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TMI Blog2022 (10) TMI 1246X X X X Extracts X X X X X X X X Extracts X X X X ..... ncentive / subsidy as capital receipts in the hands of the assessee - HELD THAT:- West Bengal Incentive Scheme 1999 was discontinued pursuant to the national policy. However, the state of West Bengal decided to introduce the West Bengal Incentive Scheme 2000 which also covered the district of Howrah and, therefore, the units of the assessee are eligible for the incentive scheme. It is provided that the industrial unit to get State capital investment subsidy on the investment made in the fixed capital depending on location with direct employment generation of 200 or more. The minimum investment qualified for special package of benefits as mega projects is Rs. 25 crores and it is provided that the waiver of electricity duty on electric consumption for production/ operation for 5 years. The 2000 scheme was generally be applicable to all large, medium, cottage and small scale projects to which / medium sector tourism units to be set up and also to expansion projects of existing units on or after 1.01.2000. Eligibility criteria is concerned the unit at Jangalpur Distt. Howrah is eligible and there is no quarrel in respect of its eligibility. The only reason for denying the scheme of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007 declaring total income at Rs. 49197161/-. Pursuant to the notice served u/s. 153A, the assessee filed its return of income on 09.09.2013 returning the same income of Rs. 49197161/-. 6. During the course of the scrutiny assessment proceedings assessee filed a revised computation of income wherein it claimed deduction of the amount of incentive of sales tax paid and also of the amount of power incentive granted by the Government of West Bengal. The claim of the assessee was rejected by the AO relying upon the decision by the Hon ble Supreme court in the case of Goetze India Limited 284 ITR 323. 7. The assessee agitated the matter before the CIT(A) but without any success. 8. Before us the Counsel for the assessee vehemently stated that since the search and seizure action was conducted on 14.11.2011 the assessment year A.Y .2007-08 becomes a nonabated assessment year, therefore, the same becomes nonest since nothing was found incriminating during the search proceedings and the ratio laid down by the Hon ble Jurisdiction High Court of Delhi in the case of Kabul Chawla 380 ITR 573 squarely apply. 9. Per contra the DR strongly supported the findings of the AO. 10. We have carefully p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y.2012-13. 19. After considering the facts and the submission the CIT(A) observed that the assessee has claimed the deduction as per the West Bengal Incentives Scheme 2000 by which sales tax subsidy and power incentive has been provided in the scheme mainly for sustaining the units in backward year. The CIT(A) further observed that under the scheme there is no provision as to how these incentives will be used whether for capital or revenue purposes. Though the CIT(A) agreed that the basic nature of any subsidy is to be examined for the purpose but the purpose is decided mainly by utilization to subsidy. The CIT(A) concluded by holding just because the scheme of West Bengal Government talks about generation of employment or development of the area does not make any incentive / subsidy as capital receipts in the hands of the assessee . 20. Before us the Counsel for the assessee vehemently stated that the CIT(A) grossly erred in not understanding the scheme of subsidy. It is the say of the Counsel that there is no dispute whatsoever that the assessee is eligible for the West Bengal incentive scheme 2000 for its unit at Jangalpur Distt., Hawrah. Referring to the decision of the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2000. 25. In so far as the eligibility criteria is concerned the unit at Jangalpur Distt. Howrah is eligible and there is no quarrel in respect of its eligibility. The only reason for denying the scheme of the assessee given by the CIT(A) is that the purpose of the subsidy is to be decided by utilization of subsidy. This is not what the Hon ble Supreme Court has decided in the case of VSSV Meenakshi Achi (supra) as in that case the Hon ble Supreme Court has held that the character of the of the subsidy in the hands of the recipient is to be determined having regard to the purpose for which the subsidy has been given. 26. The Hon ble Surpeme Court in the case of Ponni Sugar and Chemicals Limited 306 ITR 392 had the occasion to consider the taxability of incentive bestowed on new / expanded sugar factories and the Hon ble Supreme Court following Sahaney Steel and Press Works Ltd. 228 ITR 253 held that the subsidy received by the assessee was in the nature of capital receipt since the object behind the same was to assist entrepreneurs in setting up of new unit/ expansion of existing business. 27. In the light of the ratio laid down by Hon ble Supreme Court (supra). We are of the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. (supra). CIT v. Ponni sugars Chemicals Ltd. (supra) and the decision of our High Court in case of Rasoi Ltd. (supra) against which SLP has been dismissed. The mode of computation/form of subsidy is irrelevant. The mode of giving incentive is reimbursement of energy charges. The nature of subsidy depends on the purpose for which it is given. Hence the assessee draws support from the decisions already discussed earlier as the same principle will apply here. Thus, the entire reason behind receiving the subsidy is setting up of plant in the backward region of West Bengal, namely, Bankura. 25. Accordingly we hold the aforesaid incentive subsidies are 'capital receipts' and is not an 'income' liable to be taxed in relevant assessment year 2010-11 on the basis of discussion made above and further taking into consideration the definition of Income under Section 2(24) of the Income Tax Act, 1961, where sub-clause (xviii) has been inserted including 'subsidy' for the first time by Finance Act, 2015 w.e.f. April, 2016 i.e assessment year 2016-17. The amendment has prospective effect and had no effect on the law on the subject discussed above applicable to the su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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