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TMI Blog2018 (6) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... rict and to generate employment there so as to bring life back to the normalcy and for attracting capital investments. The basis of computation of incentives are disbursed in the form refund a excise duty/exemption of sale tax/VAT payable by the companies setting up industries in the said district (notified area). The assessee company has set up an industrial unit in the Kutch District and has received incentive for setting up an industrial unit in Kutch District in accordance with the scheme formulated by the Government. Similar receipts in the form of incentives have been held to be in the nature of capital receipt by the Appellate Authority viz. CIT(A) and ITAT in the assessee’s own case for Asst. Year 2006-07 Co-ordinate Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals read as under:- 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 11,91,08,010/- made on account of Sales Tax (VAT) Exemption Benefit treated as capital in nature; whereas the same is revenue receipt as the same is promotional scheme pronounced by the Govt. of Gujarat and the same is not capital in nature. In this case, subsidies have not been granted for production of or bringing into existence any new asset. The subsidies were granted year after year only after setting up of the new industry and commencement of production. Such a subsidy could only be treated as assistance given for the purpose of carrying on of the business of the assessee. Applying Lest o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Clocks, Telephone, Vitrified Tiles, Digital Display Boards, Home Appliances and Electromotive Bikes etc. 5. On verification of audit accounts and details submitted during the course of assessment proceedings, it was noticed that assessee has received incentives of ₹ 12,03,66,408/-, which is credited to profit and loss accounts under the head other income as Capital Receipts (Kutchha Incentive Scheme). The profit before taxation for the year is shown at 15,96,86,401/-. However, while computing the taxable income profit/loss as per profit and loss account is shown as loss of ₹ 3,93,19,993/- after excluding incentives of ₹ 12,03,66,408/-. Since incentives of ₹ 12,03,66,408/- received by assessee are in the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t record and impugned order. During the year under consideration, the assessee company had received incentive viz. Excise Duty refund of ₹ 12,58,398/- and Sales Tax (VAT) Exemption Benefit of ₹ 11,91,08,010/- aggregating to ₹ 12,03,66,408/- which were credited to the Profit and Loss Account under the head income as Capital Receipts (Kutch Incentive Schemes). 12. Assessee company has received aforesaid incentives in the nature of capital receipt from the Central and State Governments in the form of sales tax exemption under the Kutch District Economic Development Encouragement Policy, 2001 formed by the Gujarat Government and refund of Excise Duty vide notification No.39/2001- C.E dated 31/07/2001 for putting up industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase in ITA No.793/Rjt/2010 for Asst. Year 2006-07. Relevant para of the said order is reproduced as under: Thus it can clearly be seen that a finding has been recorded that the object of the subsidy was to encourage the setting up of industries in the backward area by generating employment therein. In our opinion, in answering the issue, the test as laid down by the Supreme Court in Commissioner of Income-tax v. Ponni Sugan and Chemicals Ltd. (2008) 306 ITR (SC) = (2008 TIOL 174 SC - IT) will have to be considered. The Supreme Court has held that the test of the character of the receipt of a subsidy in the hands of the assessee under a scheme has to be determined with respect to the purpose for which the subsidy is granted. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not have any income element and therefore, they should be excluded for the computation of income u/s.115JB of the Act. 17. ITAT, Jaipur has held in the case of Shree Cement Ltd. (ITA No.614/615/635/JP/2010) and held that sales tax incentive and excise incentive are capital receipts and hence, they are not liable for inclusion under the computation of book profit u/s.115JB of the Act. 18. As ITAT, Rajkot in appellant s own case, it is held that incentives received by the appellant are capital receipts. Capital receipt are not chargeable to tax even in the computation of book profit u/s.115JB of the Act. 19. In our considered opinion, the incentive of Sale Tax/VAT and Excise Duty, which was given as per the Government policy as enu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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