Appeal details
Counselvise Citation
[2024] 138 COUNSELVISE.COM (IT) 8493 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-12-2024
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Assessment Year
2005-2006
Appeal Filed On
28-10-2024
Judgement Text
"| आयकर अपीलीय अिधकरण \fा\nयपीठ, मुंबई | \nIN THE INCOME TAX APPELLATE TRIBUNAL \n“C” BENCH, MUMBAI \n \n \n \nSHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER \n& \nBEFORE SMT. BEENA PILLAI, HON’BLE JUDICIAL MEMBER \n \n \nI.T.A. No. 5612/Mum/2024 \nAssessment Years: 2005-06 \nI.T.A. No. 5614/Mum/2024 \nAssessment Years: 2006-07 \nI.T.A. No. 5617/Mum/2024 \nAssessment Years: 2007-08 \nI.T.A. No. 5618/Mum/2024 \nAssessment Years: 2008-09 \nI.T.A. No. 5619/Mum/2024 \nAssessment Years: 2009-10 \n \n \nACIT, CC-6(1), Mumbai \n \n \nVs \nPrism Johnson Limited \n2nd Raheja S.V.P. Road \nMain Avenue \nSantacruz - 400054 \n[PAN: AAACP6224A] \nअपीला\nथ\u0016/ (Appellant) \n \n\u0017\u0018 \nयथ\u0016/ (Respondent) \n \nAssessee by : \nShri Vijay Mehta, A/R \nRevenue by : \nMr. R.A. Dhyani, CIT, D/R \n \n सुनवाई की तारीख/Date of Hearing : 11/12/2024 \n घोषणा की तारीख /Date of Pronouncement: 13/12/2024 \n \nआदेश/O R D E R \n \n \n \nPER BENCH: \n \nThe captioned appeals by the revenue are preferred against the \norder of the ld. CIT(A)-54, Mumbai, pertaining to AY 2005-06 to AY \n2009-10. \n2. \nSince common issues are involved, these appeals were heard \ntogether and are disposed off by this common order for the sake of \nconvenience and brevity. \n3. \nThe solitary grievance relates to the treatment of Sales Tax/VAT \nsubsidy received by the assessee as a capital receipt on the ground that \n\n \nI.T.A. No. 5612/Mum/2024 \nI.T.A. No. 5614/Mum/2024 \nI.T.A. No. 5617/Mum/2024 \nI.T.A. No. 5618/Mum/2024 \nI.T.A. No. 5619/Mum/2024 \n2 \n \nsubsidy received by the assessee is purely linked to production of goods \nand not to capital expenditure undertaken by the assessee. \n4. \nBriefly stated, the facts of the case are that in the first round of \nlitigation, the quarrel travelled up to the Tribunal and the Tribunal in \nITA No. 5751/Mum/2009 for AY 2005-06 with regard to the assessee’s \nappeal gave relief on the additions/disallowance relating to claim of \ndeduction u/s 35E of the Act, disallowance u/s 40A(9) of the Act and \nclaim of depreciation in respect of badminton court. The claim in respect \nof Sales Tax/VAT subsidy was taken before the Tribunal by way of an \nadditional ground and the claim of the assessee was that the said \nsubsidy is a capital receipt. While deciding the issue on additional \nground, the Tribunal set aside the issue and remitted it back to the file \nof the AO to examine the claim of the assessee, in accordance with law. \n4.1. \nPursuant to the decision of the Tribunal, the AO issued showcause \nnotice to the assessee calling for the details with regard to the claim of \nSales Tax/VAT subsidy from Government of Madhya Pradesh. The \nassessee furnished a detailed reply explaining the nature of subsidy and \nits claim to be capital receipt, drawing support from various judgments \nof the Hon’ble Supreme Court. \n5. \nAfter considering the submission of the assessee, the AO was of \nthe firm belief that the ratio laid down by the Hon’ble Supreme Court \nin the case of Commissioner of Income-tax, Madras v. Ponni Sugars & \nChemicals Ltd. [2008] 306 ITR 392 (SC), does not apply on the facts of the \ncase in hand and concluded by holding that the impugned subsidy is of \nrevenue in nature and taxed the same accordingly. The assessee \n\n \nI.T.A. No. 5612/Mum/2024 \nI.T.A. No. 5614/Mum/2024 \nI.T.A. No. 5617/Mum/2024 \nI.T.A. No. 5618/Mum/2024 \nI.T.A. No. 5619/Mum/2024 \n3 \n \nchallenged the assessment before the ld. CIT(A) and reiterated its claim \nof capital receipt drawing support from the decision of the Hon’ble \nSupreme Court in the case of Ponni Sugars & Chemicals Ltd. (supra) and \nCIT vs. Chaphalkar Brothers [2018] 400 ITR 279 (SC). It was also brought \nto the notice of the ld. CIT(A) that on identical set of facts, the Tribunal \nin assessee’s own case in AY 2011-12 and 2012-13 has decided the issue \nin favour of the assessee and against the revenue. After considering the \nfacts and the submissions, the ld. CIT(A) was convinced with the claim \nof the assessee and directed the AO to treat the subsidy as capital receipt \nand excluded the same from computation of book profit u/s 115JB of \nthe Act. \n6. \nBefore us the ld. D/R strongly supported the findings of the AO \nbut could not bring any distinguishing decision in favour of the revenue \nnor could point out any factual error or infirmity in the findings of the \nld. CIT(A). \nThe ld. Counsel for the assessee reiterated what has been stated \nbefore the lower authorities. \n7. \nWe have carefully considered the orders of the authorities below. \nThe undisputed fact is that, in the assessee’s own case, the Co-ordinate \nBench has decided the issue in favour of the assessee and against the \nrevenue. It is also not in dispute that the ld. D/R could not point out \nany error or infirmity in the findings of the ld. CIT(A). We are of the \nconsidered view that the AO has mis-interpreted the decision of the \nHon’ble Supreme Court in the case of Ponni Sugars & Chemicals Ltd. \n(supra). The judgment clearly indicates that the purpose of the subsidy \n\n \nI.T.A. No. 5612/Mum/2024 \nI.T.A. No. 5614/Mum/2024 \nI.T.A. No. 5617/Mum/2024 \nI.T.A. No. 5618/Mum/2024 \nI.T.A. No. 5619/Mum/2024 \n4 \n \nis the crucial determining factor. Since the exemption scheme was \naimed at promoting industrialization and creating employment in \nunder-developed areas, the subsidy was intended to support the \nestablishment of new units. \n8. \nThe Madhya Pradesh General Sales Tax Act, is exhibited at pages \n72 to 74 and pages 75 to 104 of the paper book, exemption schemes for \nunits with capital investment in fixed investment of Rs. 100 Crores, or \nmore has been exhibited. There is no dispute that the assessee is eligible \nfor the subsidy. The class of dealers exempt from the payment of tax in \nthe State Government and Central Government Act, are mentioned in \nthe Schedule. \n8.1. \nThe objectives of the Industrial Promotion Policy are as under:- \n“• To make state administration industry friendly by simplifying rules and procedures \n• To accelerate the pace of industrialization and make Madhya Pradesh industrially a leading \nstate. \n• To maximise employment prospects \n• To attract NRI and foreign investment by developing world-class infrastructure \n• To create congenial environment for the development of small, medium and large \nindustries. \n• To ensure balanced regional development by generating employment in the non-farm \nsector \n• To chalk out special packages for removing industrial sickness. \n• To integrate the different employment oriented \nschemes in order to provide employment opportunities on a sustainable basis \n• To rationalize commercial tax rates to make the state's industries competitive vis-à-vis \nindustries in other states \n• To provide direction to industrialization, keeping in view the available local resources and \nthe existing industrial base. \n• To ensure private sector participation in the state's industrialisation \n\n \nI.T.A. No. 5612/Mum/2024 \nI.T.A. No. 5614/Mum/2024 \nI.T.A. No. 5617/Mum/2024 \nI.T.A. No. 5618/Mum/2024 \nI.T.A. No. 5619/Mum/2024 \n5 \n \n• To financially strengthen the undertakings of Department of Industries, enabling them to \nplay a pivotal role in the promotion of industries” \n9. \nOn the aforementioned scheme for the aforementioned objectives, \nthe Co-ordinate Bench in ITA No. 804 & 805/Mum/2018 for AY 2011-12 \n&2012-13, has held as follows:- \n“19. We have heard rival contentions and gone through the finding given in the \nimpugned orders. The subsidy given by the MP Government in pursuance of \n\"Madhya Pradesh Udyog Nivesh Samvardhan Yogna\" was for setting-up of an \nindustrial unit in the backward area of state of Madhya Pradesh and subsidy offered \nwas in the form of refund of VAT / CST paid. The said subsidy was purely for \ninvestment in the setting-up of industrial unit. The Ld. CIT(A) and the AO have \ntreated it as a „revenue receipt‟ on the ground that subsidy has been granted to \npromote industries in the state and in the form of a refund of commercial taxes paid. \nSince the subsidy was for augment of profit and hence it has to be treated as revenue \nreceipt. While adjudicating such kind of cases, what is to be seen is the purpose for \nwhich subsidy is given and not the form or manner in which subsidy is given. The \nHonble Supreme Court in the case of Ponni Sugar Mills (supra) has laid down a very \nimportant proposition that the test of character of the receipts in the hands of the \nassessee has to be determined with respect to the purpose for which the subsidy is \ngiven. Hence, the \"purpose test\" has to be applied. The point of time at which subsidy \nis paid is not relevant, neither the source nor the form of subsidy is material. In that \ncase, the Honble Supreme Court held that if the subsidy has been given for setting \nup of new units or substantial expansion of the existing unit, then same is to be \ntreated as capital account. If the object of the subsidy scheme is to enable the assessee \nto run the business more profitably then the receipts is on revenue account. Hence in \nthis case if we see the \"Preface\" of the \"Madhya Pradesh Udyog Nivesh Samvardhan \nYogna\" of Industrial Promotion Policy of 2004 of the Madhya Pradesh Government, \nit provides that the subsidy would be given for setting up of a new industrial units \nat various places for employment generation and to accelerate the pace of \nindustrialization in Madhya Pradesh. From the reading of the entire scheme, it is \nabsolutely clear that the subsidy provided is not for assisting the assessee for \naugmenting the profit or help in running of the business, albeit it is for setting up of \nnew industrial unit, for promotion of employment, growth, infrastructure in the \nbackward areas of Madhya Pradesh. Thus, such a subsidy though given in the form \nof refund of VAT or CST is on capital account. Accordingly, we hold that the subsidy \nreceived by the assessee cannot be taxed as revenue, as it is on capital account, hence \ncapital receipt. Accordingly, ground no. 4 is allowed.” \n\n \nI.T.A. No. 5612/Mum/2024 \nI.T.A. No. 5614/Mum/2024 \nI.T.A. No. 5617/Mum/2024 \nI.T.A. No. 5618/Mum/2024 \nI.T.A. No. 5619/Mum/2024 \n6 \n \n10. \nRespectfully following the decision of the Co-ordinate bench \n(supra), we hold that the subsidy received by the assessee cannot be \ntaxed as revenue as it is on capital account hence capital receipt. \n11. \nIn the result, captioned appeals by the revenue are dismissed. \n \n \n \nOrder pronounced in the Court on 13th December, 2024 at Mumbai. \n \n \n \nSd/- \n \n \n \n \n \n \n \nSd/- \n(BEENA PILLAI) \n \n \n (NARENDRA KUMAR BILLAIYA) \nJUDICIAL MEMBER \n \n \n \n ACCOUNTANT MEMBER \n \n \n \n \n \n \n \n \n \nMumbai, Dated 13/12/2024 \n*SC SrPs\n*SC SrPs\n*SC SrPs\n*SC SrPs \n \n \n \n \n \n \n \nआदेश की \u0014ितिलिप अ\u0019ेिषत \n/Copy of the Order forwarded to : \n \n1. \nअपीलाथ\u001b / The Appellant \n2. \n\u0014\u001cथ\u001b / The Respondent \n3. \nसंबंिधत आयकर आयु! / Concerned Pr. CIT \n4. \nआयकर आयु!\n)\nअपील\n (\n/ The CIT(A)- \n5. \nिवभागीय \u0014ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, \n6. \nगाड% फाई/ Guard file. \n \n \n \n \nआदेशानुसार/ BY ORDER, \nTRUE COPY \n \n \n \n \nAssistant Registrar \nआयकर अपीलीय अिधकरण \nITAT, Mumbai \n \n \n \n \n"
Mehul