to tax. We have observed that the reimbursement of commercial taxes (VAT) on purchase of Molasses under Bihar incentive Package 2006 is given to promote establishment of new units and for expansion of capacity of existing units. As per this scheme, the distillery is entitled for reimbursement of commercial taxes(VAT) paid on purchase of molasses for production of alcohol and the said benefit will be available for five years from the date of establishment of distillery unit. We do not find any reason to interfere with the order of the learned CIT(A) with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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