Deputy Commissioner of Income-tax, Pune V. Inox Air Products Limited, Pune

ITA 1118/PUN/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 1410 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-03-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 05-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt; FORM 26AS
• Section: 264; 13; 10

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENC H B , PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI INTURI RAMA RAO, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM . / ITA NO.1042/PUN/2017 / ASSESSMENT YEAR : 2014-15 INOX AIR PRODUCTS PRIVATE LIMITED, SOLITAIRE, OFFICE NO.4, FIRST FLOOR, NEAR AGA-KHAN PALACE, NAGAR ROAD, PUNE. PAN : AAAC15569D. . / APPELLANT V/S THE ADDL. COMMISSIONER OF INCOME TAX, CIRCLE 11, PUNE. . / RESPONDENT . / ITA NO.1118/PUN/2017 / ASSESSMENT YEAR : 2014-15 THE ADDL.COMMISSIONER OF INCOME TAX, CIRCLE 11, PUNE. . / APPELLANT V/S INOX AIR PRODUCTS PRIVATE LIMITED, SOLITAIRE, OFFICE NO.4, FIRST FLOOR, NEAR AGA-KHAN PALACE, NAGAR ROAD, PUNE. PAN : AAAC15569D. . / RESPONDENT ASSESSEE BY : SHRI C.H. NANIWADEKAR. REVENUE BY : SHRI DEEPAK GARG. / DATE OF HEARING : 25.06.2021 / DATE OF PRONOUNCEMENT : 06.07.2021 / ORDER PER INTURI RAMA RAO, AM: THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE AS WE LL AS THE REVENUE DIRECTED AGAINST THE ORDER OF THE LEARNED COMM ISSIONER OF INCOME 2 TAX (APPEALS), PUNE 1 DATED 27.02.2017 FOR THE ASSESSME NT YEAR 2014- 15. 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER : THE ASSESSEE NAMELY, INOX AIR PRODUCTS PVT. LTD., IS A CO MPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1 956. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLING OF IND USTRIAL / MEDICAL GASES. THE RETURN OF INCOME FOR THE A.Y. 2014-15 W AS FILED ON 27.11.2014 DECLARING A TOTAL INCOME OF RS.1,32,98,33,950/-. AGA INST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY T HE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 11, PUNE (HEREINAFTER RE FERRED AS THE ASSESSING OFFICER) AT A TOTAL INCOME OF RS.141,87,22,120/-. THE DISPARITY BETWEEN THE RETURNED INCOME AND THE ASSESSED INCOME IS ON ACCOUNT OF THE FOLLOWING ADDITIONS : (I) ADDITION OF SUBSIDY RECEIVED CONSIDERING OF NEW INDUSTRIAL SALE S FROM STATE GOVERNMENTS OF RS.8,81,44,464/- TREATING AS A REVENUE RECEIPT AS AGAINST THE ASSESSEES CLAIM OF CAPIT AL RECEIPT. (II) ADDITION OF RS.7,43,508/- ON ACCOUNT OF DISCREPANCY BETWEE N INFORMATION IN FORM 26AS DATA ON ITS AND THE AMOUNT CRE DITED TO PROFIT AND LOSS ACCOUNT. 3. THE BRIEF FACTUAL BACKGROUND IS AS UNDER : 3 DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT Y EAR UNDER CONSIDERATION, THE ASSESSEE COMPANY RECEIVED CAPITAL SUBS IDY OF RS.8,81,44,464/- ON THE SETTING UP OF THE FOLLOWING UNITS : UNIT SUBSIDY PERTAINING TO (FINANCIAL YEAR) NATURE AMOUNT RS. BOKARO 2013 - 14 CAPITAL INVESTMENT SUBSIDY 7,78,36,000 SUB TOTAL A 7,78,36,000 JEJURI 2012 - 13 INDUSTRIAL PROMOTION SUBSIDY (IPS)- REVERSAL BASED ON FINAL CLAIM SUBMISSION (78,386) SUB TOTAL B (78,386) BHIWADI 2013 - 14 INVESTMENT SUBSIDY 97,24,050 BHIWADI 2013 - 14 EMPLOYMENT GENERATION SUBSIDY 6,63,000 SUB TOTAL C 1,03,87,050 GRAND TOTAL (A+B+C) 8,81,44,664 DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YE AR UNDER CONSIDERATION, THE APPELLANT COMPANY HAD RECEIVED A SUBSID Y OF RS.7,78,36,000/- ON SETTING UP THE AIR SEPARATION PLANT IN BOKARO. THE PLANT WAS ELIGIBLE FOR SUBSIDY UNDER INVESTMENT, PROMOTION, INCE NTIVE UNDER JARKHAND INDUSTRIAL POLICY, 2001. IN TERMS OF THE SAID PO LICY ANNOUNCED BY THE GOVERNMENT OF JARKHAND, THE ASSESSEE IS ENTITLED FOR CAPITAL INVESTMENT SUBSIDY OF 5% OF ITS FIXED CAPITAL SUBJECT TO MAXIMUM OF RS. 4 CRORES AND 75% OF THE AMOUNT RECEIVED BY THE GOVERNMENT TOWARDS COMMERCIAL TAXES I.E., (VAT AND CST) FOR A PERIOD OF 7 YEARS FROM DATE OF COMME RCIAL PRODUCTION I.E., 13.12.2008. THE CAPITAL SUBSIDY WAS ACCOUNT ED ON ACCRUAL BASIS BY CREDITING CAPITAL SUBSIDY UNDER RESERVES AND SURPLUS. 4 SIMILARLY, IN RESPECT OF THE JEJURI UNIT, THE ASSESSEE COMP ANY HAD MADE INVESTMENTS TOWARDS EXPANSION OF THE EXISTING PLANT AT JEJURI. THE COST OF INVESTMENT ON THE EXPANSION IS ELIGIBLE FOR SUBSIDY U NDER INDUSTRIAL PROMOTION SUBSIDY UNDER PACKAGE SCHEME OF INCENTIVES 2 007 ISSUED BY THE GOVERNMENT OF MAHARASHTRA FOR A PERIOD OF 3 YEARS. TH E SUBSIDY WAS ACCOUNTED FOR ON ACCRUAL BASIS AND THE SAME IS CREDITED TO CAPITAL RESERVE ACCOUNT. IN RESPECT OF BHIWADI UNIT ALSO, THE ASSESSEE COMPANY H AS SET UP A UNIT IN KAHARANI INDUSTRIAL AREA, BHIWADI, DIST - ALWAR, RA JASTHAN AND THE PLANT WAS SET UP IN THE ACCOUNTING YEAR 2012-13 AND T HE COMMERCIAL PRODUCTION WAS COMMENCED ON 02.12.2012 AND THE SAID PLA NT WAS ELIGIBLE FOR INVESTMENT SUBSIDY AND EMPLOYMENT GENERATION SUBS IDY FOR A PERIOD OF 7 YEARS IN TERMS OF THE POLICY ANNOUNCED BY THE GOVER NMENT OF RAJASTHAN I.E., INDUSTRIAL AND INVESTMENT POLICY, 2010. THE SUBSIDY DUE WAS ACCOUNTED FOR ON ACCRUAL BASIS AND CREDITED TO CAPITAL RE SERVE ACCOUNT. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE SUBSIDIES WERE RECEIVED AFTER THE COMMENCEMENT OF COMMERCIAL PRODUCTION, THEREFORE , ACCORDING TO HIM, THESE SUBSIDIES WERE GRANTED ONLY TO ASSIST THE REV ENUE OPERATIONS OF THE BUSINESS OF THE ASSESSEE COMPANY AND THEREFORE, THE NATURE OF THE SUBSIDY IS ONLY REVENUE IN NATURE PLACING RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS WORK S LIMITED VS. CIT REPORTED IN 94 TAXMAN 368 (SC), ACCORDINGLY, TAXED THE SUBSIDY AMOUNT AS REVENUE INCOME. 5 4. WE ARE NOT CONCERNED WITH REGARD TO THE ADDITION OF RS.7,43,508/- ON ACCOUNT OF DISCREPANCY BETWEEN INFORMATION IN FORM 26AS D ATA ON ITS AND THE AMOUNT CREDITED TO PROFIT AND LOSS ACCOUNT. 5. ON APPEAL BEFORE THE LD.CIT(A), CONSIDERING THE SCHEME O F THE SUBSIDY IN ALL THE THREE STATES, LD.CIT(A) HAS CONCLUDED THAT THE S UBSIDY WAS GIVEN FOR CAPITAL INVESTMENT AND THE SAME IS ALSO LINKED TO THE CAPITAL INVESTM ENT. HE FURTHER CONCLUDED THAT THE FACT THAT PART OF THE SU BSIDY WAS GIVEN BY WAY OF REFUND OF SALES TAX PAID BY THE APPELLANT WILL NOT CHANGE THE CHARACTER OF THE SUBSIDY AND THEREFORE, HELD THAT IT IS A CAPITAL RECEIPT . HOWEVER, THE LD.CIT(A) CONSIDERING THE PROVISIONS OF EXPLANATION 10 OF SEC .43(1) OF THE INCOME TAX ACT, DIRECTED THE ASSESSING OFFICER TO REDUCE THE AMOUNT OF THE SUBSIDY RECEIVED FROM THE RESPECTIVE BLOCK OF ASSETS. 6. BEING AGGRIEVED BY THE DECISION OF LD.CIT(A) HOLDING IT TO B E A CAPITAL RECEIPT, THE REVENUE IS IN APPEAL BEFORE US IN APPEAL NO.111 8/2017. THE ASSESSEE BEING AGGRIEVED BY THE DIRECTIONS OF LD.CIT(A) TO R EDUCE THE SUBSIDY FROM THE COST OF THE RESPECTIVE BLOCK OF ASSETS IS IN AP PEAL BEFORE US VIDE APPEAL NO. 1042 OF 2017. 7. FIRST, WE SHALL TAKE UP THE APPEAL FILED BY THE REVENUE IN ITA NO.1118/PUN/2017. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT T HE ISSUE IS SQUARELY COVERED BY THE DECISION OF THIS CO-ORDINATE BE NCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2013-14 IN ITA NOS. 1041/ PUN/2017 DATED 10.11.2020 WHEREIN THE CO-ORDINATE BENCH OF THE TRIBUNAL C ONSIDERING THE 6 SCHEME OF THE SUBSIDY CONCLUDED THAT THE PURPOSE OF S UBSIDY IS ONLY TO ACCELERATE THE INDUSTRIAL DEVELOPMENT IN THE CONCERNED ST ATES AND BY APPLYING PURPOSE TEST IN DETERMINING THE NATURE OF THE SUBSIDY, HELD THAT THE SAME CANNOT BE CONSTRUED AS A REVENUE RECEIPT IN NATURE. SIMILARLY, AS REGARDS TO THE REDUCTION OF THE SUBSIDY FROM THE BLOCK OF ASSETS IN TERMS OF EXPLANATION 10 TO SEC.43(1) OF THE ACT , THE CO-ORDINATE BENCH OF THE TRIBUNAL PLACING RELIANCE ON THE DECISION OF JUR ISDICTIONAL HIGH COURT IN THE CASE OF PR. CIT VS. M/S. WELSPUN STEEL LTD. (2 019) 264 TAXMANN 252 (BOM) CONCLUDED THAT SINCE THE SUBSIDY WAS NOT GRANTED TO MEET THE COST OF THE ASSET, THEREFORE, THE SAME CANNO T BE DEDUCTED FROM THE RESPECTIVE BLOCK OF THE ASSETS. AS REGARDS THE SUBSIDY ISSUED BY THE STATE OF MAHARASHTRA, RELIANCE WAS PLACED ON THE DECISION OF HONB LE MADRAS HIGH COURT IN THE CASE OF CIT VS. KANYAKUMARI DISTRICT SPINNING MILLS REPORTED IN 684 ITR IN SUPPORT OF THE PROPOSITION THAT THOUGH TH E SUBSIDY WAS CALCULATED IN TERMS OF THE COST OF THE EMPLOYEES IT DOES NOT MEAN THAT THE SUBSIDY IS GRANTED WITH INTENTION TO SUPPLEMENT THE REVE NUES OF THE ASSESSEE COMPANY. 9. THE LD.CIT D.R. PLACED RELIANCE ON THE ORDERS OF LOWER AUT HORITIES AND PLEADED THAT SINCE THE INVESTMENT WAS GRANTED IN TERMS OF EMPLOYMENT GENERATION AND IN TERMS OF REFUND OF SALES TAX PAID, THE SA ME SHOULD BE TREATED AS REVENUE IN CHARACTER PLACING RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE DECISION OF SAHNEY STEEL & PRESS WORKS LTD. (SUPR A). 10. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE ISSUE IN THE PRESENT APPEAL RELATES TO THE SUBSIDY RECEIVED BY THE 7 ASSESSEE COMPANY IS WHETHER IN THE NATURE OF CAPITAL OR REVENUE. THERE IS NO NEED TO EXTRACT THE SCHEMES OF THE SUBSIDY POLICIES O F THE RESPECTIVE STATES AS THE ASSESSING OFFICER HAD SET OUT CLEARLY THE SCHEMES OF THE SUBSIDIES OF THE THREE STATES. ON PERUSAL OF THE RESPECT IVE SCHEMES OF THE SUBSIDY, IT IS CLEAR THAT THE SUBSIDY IS ONLY GRANTED IN OR DER TO ACCELERATE THE INDUSTRIAL DEVELOPMENT AND PROMOTE THE EMPLOYMENT OPPORT UNITIES. IT IS SETTLED POSITION OF LAW THAT TO DETERMINE THE TRUE NATURE OF THE SUBSIDY, A PURPOSE TEST HAS TO BE APPLIED AS HELD BY THE HON'B LE SUPREME COURT IN THE CASE OF CIT VS. PONNI SUGARS AND CHEMICALS LTD REPO RTED IN 306 ITR 392 (SC). THE CO-ORDINATE BENCH OF THE TRIBUNAL HAS RIGH TLY APPLIED THE PURPOSE TEST AND HAD COME TO CONCLUSION THAT THE NATURE OF SUBSIDY IS ONLY IN CAPITAL NATURE AND WE DO NOT SEE ANY REASON TO DIFFER WITH THE REASONING OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSE SSEES OWN CASE IN ITA NO.1042/PUN/2017 AND ACCORDINGLY, WE DO NOT FIN D MERIT IN THE GROUNDS OF APPEAL FILED BY THE REVENUE. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 12. NOW WE TAKE UP THE APPEAL FILED BY THE ASSESSEE IN IT A NO.1042/PUN/2017. 13. IN THIS APPEAL, THE ASSESSEE COMPANY CHALLENGED THE D IRECTIONS OF LD.CIT(A) TO REDUCE THE AMOUNT OF THE SUBSIDY RECEIVED FROM THE RESPECTIVE BLOCK OF ASSESSMENT YEARS IN TERMS OF THE EXPLANATION 10 TO SEC.4 3(1) OF THE I.T. ACT. ON PERUSAL OF THE RESPECTIVE SCHEMES OF THE SU BSIDY, IT IS CLEAR THAT THE SUBSIDY IS NOT GRANTED TO MEET THE COST OF ANY FIXE D ASSET AND THEREFORE THE EXPLANATION 10 TO SEC.43(1) HAVE NO APPLICATION TO THE FACTS OF THE 8 PRESENT CASE. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN A PPEAL IN EARLIER YEAR IN ASSESSEES OWN CASE IN ITA NO.1041/PUN/2017 HAD RIGHTLY APPLIED THE DECISION OF THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. WELSPUN STEEL LTD., (SUPRA) AND WE DO NOT SE E ANY REASON TO DIFFER WITH THE REASONING OF THE DECISION OF THE CO-ORDINATE BENCH. ACCORDINGLY, WE REVERSE THE DIRECTIONS OF THE LD.CIT(A) DIREC TING THE ASSESSING OFFICER TO REDUCE THE AMOUNT OF THE SUBSIDY FROM THE COST OF THE RESPECTIVE BLOCK OF ASSETS. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 15. TO SUM UP, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED A ND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 6 TH DAY OF JULY, 2021. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (INTURI RAM A RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 6 TH JULY, 2021. YAMINI 9 ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT( APPEALS), PUNE 1. PRL. CIT-1, PUNE. , , / DR, ITAT, B PUNE; !/ GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.