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TMI Blog2017 (1) TMI 1198X X X X Extracts X X X X X X X X Extracts X X X X ..... ncession given by the Ld. AR for the assessee, we condone the delay and admit the appeals for adjudication. 3. These three appeals pertain to same assessee, different assessment years, common issues involved, therefore, therefore, all the appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. The Revenue appeal in ITA No. 388/Kol/2014, pertaining to AY 2009-10 is taken as the lead case. 4. The brief facts qua the assessee are that the assessee filed its return of income for AY 2009-10 on 30.09.2009 declaring total income at 'Nil'. The return of income was processed u/s. 143(1) of the Act on 30.09.2010. Later on the assessee's case was selected for scrutiny u/s. 143(3) of the Act and the AO has completed the assessment by making the disallowance on account of sales tax incentive scheme. The assessee got the benefit of a sum of Rs. 6,19,47,252/- being 75% of sales tax/VAT as receivable as Sales Tax Incentive under the scheme of State of West Bengal. The AO has treated the sales tax incentive as capital receipt and added to the income of the assessee. 5. Aggrieved from the order of the AO, the assessee filed ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wordings: "Whereas in pursuance of a National policy the sales tax related incentives have been withdrawn from the 1st January, 2000. And whereas the State Government have considered it necessary and expedient to extend new types of incentives for promotion of industries in the State from the same date. Now, therefore, the Governor is pleased hereby, in supersession of the West Bengal Incentive Scheme, 1999 sanctioned under Commerce & Industries Department's Notification No. 580-CI/H dated 22.06.1999 and amended from time to time, to approve and sanction a New Incentive Scheme for large, medium and small scale industrial units as under." As per the Notification the scheme is known as 'the West Bengal Incentive Scheme, 2000' and shall come into effect on and from the 1st day of January, 2000 in the whole of West Bengal and shall remain valid for a period of five years ending on the 31st December, 2004. The section 4 of the Scheme provide the applicability of the 2000-Scheme and it says that it shall generally be applicable to all large, medium, cottage and small scale projects and to large/medium sector tourism units to be set up and also to expansion projects of existing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efinery plant and captive power generation unit. The said package was consisting of Industrial Promotion Assistance (IPA), State Capital Investment Subsidy, Waiver of Electricity Duty, Employment General Subsidy and Remission of stamp duty & registration charges. As per the approval letter, the Industrial Promotion Assistance was @ 75% of the sales tax paid in the year previous to the year during which IPA would be released subject to maximum of 100% of the fixed capital investment by way of adjustment against sales tax liability of that year. The sales tax paid will not include tax paid on the purchase of raw materials. The IPA will be available for a period of 15 years or till the financial cap is reached, whichever ends earlier. As per the approval letter, this package will continue even if West Bengal Sales Tax Act, 1994 is substituted by any other Act. The unit will apply to the Commissioner, Commercial Taxes, W.B. in the prescribed form requesting him to certify the total amount of tax paid during the year on sales and purchase in respect of which application has been made. Such application be filed at the end of each year. Upon receipt of application, the Commissioner, Comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for which the subsidy is given. The source of the fund is quite immaterial. However, if the purpose is to help the assessee to set up its business or complete a project, the moneys must be treated as having been received for capital purposes. But, if moneys are given to the assessee for assisting him in carrying out the business operation and the money is given only after and conditional upon commencement of production, such subsidies must be treated as assistance for the purpose of the trade. In the case of appellant, it had received subsidy/incentive under the West Bengal Incentive Scheme, 2000 in the form of Industrial Promotion Assistance. On perusal of approval letter, it is apparent that the incentive was allowed to the appellant company for setting up an Edible Oil Refinery Plant and Captive Power Generation unit. The sole objective of the scheme formulated by the State Government was to allow incentive to the entrepreneurs to establish the new industries or expand the existing industries in backward areas for overall economic development of the State of West Bengal. On going through the West Bengal Incentive Scheme, it is observed that the subsidy was not allowed to assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otion assistance receivable by the appellant company is on capital account. 5.8. The view taken by the appellant that the amount received/receivable from the Govt. of West Bengal in the form of Industrial Promotion Assistance for setting up a new unit is capital in nature, also find support from the decision in the case of DCIT Vs. Inox Leisure Ltd., 351 ITR 314 (Guj); CIT Vs. Reliance Industries Ltd., 339 ITR 632 (Bom); Shree Balaji Alloys Vs. CIT, 333 ITR 335 (J&K) and CIT Vs. Chaphalkar Bros., 215 Taxman 145 (Bom)(Mag.). In view of the facts in the case of appellant company as well as respectfully following the principles laid down in various judicial pronouncements by the Hon'ble Supreme Court, Jurisdictional High Court as well as the Jurisdictional ITAT, as discussed above, it is to be held that the receipt of Rs. 6,19,47,252/- receivable by the appellant company on account of industrial promotion assistance under West Bengal Incentive Scheme, 2000 is capital in nature. Hence, the said receipt is not includible in the taxable income of the appellant company. There is no application of provisions of section 41(1) as held by the AO as there was no cessation of liability on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of the incentive was "Industrial Promotion Assistance" which is a capital receipt as stated earlier while making submissions in respect of ground nos. 1 and 2 above. The Appellant Company refers to and relies on various decisions as stated herein above. In any case, the said amount cannot be considered as waiver or cessation of sales tax liability as alleged by the Ld. Assessing Officer inasmuch as the CST/VAT for the financial year 2006-07 relevant to Assessment Year 2007-08 (to which the Incentives was received) was duly paid by the Appellant in those years. Thus the Ld. Assessing Officer was not justified in adding the sum of Rs. 3,72,95,124/-. The said amount cannot be added to the income of the Appellant Company for any reasons whatsoever since the same is a capital receipt as stated hereinabove." 8. I have considered the submission of the appellant and perused the assessment order. The issue raised in ground no. 3 is same as in ground no.1 and 2. The only difference is that in ground no. 1 and 2 the amount on account of Industrial Promotion Assistance was receivable whereas in ground no. 3 the amount was received by the appellant in the year under consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new unit or to expand an existing unit in the State of West Bengal. But the AO has treated the said incentive as revenue in nature and invoked the provisions of section 41(1) of the Act for the reason that the incentive was to be receivable by the assessee company by way of 75% of sales tax collected by the company on sale of its finished products. The assessee company collected the sales tax and the 75% of the same was not paid to the government as per the scheme of the Government. In addition to this, the deduction on account of payment of sales tax was allowed in earlier years and therefore, 75% of such sales tax was taxable u/s. 41(1) of the Act as per the Assessment Order. In the assessment order, the AO did not discuss the submission made by the assessee company in the course of assessment proceedings explaining the reason as to why the sum of Rs. 6, 19,47,252/- is not taxable as revenue receipt. The assessee company has clearly submitted before the AO that the sum of Rs. 6,19,47,252/- was receivable as industrial promotion incentive under the West Bengal Incentive Scheme, 2000 and that there is no application of the provisions of section 41(1) of the Act, because the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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