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TMI Blog2020 (6) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the subsequent decision after considering the Sahaney Steel Press Works Pvt. Ltd. [ 1997 (9) TMI 3 - SUPREME COURT ] AND in the case of CIT Vs. Pony Sugars Chemicals Ltd. [ 2008 (9) TMI 14 - SUPREME COURT ] has made it clear that for determining the nature of the incentive/ subsidy, the object for which the subsidy/assistance given will be the deciding factor and the form or the method of the payment through which the subsidy is given is irrelevant. Merely because the amount of subsidy was equivalent to 75% of the sales tax paid by the beneficiary does not imply that the same was in the form of refund of sales tax paid. Therefore, since the subsidy was for setting up of large/medium/small scale eligible unit in group B and C areas in the State of West Bengal and the competent authority has issued the eligibility certificate (West Bengal Industrial Development Corporation Ltd.) to the assessee and since the assessee fulfills all the conditions as laid in the WBIS 2000 scheme, the industrial promotion assistance it received was on capital account. In the light of the discussion above and relying on the ratio laid in the decision of the Hon ble Calcutta High Court in M/s. Raso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60/- received from West Bengal Industrial Development Corporation (in short WBDIC ) as Industrial Promotion Assistance ( in short, IPA ). According to AO, in the original return the assessee treated it as revenue receipt but in the revised return the assessee changed tact and claimed deduction of this amount in the computation of taxable income treating it as capital receipt. According AO, the assessee submitted before him that the financial assistance provided by the West Bengal State Govt. was for expansion which was capital receipt in nature in view of the decision taken by Hon'ble High Court of Calcutta in the case of CIT-Vs- Rasoi Limited. However, according to AO, in the case of Rasoi Ltd., subsidy had been received by the assessee under WBIS-Scheme 1994 whereas in the instance case, the subsidy was received by the assessee under the WBIS-2000. So according to AO, the facts of the two cases are different and the decision in the case of CIT-vs- Rasoi Limited was not applicable in the instance case. Further, the AO observed that in the A.Y, 2010-11 the assessee credited the amount of incentive in P/L account as Other Income treating it as revenue receipt but claimed deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s P L account only ₹ 233.52 Lakhs from WBIDC on 22-09-2009 under WBIS-2000, out of which sum of ₹ 39.35 Lakhs was given under SCIS (State Capital Investment Scheme) and remaining ₹ 196.77 Lakhs was given as IPA (Industrial Promotion Assistance). Thus, according to the AO only amount of ₹ 39.35 lakhs can be treated as capital subsidy as it was specifically given for capital investment and remaining ₹ 196.77 lakhs was revenue receipt. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who was pleased to allow the claim of the assessee by treating the remaining amount of ₹ 1,96,77,000/- as capital receipt and directed deletion of addition made by the AO to the tune of ₹ 1,96,77,000/-. Aggrieved by the action of the ld. CIT(A), the Revenue preferred this appeal. 5. The learned JCIT/ Sr. Departmental Representative ( in short, the ld. Sr. DR) contended that the ld. CIT(A) erred in relying on the decision of the Hon ble High Court of Calcutta in the case of CIT Vs.- Rasoi Limited reported in 335 ITR 428 (Cal.) According to the ld. Sr. DR in that case (Rasoi Limited ) the assessee had received subsidy on account of West Bengal Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e set up with an investment of ₹ 279 crore for the purpose of setting up of a unit for manufacturing of Sponge Iron, Rolled Products, Ferro Alloys etc in West Bengal. Package: a) Industrial Promotion Assistance equivalent to upto @75% of the Sales tax paid in previous year on sales of financial goods subject to a maximum of 100% of the fixed capital investment for a maximum period of 15 years. Such assistance will be adjusted against current liabilities; b) Capital investment subsidy @ 25% of the fixed capital investment subject to a maximum of ₹ 2.5 crore. c) All other incentives under WBIS 2000 except interest subsidy in lieu of which IPAis being given. Further, the modalities of payment with regards to benefit as detailed above are also part the letter as mention above ( copy enclosed). 8. Before going further, we would like to have looked at the relevant scheme of West Bengal Incentive Scheme, 2000, which are reproduced hereunder:- Short Title : The Scheme may be called The West Bengal Incentive Scheme, 2000 (hereinafter referred as the 2000 Scheme) for Industrial Projects of large, medium and small scale units (hereinafter referred to as Units) to be set up in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment ii) Special nature of the industry iii) Employment potentiality, iv) Down-stream effect of the industry, v) Ancillarisation effect of the industry, vi) Export Potentiality Further, the term Mega Unit as been defined in clause 3 (xiii) on page 2 of the West Bengal Incentive Scheme, 2000 is reproduced as under: Mega Unit means an eligible unit of special characteristics set up on or after the 1st January, 2000 with investment exceeding ₹ 250.00crores/₹ 25 croresw.e.f01.07.2001, (vide notification No. 538-CI/H dt. 14.08.2001) 10. Since the assessee falls under the definition (supra), it qualified as a Mega Unit Project under the West Bengal Incentive Scheme 2000. Since the project of the assessee was a mega project and the assessee fulfilled the condition laid down in the schemeof WBIS-2000 (West Bengal Incentive Scheme, 2000) issued by the Department of Commerce Industries, Government of West Bengal, the Government approved Industrial Promotion Assistance (IPA) to the assessee @ 75% of sales tax/VAT paid on sale of finished goods subject to maximum 100 for a maximum period of 15 years. According to the assessee whatever sales tax collected by it is first deposited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch projects were covered by a detailed feasibility report/project report and the project had been approved and sanctioned by the financial institutions/banks. It was found that the subsidy was in the form of relaxation of the tax was more for encouragement to entrepreneurs to establish/ expand industrial unit in the state of West Bengal rather than towards acquisition of specific capital assets in that industrial unit. The intention was with the object of supplementing trade receipt and profits of the assessee company rather than to assist the assessee in acquiring a capital asset, accordingly, it was incidental to carrying on the business of the assessee. Moreover, the subsidy in question has been granted to the assessee only after commencement of production and subsidy granted after commencement of production is operation subsidy which is of revenue nature. The assessee's claim for treating the subsidy in the nature of capital receipt is therefore not accepted. Further, any claim not made through I.T. Return or Revised Return, same is not allowable by AO. The Hon'ble Supreme Court in case of Goetze (India) Ltd. in 284 ITR 323, confirmed this decision. Therefore, fresh cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law. Such taxability cannot be decided on the basis of any admission. Reliance in this behalf is placed on the decisions of the Hon 'ble Supreme Court in CIT v Ajax Products Ltd., (1965) 55 ITR 741 (SC) and those of the Hon 'ble Calcutta High Court in CIT v BhaskarMitter, (1974) 73 Taxman 437 (Cal) and MaynakPoddar (HUF) v WTO, (2003) 262 ITR 633 (Cal). The same view has also been taken by the Hon 'ble Tribunal in the assessee's own case for the assessment year 2006-07. 5.4 The 2000 Scheme was formulated by the West Bengal State Government for the promotion of industry in the State. The 2000 Scheme was for industries in large, medium, small scale and tourism sectors. The 2000 Scheme provided for special package of benefits for Mega Projects having a minimum investment of ₹ 25 crores. Districts in the State were put under different groups. Group A comprised area falling under Calcutta Municipal Corporation and no incentive was available for any industry located in Group A. 5.5 The 2000 Scheme was applicable in respect of units to be set up and also to expansion projects of existing units having investment in fixed asset. Commercial production in the new uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of issue. If effective steps for establishment of the project were not taken within the said period, the validity period of the certificate was not to be extended unless an order was passed in that behalf after considering the merits of the case and subject to other condition stipulated in the 2000 Scheme and the order of extension. It was stipulated in the eligibility certificate that during the validity period thereof, the unit shall furnish to the Directorate of Industries, West Bengal and WBIDC the following information :- (a) Date of taking effective step; (b) Quarterly progress report on the implementation of the project, physical target achieved and new fixed capital investment made; (c) Date of commencement of power supply for production purposes; (d) Date of starting commercial production/operation; (e) Total number and date of appointment of new/additional factory workers in the unit: (f) Yearly report on the working and performance of the unit; 5.8 One of the conditions stipulated in the said eligibility certificate was that a true account of the value of fixed assets acquired, sold or otherwise disposed of had to be kept . Conditions (III) and (IV) of the eligib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and had to remain in production for the specified period. In case of default, the benefit allowed under the 2000 scheme was to become immediately recoverable. If loans were not repaid by due date, the entire loan/balance loan was to become due on the date of default and action for recovery could be taken immediately. Measurement of the amount of assistance with reference to the sales tax paid and payment of the assistance by way of adjustment against the sales tax liability merely relate to the form or mechanism through which the assistance is granted and do not determine the character of the subsidy. The amount of sales tax paid is only the measure for determining the quantum of assistance. It is not a case of relaxation of tax or supplementing of trade receipt/profits as erroneously held by the Assessing Officer. Further, the time of payment of the assistance is also of no relevance. It is submitted that the treatment of the assistance as a revenue receipt by the Assessing Officer is contrary to the law laid down by the Hon'ble Supreme Court and the Hon'ble High Courts including the jurisdictional High Court . 4.2. The ld CITA by following the tribunal order in assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in ITA No. 683 581 /Kol/2011 dated 8.12.2014 wherein the grounds raised by the assessee as well as by the revenue were as under:- Assessee Ground No. 1 That on the facts and circumstances of the case, the learned CIT(Appeals) though holding that sales-tax incentive of ₹ 1238000 allowed by the State Govt. is the nature of capital receipt but erred in directing the Assessing Officer (AO) for reducing the same from the cost of Fixed Assets for the purpose of computing depreciation by applying the Explanation 10 to Sec. 43(1) of I. T. Act. Revenue Ground No. 1 That Ld.CIT(A)-VI Kolkata has erred in law as well as on facts by deleting the addition made by the AO on account of Sales Tax Subisidy received by the assessee as revenue income of ₹ 12,38,000/-. The decision rendered thereon by this tribunal is as under:- 7. We have heard rival contentions on this issue and gone through the facts and circumstances of the case. We find that the facts are discussed in detail and which are undisputed. It is admitted that the assessee's issue of Sales Tax Incentive is capital in nature for the reason that the very scheme under which the expansion of the unit and subsidy under Rajast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as a percentage of such cost, it does not partake the character of payment intended either directly or indirectly to meet the actual cost . By implication, the above judgment also provides that if the subsidy is intended for meeting a portion of the cost of the assets, then such subsidy should be deducted from the actual cost, for the purpose of computing depreciation. As per Hon'ble Supreme Court, law is that if the subsidy is asset-specific, such subsidy goes to reduce the actual cost. If the subsidy is to encourage setting up of the industry, it does not go to reduce the actual cost, even though the amount of subsidy was quantified on the basis of the percentage of the total investment made by the assessee. The law is already settled on the subject. Now, the only wavering is with reference to Explanation 10 provided under sec.43(l) of the Act. The said Explanation provides that where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same need not be reduced from the cost of assets in terms of Explanation 10 to Section 43(1) of the Act. Accordingly, the grounds raised by the revenue are dismissed and grounds raised by the assessee are allowed. 11. We note that similar issue came up before this Tribunal in the cases of M/s. Shyam Steel Industries Ltd (supra), M/s. Budge Budge Refineries Ltd (supra), wherein also the issue was the same in nature and the tribunal was adjudicating the issue as to whether the assessee received IPA (Industrial Promotion Assistance) from the West Bengal Government pursuant to the West Bengal Industrial Promotion Assistance Scheme 2000 received IPA (Industrial Promotion Assistance) from West Bengal Incentive Scheme 2000 is a capital nature or not and the Tribunal after analyzing the scheme 2000 held as capital in nature. Therefore, we respectfully decides to follow the orders of the Tribunal in the aforesaid cases as well as keeping the ratio decidendi of the Hon ble Calcutta High Court in the case of Rasoi Limited (supra), though it pertained to the West Bengal Industrial Promotion Scheme 1994 (WBIPS-1994). 12. We note that the Govt. of West Bengal has decided to grant the subsidy by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y received by Sahaney Steel could not be regarded as anything but a revenue receipt and the Apex Court was pleased to confirm the Tribunal s action. However, the case in hand before us is different as discussed above. The object of the subsidy in this case in was for setting up of unit in group B or C areas as spelled out in the WBIS scheme 2000 and since the object of the assistance under the subsidy scheme was to enable the assessee to set up unit, the receipt of subsidy was on capital account. We note that the Hon ble Supreme Court in the subsequent decision after considering the Sahaney Steel Press Works Pvt. Ltd. (Supra) in the case of CIT Vs. Pony Sugars Chemicals Ltd. (supra) has made it clear that for determining the nature of the incentive/ subsidy, the object for which the subsidy/assistance given will be the deciding factor and the form or the method of the payment through which the subsidy is given is irrelevant. Merely because the amount of subsidy was equivalent to 75% of the sales tax paid by the beneficiary does not imply that the same was in the form of refund of sales tax paid. Therefore, since the subsidy was for setting up of large/medium/small scale eligible un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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