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TMI Blog2021 (7) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Vs. Ponni Sugars and Chemicals Ltd [ 2008 (9) TMI 14 - SUPREME COURT] The Co-ordinate Bench of the Tribunal has rightly applied the purpose test and had come to conclusion that the nature of subsidy is only in capital nature and we do not see any reason to differ with the reasoning of the Co-ordinate Bench of the Tribunal in assessee s own case[ 2020 (11) TMI 418 - ITAT PUNE] - Decided against revenue. Directions of ld.CIT(A) to reduce the amount of the subsidy received from the respective block of assessment years in terms of the Explanation 10 to Sec.43(1) - HELD THAT:- As decided in own case [ 2020 (11) TMI 418 - ITAT PUNE] on perusal of the respective schemes of the subsidy, it is clear that the subsidy is not granted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer) at a total income of ₹ 141,87,22,120/-. The disparity between the returned income and the assessed income is on account of the following additions : (i) Addition of subsidy received considering of new industrial sales from State Governments of ₹ 8,81,44,464/- treating as a revenue receipt as against the assessee s claim of capital receipt. (ii) Addition of ₹ 7,43,508/- on account of discrepancy between information in Form 26AS data on ITS and the amount credited to Profit and Loss account. 3. The brief factual background is as under : During the previous year relevant to the assessment year under consideration, the assessee company received capital subsidy of ₹ 8,81,44,464/- on the set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said policy announced by the Government of Jarkhand, the assessee is entitled for Capital Investment Subsidy of 5% of its fixed capital subject to maximum of ₹ 4 crores and 75% of the amount received by the Government towards commercial taxes i.e., (VAT and CST) for a period of 7 years from date of commercial production i.e., 13.12.2008. The capital subsidy was accounted on accrual basis by crediting capital subsidy under Reserves and Surplus. Similarly, in respect of the Jejuri Unit, the assessee company had made investments towards expansion of the existing plant at Jejuri. The cost of investment on the expansion is eligible for subsidy under Industrial Promotion Subsidy under Package Scheme of Incentives 2007 issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the scheme of the subsidy in all the three States, ld.CIT(A) has concluded that the subsidy was given for capital investment and the same is also linked to the capital investment. He further concluded that the fact that part of the subsidy was given by way of refund of sales tax paid by the appellant will not change the character of the subsidy and therefore, held that it is a capital receipt. However, the ld.CIT(A) considering the provisions of Explanation 10 of Sec.43(1) of the Income Tax Act, directed the Assessing Officer to reduce the amount of the subsidy received from the respective block of assets. 6. Being aggrieved by the decision of ld.CIT(A) holding it to be a capital receipt, the Revenue is in appeal before us in appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Mills reported in 684 ITR in support of the proposition that though the subsidy was calculated in terms of the cost of the employees it does not mean that the subsidy is granted with intention to supplement the revenues of the assessee company. 9. The ld.CIT D.R. placed reliance on the orders of lower authorities and pleaded that since the investment was granted in terms of employment generation and in terms of refund of sales tax paid, the same should be treated as revenue in character placing reliance on the decision of Hon ble Supreme Court in the decision of Sahney Steel Press Works Ltd. (supra). 10. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the subsidy recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the subsidy, it is clear that the subsidy is not granted to meet the cost of any fixed asset and therefore the Explanation 10 to Sec.43(1) have no application to the facts of the present case. The Co-ordinate Bench of the Tribunal in appeal in earlier year in assessee s own case in ITA No.1041/PUN/2017 had rightly applied the decision of the Hon ble jurisdictional Bombay High Court in the case of CIT Vs. M/s. Welspun Steel Ltd., (supra) and we do not see any reason to differ with the reasoning of the decision of the Co-ordinate Bench. Accordingly, we reverse the directions of the ld.CIT(A) directing the Assessing Officer to reduce the amount of the subsidy from the cost of the respective block of assets. 14. In the result, the appeal fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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