9911796707
TMI Blog2025 (3) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... . Facts of the case, in brief, are that the assessee is a limited company engaged in the business of Unit manufacturing homogenized and pasteurized milk and manufacturing of milk products like Ghee Butter, milk powder and other milk products. It filed it's return of income on 30.11.2016 declaring total income of Rs.10,59,85,260/-. The said return was processed u/sec.143(1) of the Income Tax Act, 1961 (in short "the Act"). Subsequently, the case was selected for scrutiny under CASS and notices u/sec.143(2) and 142(1) were issued and served upon the assessee, in response to which, the learned Authorised Representative of the Assessee appeared before the Assessing Officer from time to time and filed the requisite details. 3.1. During the course of assessment proceedings, the Assessing Officer noted that the assessee has received Rs.2,50,00,000/- as government grant-in-aid on 04.07.2015. He observed that the relevant part of the accounting policy reads as under : "Scheme of cold chain, value Addition and Preservation Infrastructure under National Mission on Food Processing sanctioned in earlier year noe released partly: The company had applied for Financial aid under the above schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... instant case, assessee contends that the subsidy is received in the form of value addition and preservation of infrastructure of diary industries. Assessee further states that the objective of the scheme is to provide integrated and complete cold chain and preservation of infrastructure facilities without any break. 6.2. The Central question, from the point of view of taxation, is whether such subsidies constitute a capital or a revenue. Subsidies are granted by the Government to meet certain requirements which are essential for the progress and development of the nation. For example, subsidies are provided for the establishment of industries in areas which are declared by the Government as industrially backward, for export-oriented industries, small-scale industries and so on. Whatever may be the purpose of the subsidy, we have to see from the point of view of income-tax whether the subsidy received is a capital receipt or a revenue receipt, Where subsidy received is relatable to the setting up of the industry, it would be a capital receipt and if it is give benefits in any other form then it increase the profit margin of an industry which is already running, it would be treate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the meaning of sec.28(iv) of the Act. 4. In appeal, the Ld. CIT(A), deleted the addition by observing as under : "Decision: 6. The appellant in its grounds of appeal assailed the AO in assessing the subsidy of Rs 2.50 crore as the revenue receipt and also not granting the MAT credit u/s 115.JAA of the Act The AO in Para 2 of the assessment order noted that the assessee had received Rs. 2.50 crore a government grant in aid which it had not offered as income. The AO asked the assessee to explain the same. The assessee in his reply reproduced in Para 5 of the assessment order submitted that it had got grant in aid from the government for setting up the cold chain value addition under National Mission for Food Processing which it has credited in the 'Capital reserve Account' being a capital receipt. The assessee further relied on a number of case laws to strengthen its case before the AO. However, the AO not satisfied with the submission of the appellant invoked Explanation 10 to sub-section (1) of section 43 of the Act and following the decision of Sahney steels & Presswork's, Sundram Exhibitions and Merino Ply treated the grant in aid as the revenue receipt and ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alyses of the Scheme therein that the subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for production of or bringing into existence any new asset. The subsidies in that case were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Consequently, the contentions raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly, the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel case lies in the fact that it has discussed and analyzed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. Since, we have already held that the amount received by the assessee by way of grant-in-aid from Government of India was not the income accrued to the assessee, the substantial questions Nos. (a) & (b) are rendered redundant. 19. In the light of the above discussion, there is merit in the instant appeal and it is accordingly allowed Consequently, order dated 20-1-2016 passed by the Income-tax Appellate Tribunal, Division Bench, Chandigarh, in H.P. Nursing Registration Council (supra) affirming the order dated 20th January, 2016, passed by the Commissioner of Income-tax (Appeals), Shimla in Appeal No. IT/76/13-14/Sml and assessment order dated 18-5-2013 are set aside. No order as to the costs. Pending application(a), if any, shall also stand disposed of. 6.1.1. After carefully examining the facts of the case, the scheme and submission of the appellant and the above judicial decisions the grant in aid is a capital receipt and not the revenue receipt. The addition of Rs. 2.50 crore made by the AO is deleted. The ground of appeal is allowed." 5. Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds : 1. "On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , concession, or reimbursement provided by the Central or State Government is income, hence taxable, unless used to determine the actual cost of an asset. He submitted that in the instant case the subsidy was granted after the assessee set-up it's business. Therefore, in view of the decision of Hon'ble jurisdictional Bombay High Court in the case of Serum Institute of India Private Limited, Pune vs. Union of India & Others (supra), the order of the Ld. CIT(A) has to be reversed and that of the Assessing Officer be restored. 7. We have heard the Learned DR and perused the material available on record. We find the assessee company in the instant case has completed and commenced the cold chain facility during the preceding financial year on 15.03.2015 and became eligible for receipt of the financial aid from the Government. We find the amount of financial aid was accounted for as "capital reserves" under Note No.3 Reserves and Surplus. During the impugned assessment year, the company has received aid of Rs.2,50,00,000/- on 04.07.2015 and treated the same as capital receipt. We find the Assessing Officer treated the same as revenue receipt and brought to tax u/sec.28(iv) of the Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would undoubtedly include an assessment of tax implications on all fiscal benefits, including subsidies. The amendment was public knowledge, and the implications of the inclusion of subsidies within the ambit of taxable income were clear and unambiguous. Therefore, petitioner, at the time of application, was having full knowledge or ought to have had full knowledge of the tax treatment of such subsidies post-amendment. Secondly, the act of applying for a subsidy after the amendment came into force indicates an acceptance of the prevailing tax regime. It is reasonable to infer that by choosing to partake in the subsidy scheme, petitioner implicitly acknowledged and consented to the accompanying tax obligations as legislated by the amendment. Thirdly and furthermore, it is a well-settled principle that ignorance of the law is no excuse. Petitioner cannot claim ignorance of the amendment or its implications. The legislative change was not done surreptitiously but was the result of a transparent legal process, providing ample opportunity for all stakeholders to acquaint themselves with the new provisions. 7.2. Similarly, in para-43 of the order the Hon'ble High Court has observed as ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
