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TMI Blog2025 (1) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... es direct concession in the investments or introduces mechanism in relation to the ultimate achievement of the objects of the scheme. In this scheme, the ultimate object is to make available the required fertilizers and at appropriate price to the farmers, this can be achieved only by bringing new investments in the industry. This is a recurring issue in the case of the assessee which has already been adjudicated by the ITAT in favour of the assessee as discussed supra in this order therefore following the decision of the ITAT and other judicial findings as elaborated in the findings of ld. CIT(A) we do not find any merit in this appeal of the revenue therefore the same stand dismissed. - Shri Amarjit Singh, Hon ble Accountant Member And Shri Rahul Chaudhary, Hon ble Judicial Member For the Assessee : Shri S.S. Sagar (virtually present) Shri Vipul Jain For the Revenue : Shri H.M. Bhatt (Sr. DR) ORDER PER AMARJIT SINGH, AM: The present appeal filed by the revenue is directed against the order dated 05.12.2023 for Assessment Year 2013-14. The revenue has raised the following grounds of appeal: 1. Whether on the facts and circumstances of the case and in law, the Ld CITA) is justifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Subsequently, the assessee vide letter dated 27.02.2019 filed rectification application u/s 54 of the Act stating that the amount of subsidy was wrongly offered for taxation under a mistaken belief as revenue receipt however the same did not constitute taxable income of the assessee as per the ratio laid down by various Hon ble High Courts as well as by the Hon ble Supreme Court. Thereafter, the assessing officer has passed the rectification u/s 154 of the Act on 03.04.2019 wherein the assessing officer accepted the treatment of fertilizer subsidy as capital receipts relying on the ratios of Hon ble Supreme Court as mistake apparent from the record for the purpose of section 154 of the Act. However, the assessing officer has dismissed the rectification application on the ground that the mistake was not rectifiable through filing of original return and also not filed any revised return of income. The relevant extract of the ld. CIT(A) is reproduced as under: 11.14 I have carefully gone through the submissions made on behalf of the appellant and also perused the relevant schemes. From the perusal of the schemes and various facts and judicial precedents placed before me, I find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngwith the submissions. From the perusal of the schemes and various facts and judicial precedents placed before me, I found that the salient features and the objective of NBS Policy under which the Appellant company is getting the fertilizer subsidy is overall growth of fertilizer industry by increasing the investment, modernization, balanced fertilization and growth of indigenous fertilizer industry, competitiveness amongst the fertilizer companies, Thus, it is seen that, the purpose of the introduction of the scheme was to encourage and industrial growth of the fertilizer industry as a whole and thus it fulfils the purpose test as laid down by the Apex Court. 8.3.11 In view of the objectives of the scheme as above, I find that the appellant s case is covered by the above judicial precedents and also by the principle laid down by the Apex Court in the case of Ponni Sugars Chemicals, Shree Balaji Alloys and Chaphalkar Brothers (supra). In all the decision it has been held that purpose of the incentive will decide the nature of the incentive. The said criteria have been fulfilled in the case of the appellant. Thus, respectfully following the principle laid down by the Apex Court, de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fertilizers. Therefore, the scheme was mainly to attract the investment in the industry and the purpose test is that the attraction of new players in the industry and also attracts the existing players to bring new investment. How the benefit of scheme is passed on to the industry matters. Sometime, Govt. introduces direct concession in the investments or introduces mechanism in relation to the ultimate achievement of the objects of the scheme. In this scheme, the ultimate object is to make available the required fertilizers and at appropriate price to the farmers, this can be achieved only by bringing new investments in the industry. It is only the mechanism to pass on the capital subsidy to the companies, who bring in new investments and innovation. The subsidy calculated and MRP are under constant monitoring of the Ministry. Therefore, we are inclined to accept the adoption of purpose test by the learned CIT(A) in this case and the subsidy can be classified as capital in nature. In our considered opinion, a receipt that is held to be a capital in nature and not chargeable to tax under the normal provisions of the Act. 11.18 Similarly, in the case of Hon ble Rajasthan High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital in nature and not chargeable to tax in computing the total income as per the normal provisions of the Act, the said subsidy cannot be termed as Income to be fall under the section 4 of the Income-tax Act being the charging section. As stated by the Apex Court Padmaraje R. Kadambande (supra) wherein it has been held that Capital Receipts are not income within the definition of section 2(24) of the Act and hence are not at all chargeable under the entire Income-tax Act. 11.22 Thus, it is well settled position in law that capital receipt is not to be included in computing Book Profit under section 115JB. Hon ble Bombay High Court in the case of CIT Vs Harinagar Sugar Mills Ltd (supra) has held that once subsidy received by the assessee from Government is treated as capital receipt, not chargeable to tax in computing total income as per normal provisions, the same shall also be excluded in computing Book Profit under section 115JB. The jurisdictional bench of ITAT in the case of Alok Industries Ltd Vs DCIT (ITA No. 1017/Mum/2017 dated 21.05.2018) has held that interest subsidy received under the Technology Upgradation Fund Scheme was capital receipt, not chargeable to tax in compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introduced considering all the issues relating to agriculture productivity, balanced fertilization and growth of indigenous fertilizer industry, competitiveness among the fertilizer companies and to overcome the deficiency of concession scheme. Therefore, it is clear that this scheme is introduced with the object of passing the benefit to the farmers at the same time, there is no fresh investment and innovations were not coming to the industry due to low profitability in this industry. In order to attract the new investments, to increase the productivity and to reduce the manufacturing cost by bringing new M/s. Shree Pushkar Chemicals and Fertilizers Ltd. innovation in the industry in order to achieve ultimate reduction in the price of the fertilizers. Therefore, the scheme was mainly to attract the investment in the industry and the purpose test is that the attraction of new players in the industry and also attracts the existing players to bring new investment. How the benefit of scheme is passed on to the industry matters. Sometime, Govt. introduces direct concession in the investments or introduces mechanism in relation to the ultimate achievement of the objects of the scheme. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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