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TMI Blog2022 (11) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IC on the interest income of Rs.38,984 earned on vendor deposits." 2. Briefly stated, facts of the case are that the assessee filed return of income on 29/11/2014 declaring total income of Rs,35,96,53,730/-. The case was selected for scrutiny assessment and statutory notices under the Income-tax Act, 1961 (in short, 'the Act) were issued and complied with. The assessment under section 143(3) of the Act was completed on 23/12/2016 wherein the claim of the assessee for incentives received under the Package Scheme of Incentive (PSI-2007) was held by the Assessing Officer as revenue receipt as against the claim of the assessee as capital receipt. The Assessing Officer also disallowed the claim of deduction under section 80IC of the Act. 3. Aggrieved, the assessee filed appeal before the Ld.CIT(A), who partly allowed the appeal. Further aggrieved, the assessee is before the Tribunal by way of raising the grounds as reproduced above. 4. Before us, the assessee has filed a paper book containing pages 1 to 264. 5. At the outset, the Ld.Counsel of the assessee submitted that Ground No.3 was not pressed by the assessee, therefore, same is dismissed as infructuous. 6. The grounds No.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate has elaborated the purpose for which the subsidy was given to the appellant. The quantum of the subsidy was to be decided on the basis of fixed capital investment made by the appellant, but, that is also not a determining factor to decide the purpose of the subsidy. The appellant is free to use the subsidy at its will for any purpose. Thus, it cannot be said that the subsidy given to the appellant was t only for the setting up of new business or expansion of the new business. The appellant has also not furnished the utilization of the subsidy given by the State Government. The purpose which has been explained by the Hon'ble Supreme Court in the cases of Ponni Sugar & Chemicals Ltd. (supra) and also Sahney Steel & Press Works Ltd. (228 ITR 253), is the purpose which was specific for the appellant and in respect of the end-use or utilization of such subsidy. This specific aspect or purpose is missing in the case of the Industrial Promotion Subsidy given by the State Government to the appellant. Thus, respectfully following the decisions of Ponni Sugar & Chemicals Ltd. (supra) and Sahney Steel & Press Works Ltd. (supra), the Industrial Promotion subsidy of Rs. 4.01 crs. rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein the decision of the honourable Bombay High Court in decision of special bench in case of Reliance Indusres Limited , has been sent back by the honourable Supreme Court to the file of the honourable Bombay High Court for deciding it afresh. Therefore, she submitted that this issue has not reached finality. In any case it is submitted that the receipt of sales tax incentive by the assessee is based on / ales made by the assessee and therefore is revenue in nature. 39. We have carefully considered the rival contention and perused the orders of the lower authorities. On Perusal of the PSI, 2007 shows that the subsidy has been granted to encourage industrial growth in less developed areas of the State. The quantification of subsidy is linked with the amount of investment made in setting up of the eligible units. Payment of the subsidy is in the form of refund of VAT and CST paid on sale. Assessee claimed before the lower authorities that the subsidy was a capital receipt and, hence, not chargeable to tax which was rejected As held by Hon Supreme court in case of Ponni Sugar (Supra) decisive factor for considering the nature of subsidy as a 'capital' or 'revenue' r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In order to encourage the dispersal of I:ndustries to the less developed areas of the State, Government has been giving a Package of Incentives to New/Expansion Units set up in the developing region of the State since 1964 under a Scheme popularly known as the Package Schemes of Incentives. Tin Package Scheme of incentives, introduced in 1564, was amended from time to time. The last amended scheme, commonly known as the 2007 Scheme is operative from the 1st April, 2007. The Slate has declared the new Industrial, Investment, Infrastructure Policy 2006 to ensure sustained Industrial growth through Innovative initiatives for development of key potential sectors and further improving the conducive industrial climate In the State, for providing the global competitive edge to the State's Industry. The policy envisages grant of fiscal incentives to achieve higher and sustainable economic growth with emphasis on balanced Regional Development and Employment through Greater Private and Public Investment in industrial development. The Package Scheme of Incentives 2007 outlines the eligibility criteria, quantum of incentives and monitoring discretion for administering the incentives ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idy (IPS) equivalent to 75% of "ELIGIBLE INVESTMENTS (as defined in PSI 2007 )" made w.e.f 28"1 March, 2007 and made with such a period stipulated in the ." Package Scheme of Incentives 2007. The IPS will however be limited to 75% of ADAPL's eligible investments less the amount of benefits availed at Sr.No.2.1 & 2.2 as per the period prescribed therein or to the extent of taxes paid to the State Government within a period of 7 years whichever is lower. 3. The IPS mentioned at 2.3 will be admissible only after the company employs 500 number of persons on regular basis within one year from the date of commencement of commercial production at the proposed project and at least 75% of these employees are local persons." 19. A bare perusal of the Preamble to PSI, 2007 shows that the incentives are offered by the State Government to the entrepreneurs for making investment and setting up of new industries in the lesser developed areas of the State of Maharashtra. The scheme envisages grant of fiscal incentives to achieve higher and sustainable economic growth with emphasis on balanced regional development and employment generation through greater private and public investment in in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction by the CIT(A) in rejecting the claim of assesses is that the assesses has failed to complied with only one of the two criterias laid down under the PSI, 2007 for claiming benefit of Industrial Promotion Subsidy, i.e. employment criteria. The other condition of minimum investment is not fulfilled. According to Memorandum of Understanding, the assessee was required to invest approximately Rs. 117 cores and offer employment to 510 persons. A perusal of the eligibility certificate dated 17-03-2009 at page 112 of the paper book shows that as against expected investment of Rs.117 crores the assessee had made investment of Rs.94.53 crores between 28-03-2007 to 05-12-2008. The assesses had started commercial production on 01-12-2008. The total period of investment available with the assessee is from 28-03-2007 to 27-03-2012. Thus, there was still time available with the assessee to make further investment. The assessee vide letters dated 28-03-2007 and 31-11-2011 had requested the Government to consider the level of investment at Rs.562 crores instead of Rs. 117 crores and to provide employment to around 1937 persons instead of 510 persons at industrial unit set up by the assessee at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy (IPS) equivalent to 75% of your Eligible Investments i.e. Rs. 11700.00 lacs to be made w.e.f. 28.03.2007. 1. Limited to 75% of your eligible investments less the amount of benefits availed at Sr. 1 & 2 above as per the period prescribed therein OR 2. To the extent of taxes paid to the State Government within a period of 7 years, whichever is lower. The afore stated incentives shall be sanctioned and released upon submission of land use conversion to industrial purpose permission and building plan approvals from competent authority on or before 02.03.201 O.- It is evident from the eligibility certificate issued by Directorate of Industries, Government of Maharashtra that the assesses has received benefit of subsidy for Mega Project after qualifying all the conditions set out in PSI, 2007. 23. The Hon'ble Supreme Court of India in the case of Ponni Sugars and Chemicals Ltd. (supra) has laid down certain principles to determine the nature of subsidy, they are : (a) The object of subsidy scheme - If the scheme was to enable the assessee to run the business more profitably then the receipt is on Revenue account. If the object of the subsidy scheme is to enable the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uoted dictum to determine the purpose, which the two schemes had intended to achieve by the incentive subsidies, permissible under the schemes in question in these cases. It was, therefore, in the context of respective subsidy incentive schemes in the two cases, that the subsidy in Sahney Steel and Press Works Ltd was held to be revenue receipt whereas the subsidy in Ponni Sugars & Chemicals Ltd (supra) was held as capital receipt. 17) We are supported in taking this view by the observations made by the Hon'ble Supreme Court of India in a later decision reported as Mepoo Industries Ltd vs CIT & Anr.(2008) 227 CTR (SC) 313 : (2009) 31 DTR (SC) 308; 2009 (7) SCC 564, where the above dictum was reiterated as follows:- ".............Sahney Steel and Press Works Ltd (supra) was a case which dealt with production subsidy, Ponni Sugars & Chemicals Ltd (supra) dealt with subsidy linked to loan repayment whereas the present case deals with a subsidy for setting up an industry in the backward area. Therefore, in each case, one has to examine the nature of the subsidy. The judgement of this Court in Sahney Steel and Press Works Ltd Etc.(supra) was on its own facts; so also, the judgemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal, we proceed to examine the true intent and purpose underlying the Policy and the Concessions contemplated by the Office Memorandum of June 14, 2002 and statutory notifications issued in this behalf. 22) Perusal of the Office Memorandum dated 14.06.2002 indicating New Industrial Policy and other concessions for the State of Jammu and Kashmir, makes it explicit that the concessions were issued to achieve twin objects viz. (i) Acceleration of industrial development in the State of Jammu and Kashmir, which had been found lagging behind in such development and (ii) Generation of employment in the State of Jammu and Kashmir. Amendment introduced to the Office Memorandum vide Notification of November 28,2003 of the Government of India, Ministry of Commerce and industry (Department of industrial Policy and Promotion) eloquently demonstrates the Central Government's intention in extending the incentives. The Government's objective, as conveyed by Hon'ble the Prime Minister at Srinagar on April 19, 2003, was, for creation of one lac employment and self employment opportunities in Jammu and Kashmir State. 23) To achieve the purpose and objective referred In herein above,itl wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving backwardness of the area that lagged behind in industrial development, which is certainly a purpose in the Public Interest, the incentives provided by the Office Memorandum and statutory notifications issued in this behalf, to the appellant-assessees cannot be construed as mere Production and Trade Incentives, as held by the Tribunal. 28) Making of additional provision in the Scheme that incentives would become available to the industrial units, entitled thereto, from the date of commencement of the commercial production, and that these were not required for creation of New Assets cannot be viewed in isolation, to treat the incentives as production incentives, as held by the Tribunal, for the measure so taken, appears to have been Intended to ensure that the incentives were made available only to the bonafide Industrial Units . so that larger Public Interest of dealing with unemployment in the State, as intended, in terms of the Office Memorandum, was achieved. 29) The other factors, which had weighed with the Tribunal in determining the Incentives as Production Incentives may not be decisive to determine the character of the incentive subsidies, when it is found, as demon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on revenue account. The relevant extract of the findings of the Hon'ble Jurisdictional High Court are as under: "5. Since the object of subsidy was to promote construction of multiplex theatre complexes, in our opinion, receipt of subsidy would be on capital account. The fact that the subsidy was not meant for repaying the loan taken for construction of multiplexes cannot be a ground to hold that subsidy receipt was on revenue account because, if the object of the scheme was to promote cinema houses by constructing multiplex theatres, then irrespective of the fact that the multiplexes have been constructed out of own funds or borrowed funds, the receipt of subsidy would be on capital account. In the light of the aforesaid objects of the Scheme framed by the State Government, the decision of the Income Tax Appellate Tribunal that the amount of subsidy received by the assesses is on order as to costs." 27. The L,d. Departmental Representative has placed reliance on the decision of Coordinate Bench of the Tribunal in the case of Rasiklal M. Dhariwal (HUF) Vs. DCIT (supra). In the said case, the State Government for the purpose of promotion of wind energy generation in. the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in the case of Rasiklal M Dhariwal (HUF) vs DCIT(supra) would not apply in the facts and circumstances of the case. 28. Thus, in the facts of the case and in the light of various decisions discussed above, we hold that the incentive received by the assessee under the PSI, 2007 scheme in the form of refund of sales tax Is Capital receipt, not liable to tax." 17. The issue arising before us is identical to the issue before the Tribunal in Innoventive Industries Ltd. Vs. DCIT (supra) and the assessee had received incentive / subsidy from the State Government for setting up the project in the classified area, Hence, we hold that subsidy received by the assessee under PSI, 2007 Is capital receipt In the hands of assesses, Accordingly, we delete the addition of f 26,37,000/-. The grounds of appeal raised by the assessee are thus, allowed." 11. Respectfully, following the Co-ordinate Bench decision (supra), we direct the Assessing Officer to treat the subsidy received under PSI-2007 as revenue receipt and delete the addition. The grounds raised by the assessee are accordingly allowed. 13. In the result, appeal of the assessee is allowed. Order pronounced in the on thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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