M/s Paranjape Metal Shapers P.Ltd., Pune V. Dy CIT, Pune

ITA 1250/PUN/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1213 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Assessee Lawyers: RISHI LODHA
• Keywords: Business income; Depreciation; Earning of tax free income; Capital receipt; Unabsorbed depreciation
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , . . !, # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO.1250/PN/2013 % & & / ASSESSMENT YEAR : 2009-10 M/S. PARANJAPE METAL SHAPERS PVT. LTD., T-141, BHOSARI INDUSTRIAL AREA, BHOSARI, PUNE / APPELLANT PAN: AABCP1941R VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 10, PUNE / RESPONDENT . / ITA NO.1469/PN/2013 % & & / ASSESSMENT YEAR : 2009-10 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 10, PUNE / APPELLANT VS. M/S. PARANJAPE METAL SHAPERS PVT. LTD., T-141, BHOSARI INDUSTRIAL AREA, BHOSARI, PUNE / RESPONDENT PAN: AABCP1941R ASSESSEE BY : SHRI RISHI LODHA DEPARTMENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 26.05.2015 / DATE OF PRONOUNCEMENT: 19.08.2015 ' / ORDER PER SUSHMA CHOWLA, JM: THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE ARE AGAINST THE ORDER OF CIT(A)-V, PUNE, DATED 17.04.2013 RELATING TO ASSESSMENT YEAR 2009-10 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 2 2. THE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO.1250/PN/2013 HAS RAISED T HE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS & CIRCUMSTANCES OF THE CASE & IN L AW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS.4,01,676/- MA DE BY THE ASSESSING OFFICER TREATING THE SAME AS ESTIMATED INTEREST INC URRED BY THE APPELLANT I N EARNING TAX FREE INCOME WRONGLY INVOKING THE PROVIS IONS OF SEC 14A OF THE INCOME TAX ACT 1961, WITHOUT PROVING ANY NEXUS BETW EEN THE FUNDS BORROWED & THE INVESTMENTS MADE. 2. ON THE FACTS & CIRCUMSTANCES OF THE CASE & IN LA W, THE LEARNED CIT(A) ERRED IN GIVING ONLY PART I AL RELIEF I N THE COMPUTATION OF DEDUCTION U/S 80IA WRONGLY DONE BY THE ASSESSING OFFICER BY CHANGING T HE METHODOLOGY & FIGURES IN THE COMPUTATION & IGNORING THE ESTABLISH ED LAW ON THIS POINT . 3. ON THE FACTS & CIRCUMSTANCES OF THE CASE & IN LA W, THE LEARNED CIT(A) ERRED IN NOT GIVING RELIEF BY NOT DIRECTING THE ASS ESSING OFFICER TO DELETE PENALTY PROCEEDINGS U/S 271(1)(C). 4. ON THE FACTS & CIRCUMSTANCES OF THE CASE & IN L AW, THE LEARNED CIT(A) HAS ERRED IN NOT TREATING THE ORDER PASSED AS BAD I N LAW WHEN SUBSTANTIAL EVIDENCE / ARGUMENTS HAVE BEEN MADE BEFORE HIM. THE APPELLANT CRAVES FOR LEAVE TO ADD, ALTER, AMEND AND / OR DELETE FROM ANY OF THE GROUNDS OF APPEAL, BEFORE OR AT THE TIME OF HEARING. 4. THE REVENUE IN ITA NO.1469/PN/2013 HAS RAISED TH E FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD . CIT(A) WAS JUSTIFIED IN HOLDING THAT FOR THE PURPOSE OF SECTIO N 80LA THE YEAR IN WHICH THE ASSESSEE CHOOSES TO CLAIM DEDUCTION HAS TO BE T REATED AS 'INITIAL ASSESSMENT YEAR'? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD.CIT(A) WAS JUSTIFIED IN HOLDING THAT PROFIT OF THE ELIGIBLE BU SINESS HAS TO BE COMPUTED WITHOUT DEDUCTING THERE FROM BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION PRIOR TO THE INITIAL YEAR OF CLAIM DE HORS THE PROVISION U/S. 80IA(5) OF THE ACT? 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A NY OF THE ABOVE GROUNDS OF APPEAL . 5. THE FIRST ISSUE RAISED BY THE ASSESSEE IN ITS AP PEAL IS AGAINST THE DISALLOWANCE MADE UNDER SECTION 14A AT RS.4,01,676/ -. THE SECOND ISSUE RAISED BY THE ASSESSEE AND THE ONLY ISSUE RAISED BY THE RE VENUE IS IN RELATION TO THE COMPUTATION OF DEDUCTION UNDER SECTION 80IA OF THE ACT. ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 3 6. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE A SSESSEE WAS ENGAGED IN THE MANUFACTURE OF ALLIED IRON CASTING AND COMPONENTS F OR AUTOMOBILE, DIESEL ENGINES, COMPRESSORS FOR AUTOMOBILES AND OTHER INDU STRIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SHOWN EXEMPT DIVIDEND INCOME OF RS.34,12,713/- ON T OTAL INVESTMENT OF RS.333.15 LAKHS IN MUTUAL FUNDS AND RS.220.53 LAKHS IN EQUITY SHARES. RESORTING TO THE PROVISIONS OF SECTION 14A OF THE A CT, THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE AS TO WHY THE EXPENDITURE INCUR RED IN RELATION TO EARNING OF EXEMPT INCOME SHOULD NOT BE DISALLOWED IN VIEW OF P ROVISIONS OF SECTION 14A READ WITH RULE 8D OF INCOME TAX RULES, 1962 (IN SHO RT RULES). REFERENCE WAS MADE TO THE DECISION OF THE HONBLE BOMBAY HIGH COU RT IN GODREJ & BOYCE MANUFACTURING CO. LTD. VS. DCIT (2010) 328 ITR 81 ( BOM) AND THE ASSESSING OFFICER WORKED THE DISALLOWANCE ON ACCOUNT OF PROPO RTIONATE INTEREST PAID OF RS.1,12,855/- AND UNDER RULE 8D(III) AT 0.5% OF AVE RAGE INVESTMENTS AT RS.2,88,821/- TOTALING RS.4,01,676/-. THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS THAT IT HAD INTEREST FREE FUN DS AVAILABLE FOR INVESTMENT, WAS REJECTED BY THE ASSESSING OFFICER. THE ASSESSEE FI LED THE LIST OF INVESTMENTS DATE-WISE AND ALSO THE CORRESPONDING BALANCE IN THE BANK ACCOUNT ON THE AFORESAID DATES AND WORKED OUT THE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE AT RS.17,277/-. HOWEVER, THE ASSESSING OFFICER REJECTED THE ABOVE SAID EXPLANATION AND COMPUTED THE DISALLOWANCE AT R S.4,01,676/-. 7. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER ON THE PREMISE THAT THE INTEREST BEARING FUNDS WERE DIVERTED FOR THE PURPOS E OF INVESTMENT IN MUTUAL FUNDS AS WELL AS SHARES OF INDIAN COMPANIES. THE C IT(A) HELD THAT AS PER THE ADMISSION OF ASSESSEE, THERE WAS CLEAR-CUT LINK BET WEEN THE BORROWINGS AND THE INVESTMENTS AND THE PLEA OF THE ASSESSEE THAT IT HA D INTEREST FREE FUNDS FOR MAKING INVESTMENTS IN MUTUAL FUNDS / SHARES COULD N OT BE ACCEPTED AS THE MECHANICS OF SECTION 36(1)(III) OF THE ACT WERE DIF FERENT FROM SECTION 14A OF THE ACT. RELIANCE IN THIS REGARD WAS PLACED ON THE RAT IO LAID DOWN BY THE CHENNAI ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 4 BENCH OF TRIBUNAL IN M/S. LAKSHMI RING TRAVELLERS V S. ACIT IN ITA NO.2083(MDS)/2011 DATED 02.03.2012. 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF C IT(A) IN THIS REGARD. 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE AS SESSEE POINTED OUT THAT THE ASSESSEE HAD RESERVES TO THE EXTENT OF RS.18.79 CRORES AND THE CREDIT FACILITIES AVAILED FROM THE BANK WERE UTILIZED FOR WORKING CAPITAL FOR RUNNING BUSINESS. IT WAS FURTHER POINTED OUT BY THE LEARNE D AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE TOTAL INVESTMENT IN MUTUAL FU NDS AND SHARES OF INDIAN COMPANIES WAS RS.5.53 CRORES AND NO FRESH INVESTMEN T WAS MADE DURING THE YEAR AND ON THE OTHER HAND, THERE WAS REDEMPTION OF THE INVESTMENT EARLIER MADE BY THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTA TIVE FOR THE ASSESSEE FURTHER DREW OUR ATTENTION TO THE CALCULATION AT PA GES 146 AND 147 OF THE PAPER BOOK, UNDER WHICH THE ASSESSEE HAD WORKED OUT THE D ISALLOWANCE ON ACCOUNT OF INTEREST AT RS.17,277/-. THE LEARNED AUTHORIZED RE PRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT BEFORE INVOKING THE PROVIS IONS OF SECTION 14A OF THE ACT, THE ASSESSING OFFICER HAD TO RECORD SATISFACTION TH AT THE CALCULATION MADE BY THE ASSESSEE WAS NOT CORRECT. WITH REGARD TO THE DISAL LOWANCE MADE UNDER RULE 8D(III) OF THE RULES, THE LEARNED AUTHORIZED REPRES ENTATIVE FOR THE ASSESSEE SUBMITTED THAT NO EXPENDITURE WAS ATTRIBUTABLE TO T HE EXEMPT INCOME EARNED BY THE ASSESSEE. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACING RELIANCE ON THE ORDER OF CIT(A) POINTED OUT THAT WH ERE THE ASSESSEE HIMSELF HAD WORKED OUT THE DISALLOWANCE UNDER SECTION 14A OF TH E ACT READ WITH RULE 8D OF THE RULES ON THE BASIS THAT INTEREST BEARING FUNDS WERE UTILIZED FOR MAKING THE INVESTMENTS, THEN THE PROVISIONS OF RULE 8D(II) OF THE RULES HAD TO BE APPLIED TO WORK OUT THE TOTAL DISALLOWANCE OUT OF INTEREST EXP ENDITURE. IT WAS FURTHER POINTED OUT BY HIM THAT IN ANY CASE THE DISALLOWANCE ON ACC OUNT OF ADMINISTRATIVE ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 5 EXPENSES ATTRIBUTABLE TO EARNING THE EXEMPT INCOME IS TO BE COMPUTED AS PER RULE 8D(III) OF THE RULES. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING VIDE GROUND OF APPEAL NO.1 RAISED BY THE AS SESSEE IS AGAINST THE DISALLOWANCE UNDER SECTION 14A OF THE ACT, WHICH PR OVIDES THAT EXPENDITURE INCURRED IN RELATION TO THE INCOME WHICH IS NOT INC LUDABLE IN THE TOTAL INCOME OF ANY PERSON, IS NOT TO BE ALLOWED IN THE HANDS OF TH E ASSESSEE. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD EARNED DIVI DEND INCOME OF RS. 34,12,713/-, WHICH WAS CLAIMED AS EXEMPT. THE ASSE SSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS FILED TABULATED DETAILS IN RESPECT OF INVESTMENTS MADE AND THE SOURCES OF SAID INVESTMENT AND WORKED OUT THE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE AT RS.17,277/-. TH E SAID WORKING OF THE DISALLOWANCE WAS FURNISHED BEFORE THE ASSESSING OFF ICER. UNDER THE PROVISIONS OF SECTION 14A(2) OF THE ACT, IT IS PROVIDED THAT T HE ASSESSING OFFICER SHALL DETERMINE THE AMOUNT OF EXPENDITURE IN RELATION TO SUCH INCOME, WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THIS ACT, IF HA VING REGARD TO THE ACCOUNTS OF THE ASSESSEE, THE ASSESSING OFFICER IS NOT SATISFIE D WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUCH EXPEN DITURE WHICH IS ATTRIBUTABLE TO THE EXEMPT INCOME. THE PERUSAL OF ASSESSMENT OR DER REFLECTS THAT THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION IN THIS REGARD. IN VIEW THEREOF, WHERE THE ASSESSING OFFICER HAS FAILED TO RECORD SATISFACTION AS TO HIS NON-SATISFACTION WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE WITH REGARD TO THE EXPENDITURE RELATABLE TO EXEMPT INCOM E, WE FIND NO MERIT IN THE EXERCISE CARRIED OUT BY THE ASSESSING OFFICER IN TH IS REGARD. ADMITTEDLY, THE PROVISIONS OF RULE 8D(II) ARE APPLICABLE TO THE YEA R UNDER CONSIDERATION. HOWEVER, THE SAID PROVISIONS CAN BE APPLIED AFTER R ECORDING OF SATISFACTION BY THE ASSESSING OFFICER AS ENVISAGED UNDER SECTION 14A(2) OF THE ACT. IN THE ABSENCE OF THE SAME, WE HOLD THAT THE DISALLOWANCE UNDER TH E PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE 8D(II) OF THE RULES CAN AT B EST BE MADE AT RS.17,277/- I.E. ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 6 THE DISALLOWANCE WORKED OUT BY THE ASSESSEE. ACCOR DINGLY, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDE R SECTION 14A OF THE ACT READ WITH RULE 8D(II) OF THE RULES AT RS.17,277/-. 12. THE SECOND ASPECT OF THE DISALLOWANCE UNDER SEC TION 14A OF THE ACT IS ON ACCOUNT OF APPLICATION OF PROVISIONS OF RULE 8D(III ) OF THE RULES, WHICH PROVIDES THAT ADMINISTRATIVE EXPENSES INCURRED FOR THE PURPO SE OF EARNING THE EXEMPT INCOME WOULD BE DETERMINED AT 0.5% OF THE TOTAL INV ESTMENT. THE ASSESSEE HAD NOT GIVEN ANY WORKING IN RESPECT OF THE SAID EXPEND ITURE AND IN THE TOTALITY OF THE ABOVE SAID FACTS AND CIRCUMSTANCES, WE HOLD THAT TH E DISALLOWANCE UNDER RULE 8D(III) OF THE RULES AT RS.2,88,821/- IS WARRANTED AND WE UPHOLD THE SAME. ACCORDINGLY, THE GROUND OF APPEAL NO.1 RAISED BY TH E ASSESSEE IS THUS, PARTLY ALLOWED. 13. NOW, COMING TO THE SECOND ISSUE RAISED BY THE A SSESSEE VIDE GROUND OF APPEAL NO.2 AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE IN RELATION TO THE COMPUTATION OF DEDUCTION UNDER SECTION 80IA OF THE ACT. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IA OF THE ACT AT RS.15,66,722/- AGAINST THE WINDMILL INSTALLED AT MHATREWADI. THE ASSESSING OF FICER NOTED THAT THE ASSESSEE HAD CLAIMED THE DEDUCTION UNDER SECTION 80IA OF THE ACT IN RESPECT OF THE WINDMILL ON PROFITS WORKED OUT AFTER TREATING THE I NCOME ON ACCOUNT OF SALES OF SALE TAX INCENTIVES / ENTITLEMENTS. ALSO THE DEDUC TION WAS CLAIMED IN THE YEAR IN WHICH THE WINDMILL HAD EARNED PROFITS, WITHOUT CONS IDERING THE LOSSES OF THE PREVIOUS YEARS AS REQUIRED UNDER SECTION 80IA(5) OF THE ACT. THE ASSESSING OFFICER FURTHER NOTED THAT IF THE INCOME ON ACCOUNT OF SALE OF SALES TAX INCENTIVES / ENTITLEMENTS, WHICH WAS NOT A PROFIT DERIVED FROM T HE ELIGIBLE BUSINESS, WAS EXCLUDED FROM THE PROFITS OF ELIGIBLE BUSINESS, THE LOSSES WOULD BE CONSIDERED FOR THE PURPOSE OF DETERMINATION OF THE QUANTUM OF DEDU CTION UNDER SECTION 80IA(5) OF THE ACT. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS NOT ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT. SHOW CAUSE NOTICE ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 7 WAS ISSUED TO THE ASSESSEE IN THIS REGARD AND IN RE PLY, THE ASSESSEE POINTED OUT THAT THE DEPRECIATION AND LOSSES OF EARLIER ASSESSM ENT YEARS HAVE ALREADY BEEN SET OFF AGAINST THE BUSINESS INCOME OF ASSESSMENT Y EARS IN WHICH NO DEDUCTION UNDER SECTION 80IA OF THE ACT WAS CLAIMED AND FURTH ER SUCH DEPRECIATION AND LOSSES CANNOT BE ADJUSTED IN COMPUTING THE QUANTUM OF DEDUCTION UNDER SECTION 80IA OF THE ACT. THE LEARNED AUTHORIZED REPRESENTA TIVE FOR THE ASSESSEE PLACED RELIANCE ON THE DECISIONS OF THE HONBLE MADRAS HIG H COURT IN CIT VS. VELAYSUDHASWAMY SPINNING MILLS PVT. LTD. (2010) 231 CTR 368 (MAD) AND BANGALORE BENCH OF TRIBUNAL IN ANIL H. LAD VS. DCIT (BANG). THE ASSESSING OFFICER AFTER ELABORATELY DISCUSSING THE SCHEME OF THE GOVT. OF MAHARASHTRA TO ALLOW SALES TAX INCENTIVE UNDER PARA 5.2.2 HELD THA T THE PROFITS DERIVED BY WAY OF SUCH INCENTIVES DID NOT FALL WITHIN THE EXPRESSIONS PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING IN SECTION 80IA OF THE ACT. THE OTHER ARGUMENT OF THE ASSESSEE THAT IT WAS ENTITLED TO CLAIM THE DEDUCTION UNDER SECTIO N 80IA OF THE ACT ONLY WHEN THE ASSESSEE HAD POSITIVE INCOME AND THE DEDUCTION SHOU LD BE ALLOWED WITHOUT CONSIDERING THE LOSSES INCURRED EARLIER YEARS AS TH E BUSINESS ELIGIBLE FOR DEDUCTION, HAS BEEN OBSERVED TO BE WITHOUT ANY BASI S BY THE ASSESSING OFFICER, IN VIEW OF THE PROVISIONS OF SECTION 80IA(5) OF THE ACT. IN THIS REGARD, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE SPECIAL BE NCH OF AHMEDABAD TRIBUNAL IN ACIT VS. GOLDMINE SHARES & FINANCE (P) LTD. (113 ITS 209 AHD). SINCE THE ASSESSEE HAD CUMULATIVE LOSSES UP TO ASSESSMENT YEA R UNDER CONSIDERATION WHICH WERE MORE THAN THE PROFITS FROM THE ELIGIBLE UNIT, THE DEDUCTION CLAIMED UNDER SECTION 80IA OF THE ACT WAS DENIED TO THE ASS ESSEE IN VIEW OF THE DECISION OF THE HONBLE MADRAS HIGH COURT HAVING NOT BEEN AC CEPTED BY THE DEPARTMENT AND THE SAID DECISION BEING GIVEN BY NON-JURISDICTI ONAL HIGH COURT. 14. IN APPEAL, THE CIT(A) UPHELD ORDER OF ASSESSING OFFICER WITH REGARD TO THE ISSUE OF SALES TAX INCENTIVE / ENTITLEMENT BEING NO T PROFITS DERIVED FROM THE UNDERTAKING. THE SECOND ISSUE OF LOSSES OF UNDERTA KING PERTAINING TO EARLIER YEARS WHICH HAD ALREADY BEEN ADJUSTED AGAINST THE O THER INCOME, THE CIT(A) HELD ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 8 THAT THE ISSUE IS SQUARELY COVERED BY THE RATIO LAI D DOWN BY THE MUMBAI BENCH OF TRIBUNAL IN HERCULES HOISTS LIMITED VS. ACIT IN ITA NOS.7944, 7946, 2255 & 7943/MUM/2011, DATED 13.02.2013, WHICH IN TURN HAD CONSIDERED THE SPECIAL BENCH OF AHMEDABAD TRIBUNAL DECISION IN ACIT VS. GO LDMINE SHARES & FINANCE (P) LTD. REPORTED IN 113 ITD 209 (SB)(AHD.) AND ALS O THE HONBLE MADRAS HIGH COURT DECISION IN VELAYUSUDHASWAMY SPINNING MILLS ( P) LTD. VS. ACIT (2012) 340 ITR 477 (MAD.). THE CIT(A) FOLLOWING THE RATIO LAID DOWN BY THE TRIBUNAL HELD THAT THE DECISION OF MUMBAI BENCH OF TRIBUNAL SUPPORTS THE STAND TAKEN BY THE ASSESSING OFFICER AND EVEN THE PROVISIONS OF SE CTION 80IA OF THE ACT WERE CLEAR AND SUPPORTS THE STAND OF ASSESSING OFFICER. HOWEVER, THE CIT(A) FURTHER NOTED THAT PUNE BENCH OF TRIBUNAL IN POONAWALA ESTA TE STUD & AGRO FARM (P) LTD. VS. ACIT REPORTED IN 136 TTJ 236 (PUNE) (TRIB) HAS TAKEN A CONTRARY VIEW IN FAVOUR OF THE ASSESSEE ON THE ISSUE AND HELD THAT T HE INITIAL YEAR IS THE YEAR WHEN THE ASSESSEE CHOOSES TO EXERCISE ITS OPTION TO CLAI M THE DEDUCTION UNDER SECTION 80IA OF THE ACT. THE CIT(A) THUS, DIRECTED THE ASS ESSING OFFICER TO EXCLUDE THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION SET OFF AGAINST OTHER INCOME IN EARLIER YEARS, WHILE WORKING OUT THE DEDUCTION U NDER SECTION 80IA OF THE ACT. 15. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN PARTIALLY ALLOWING THE RELIEF IN THE COMPUTATION OF DEDUCTION UNDER SE CTION 80IA OF THE ACT I.E. ON THE SALES TAX INCENTIVES RECEIVED BY THE ASSESSEE FROM THE GOVT. OF MAHARASHTRA. 16. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF C IT(A) IN HOLDING THAT FOR THE PURPOSE OF SECTION 80IA OF THE ACT, YEAR IN WHI CH THE ASSESSEE CHOOSES TO CLAIM DEDUCTION HAS TO BE TREATED AS INITIAL ASSESS MENT YEAR AND FURTHER THAT THE PROFIT OF THE ELIGIBLE BUSINESS HAD TO BE COMPUTED WITHOUT DEDUCTING THE BROUGHT FORWARD LOSSES OR UNABSORBED DEPRECIATION PRIOR TO THE INITIAL YEAR OF CLAIM, DE- HORSE THE PROVISIONS OF SECTION 80IA(5) OF THE ACT. ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 9 17. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE DREW OUR ATTENTION TO THE TABULATED DETAILS PLACED AT PAGE 1 48 OF THE PAPER BOOK AND POINTED OUT THAT IN RELATION TO THE DEDUCTION UNDER SECTION 80IA OF THE ACT, THERE WERE TWO ISSUES. THE FIRST ISSUE WAS WHETHER THE S ALES TAX BENEFIT DERIVED BY THE ASSESSEE ON ESTABLISHING THE WINDMILL COULD BE TREA TED AS PROFITS DERIVED FROM ELIGIBLE BUSINESS IN ORDER TO AVAIL THE DEDUCTION U NDER SECTION 80IA OF THE ACT. IT WAS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENT ATIVE FOR THE ASSESSEE THAT BOTH THE AUTHORITIES BELOW HAVE DECIDED THE ISSUE A GAINST THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN LIBERTY INDIA VS. CIT (2009) 183 TAXMAN 349 (SC). THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE IS IN APPEAL AGAINST THE SAID FINDING OF CIT(A). IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE SECOND ASPECT OF THE ISSUE IS THE DEFINITION OF INITIAL YEAR I.E. THE YEAR FROM WHICH THE ASSESSEE HAD OPTED FOR CLAIMING DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. THE ASSESSEE HAD MADE THE SAID OPTION W.E.F. ASSESSMENT YEAR 2007-08 AND CONSEQUENTLY, THE LOSSE S, IF ANY OF THE INITIAL YEAR AND THEREAFTER HAVE TO BE CONSIDERED FOR SET OFF AG AINST THE BUSINESS PROFITS AND NOT THE LOSSES OF YEARS IN WHICH NO DEDUCTION UNDER SECTION 80IA(4) OF THE ACT WAS OPTED FOR BY THE ASSESSEE. THE LEARNED AUTHORI ZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD HAS PLACED RELIANCE ON THE RATIO LAID DOWN BY PUNE BENCH OF TRIBUNAL IN POONAWALA ESTATE STUD & AGRO F ARM (P) LTD. VS. ACIT (SUPRA) AND ALSO CHENNAI BENCH OF TRIBUNAL IN MOHAN BREWERIES & DISTILLERIES LTD. VS. ACIT AND MUMBAI BENCH OF TRIBUNAL IN SHEVI E EXPORTS VS. JCIT (2013) 33 TAXMANN.COM 446 (MUMBAI TRIB). 18. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE RESPECTIVE ORDERS OF ASSESSING OFFI CER / CIT(A). 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS FIRST WHETHER THE ASSESSEE IS ELIGIBLE FOR CLAIM OF ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 10 DEDUCTION UNDER SECTION 80IA(4) OF THE ACT ON THE S ALES TAX INCENTIVE RECEIVED FROM THE GOVT. OF MAHARASHTRA. WE FIND THAT SIMILA R ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF THE ACT IN RESPECT OF SALE S TAX BENEFITS RECEIVED IN TERMS OF POLICY ON WIND POWER GENERATION FORMULATED BY TH E GOVT. OF MAHARASHTRA, AROSE BEFORE THE TRIBUNAL IN RASIKLAL M. DHARIWAL ( HUF) VS. DCIT VIDE ITA NOS. 575/PN/2007 & 150/PN/2008, RELATING TO ASSESSMENT Y EARS 2003-04 & 2004-05. THE TRIBUNAL VIDE ORDER DATED 31.03.2011 HELD AS UN DER:- 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS. IN TERMS OF THE POLICY ON WIND POWER GENERATION FORMULATED BY THE GOVERNME NT OF MAHARASHTRA, VIDE RESOLUTIONS DATED 12.3.1998 (SUPRA), AND 1.10.1999 (SUPRA), THE ASSESSEE AVAILED OF SALES-TAX BENEFIT OF A SUM OF RS 63,74,2 91/-. THE ASSESSEE CLAIMED THAT SUCH AMOUNT IS A CAPITAL RECEIPT NOT SUBJECTED TO TAXATION. ON THE CONTRARY, AS PER THE REVENUE SUCH AMOUNT IS A REVENUE RECEIPT CHARGEABLE TO TAX. 9. BEFORE WE TOUCH UPON THE DIFFERING STANDS OF THE ASSESSEE AND REVENUE ON THE ISSUE, IT WOULD BE APPROPRIATE TO CULL OUT T HE FACTS HAVING A BEARING ON THE ISSUE. THE APPELLANT IS AN HUF WHICH IS, INTER ALIA , ENGAGED IN A RANGE OF BUSINESS ACTIVITIES VIZ. MANUFACTURE AND SALE OF MA NICKCHAND ZARDA, PAN MASALA, CONSTRUCTION ACTIVITIES, MANUFACTURING OF T ILES ETC. INCLUDING GENERATION AND SALE OF POWER. IN THE COURSE OF ITS ACTIVITIES, THE ASSESSEE COMPANY SET UP WIND MILLS IN THE STATE OF MAHARASHTRA FOR GENERATI ON OF WIND POWER. THE GOVERNMENT OF MAHARASHTRA IN TERMS OF ITS POLICY ON WIND POWER GENERATION GRANTED VARIOUS BENEFITS, INCLUDING SALES-TAX BENEF IT. IN TERMS OF THE PROCEDURE FOR AVAILING SALES-TAX BENEFITS ON NON-CONVENTIONAL ENERGY GENERATING PROJECTS, SUCH AS WIND MILLS, ASSESSEE WAS ALSO ENTITLED TO T HE FACILITY OF TRANSFERRING THE SALES-TAX BENEFIT TO THE THIRD PARTY. THE ASSESSEE AFTER OBTAINING THE REQUISITE PERMISSION FROM THE STATE GOVERNMENT TRANSFERRED TH E SALES-TAX BENEFIT ENTITLEMENTS TO A THIRD PARTY AND THE CONSIDERATION THEREOF AMOUNTING TO RS 63,74,291/- WAS CLAIMED AS A CAPITAL RECEIPT. AT TH IS STAGE, IT WOULD BE APPROPRIATE TO BRIEFLY TOUCH UPON THE RESOLUTION OF THE STATE GOVERNMENT DATED 12.3.1998 (SUPRA), THE RELEVANT PORTION OF WHICH IS REPRODUCED AS UNDER: PREAMBLE THE STATE GOVERNMENT HAS A POLICY TO PROMOTE GENERA TION OF ENERGY THROUGH NON- CONVENTIONAL SOURCES TO SUPPLEMENT THE EVER INCREAS ING DEMAND OF ELECTRICITY IN THE STATE. IT WAS FOUND AFTER A SURVEY THAT THERE IS AN IMMENSE POTENTIAL FOR GENERATION OF WIND POWER IN THE STATE. SURVEYS CONDUCTED BY MEDA IN ASSOCIATION WITH MNES, NEW DELHI AND IITM, BANGALORE INDICATE THAT THE POTENTI AL IS ABOUT 300 TO 400 MW. EIGHT DIFFERENT SITES HAVE BEEN SELECTED FOR THIS PURPOSE AND FURTHER SURVEY IS BEING CARRIED OUT. THE STATE GOVERNMENT HAD ENUNCIATED ITS POLICY ON G ENERATION THROUGH NON-CONVENTIONAL SOURCES IN JANUARY, 1996. THIS POLICY HOWEVER COULD NOT ATTRACT THE PROMOTERS. DURING THE INTERVENING PERIOD, THE GOVERNMENT OF INDIA HAD ISS UED CERTAIN GUIDELINES REGARDING WIND ENERGY GENERATION. THESE GUIDELINES FROM GOVERNMENT OF INDIA, WIND POWER GENERATION POLICIES OF OTHER STATE GOVERNMENTS AND THE PROBLEM S BEING FACED BY PROMOTERS OF WIND ENERGY GENERATION WERE UNDER ACTIVE CONSIDERATION O F THE STATE GOVERNMENT. RESOLUTION : IN PARTIAL MODIFICATION OF ITS EXISTING POLICY TO P ROMOTE WIND ENERGY GENERATION, THE STATE GOVERNMENT HAS TAKEN FOLLOWING DECISIONS TO PROMOTE WIND ENERGY GENERATION IN THE STATE:- (1) TARIFF : MAHARASHTRA STATE ELECTRICITY BOARD SHALL PURCHASE ENERGY GENERATED FROM WIND POWER PLANTS AT A RATE OF 225 PAISE PER UNIT. THE FINANCI AL YEAR 1994-95 WILL BE TAKEN AS BASE YEAR FOR THIS RATE WHICH WILL BE INCREASED AT A RAT E OF 5% PER ANNUM. THIS 5% ESCALATION WILL BE AVAILABLE TO THE DEVELOPERS FOR THE FIRST 1 0 YEARS OF THE PROJECT LIFE. THE LIABILITY OF THE PROJECT REDUCES AFTER REPAYMENT OF DEBT. DUE TO THIS, FOR THE NEXT 3 YEARS THERE WILL BE NO ESCALATION AND THE RATE WILL BE KEPT CONSTANT. T HEREAFTER, FOR THE BALANCE LIFE OF THE PROJECT (7 YEARS), AN ESCALATION OF 5% PER ANNUM WI LL BE AVAILABLE TO THE DEVELOPERS. ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 11 (2) BANKING IN LINE WITH THE CENTRAL GOVERNMENT POLICY, WIND PO WER DEVELOPERS WOULD BE GIVEN PERMISSION TO BANK THE ENERGY GENERATED FROM WIND P OWER PLANTS WITH MSEB. BANKING CAN BE DONE ANY TIME OF THE DAY AND NIGHT. THE ENER GY BALANCE AT THE END OF ONE YEAR SHALL NOT BE TAKEN INTO ACCOUNT NEXT YEAR. THE BALA NCE OF ENERGY ACCOUNT WILL BE SETTLED BETWEEN THE MSEB AND PROMOTERS AT THE END OF THE YE AR AS PER THE TARIFF APPLICABLE DURING THAT YEAR. (3) TRANSMISSION LOSSES: MSEB SHALL BEAR THE TRANSMISSION LOSSES FOR WIND EN ERGY TRANSMISSION FOR THE FIRST THREE YEARS. THEREAFTER, TRANSMISSION LOSSES WILL BE LEVI ABLE AT THE RATE OF 1%. (4) THIRD PARTY SALE : PROMOTERS WILL BE PERMITTED TO SELL EXPORTABLE POWE R TO ANY TWO (INDUSTRIAL OR COMMERCIAL) CONSUMERS PER MW. WHEELING CHARGES FOR THIS WILL BE LEVIABLE AT THE RATE OF 2%. (5) EVACUATION ARRANGEMENT: MSEB SHALL INITIALLY BEAR THE EXPENDITURE FOR ERECT ION OF HIGH TENSION SUB-STATION AND TRANSMISSION INFRASTRUCTURE. MEDA SHALL RECOVER 50% OF THIS EXPENDITURE FROM WIND POWER PROJECT PROMOTERS AND WILL GIVE IT TO MSEB. DEVELOP ERS SHALL BEAR THE COST OF TRANSMISSION LINES FROM THE SUB-STATION TO THE PROJECT AND ALL O THER RELATED EQUIPMENT. (6) APPROACH ROADS : MEDA SHALL BEAR THE COST OF CONSTRUCTION OF ROADS T O THE PROJECT SITES. MEDA WOULD BE ENTITLE TO GOVERNMENT GRANTS FOR THIS EXPENDITURE. (7) CAPITAL SUBSIDY : WIND POWER PROJECTS WILL BE GRANTED STATUS OF SMALL SCALE INDUSTRIES. MEDA SHALL GIVE A SUBSIDY UPTO 30% OR THE FIXED CAPITAL INVESTMENT (L IMITED TO RS 20 LAKHS) TO THE PROMOTERS SUBJECT TO A CONDITION THAT WIND POWER PLANT HAS SU CCESSFULLY OPERATED WITH A MINIMUM 12% PLANT LOAD FACTOR FOR AT LEAST ONE YEAR. (8) ENTRY TAX/OCTROI REFUND : ENTRY TAX/OCTROI AS PAID Y PROMOTERS WHILE MAKING C APITAL EXPENDITURE WILL BE REIMBURSED BY MEDA. (9) SALES TAX BENEFITS : INVESTMENTS IN PLANT AND MACHINERY, NEW BUILDING, L AND DEVELOPMENT, TECHNICAL DEVELOPMENT AND DESIGN IN A WIND POWER PROJECT WOUL D BE CONSIDERED AS QUALIFYING INVESTMENT. PROMOTER SHALL BE ENTITLED TO SALES-TAX BENEFITS UPTO THE AMOUNT OF QUALIFYING INVESTMENT. THIS BENEFIT WOULD BE GIVEN IN 6 EQUAL INSTALMENTS OVER A PERIOD OF 6 YEARS (1/6 OF THE QUALIFYING INVESTMENT AMOUNT EVERY YEAR ) ONLY UNDER THE CONDITION THAT THE PLANT HAS SUCCESSFULLY OPERATED EVERY YEAR WITH A M INIMUM OF 12% PLANT LOAD FACTOR. THIS BENEFIT MAY ALSO BE AVAILABLE TO ANY OTHER COM PANY ASSOCIATED WITH THE PROMOTERS. DETAILED INSTRUCTIONS ABOUT THE MODUS OPERANDI ABOU T SALES TAX BENEFITS WILL BE SEPARATELY ISSUED BY THE FINANCE DEPARTMENT. BY ORDER AND IN THE NAME OF THE GOVERNOR OF MAHARAS HTRA. SD/- (L.V.NILESH) DEPUTY SECRETARY TO GOVERNMENT 10. A PERUSAL OF THE PREAMBLE TO SUCH RESOLUTION RE VEALS THAT THE STATE GOVERNMENT HAS A POLICY TO PROMOTE GENERATION OF EN ERGY THROUGH NON CONVENTIONAL SOURCES TO SUPPLEMENT THE EVER INCREAS ING DEMAND OF ELECTRICITY IN THE STATE OF MAHARASHTRA. IT WAS FOUND THAT THERE I S IMMENSE POTENTIAL FOR GENERATION OF WIND POWER IN THE STATE AND DIFFERENT SITES WERE SELECTED BY THE GOVERNMENT FOR THIS PURPOSE. IT APPEARS THAT THE ST ATE GOVERNMENT HAD ENUNCIATED ITS POLICY OF GENERATION THROUGH NON CON VENTIONAL SOURCES IN JANUARY 1996, WHICH WAS NOT FOUND ATTRACTIVE BY THE PROMOTE RS. IN TERMS OF THE SAID RESOLUTION THE GOVERNMENT MODIFIED ITS EXISTING POL ICY TO PROMOTE WIND ENERGY GENERATION BY ANNOUNCING CERTAIN CONCESSIONS AS INC ENTIVES ENUMERATED THEREIN. SUCH INCENTIVES RELATED TO TARIFF STRUCTURING, BAN KING OF POWER GENERATED BY WIND MILLS WITH MSEB, BEARING OF TRANSMISSION LOSSES BY MSEB, PERMITTING PROMOTERS TO SELL POWER TO THIRD PARTIES, BEARING INITIAL EXP ENDITURE FOR ERECTION OF HIGH TENSION AND SUB-STATION AND TRANSMISSION INFRASTRUC TURE, BEARING THE COST OF CONSTRUCTION OF ROADS TO PROJECT SITES, REIMBURSEME NT OF ENTRY TAX/OCTROI TO THE PROMOTERS, CAPITAL SUBSIDY UPTO 30% OF THE FIXED C APITAL INVESTMENT (LIMITED TO RS 20 LAKHS), AND SALES-TAX BENEFITS. SINCE THE PRIMAR Y DISPUTE BEFORE US IS IN ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 12 RELATION TO THE SALES-TAX BENEFITS AVAILABLE UNDER THE SCHEME, IT WOULD BE IN THE FITNESS OF THINGS THAT WE MAY LOOK AT IT IN SLIGHT DETAIL. THE SCHEME INTENDED THAT INVESTMENTS IN PLANT AND MACHINERY, NEW BUILDING, L AND DEVELOPMENT, TECHNICAL DEVELOPMENT AND DESIGN IN A WIND POWER PROJECT WOUL D CONSTITUTE QUALIFYING INVESTMENT AND A PROMOTER SHALL BE ENTITLED TO SALE S-TAX BENEFITS UPTO THE AMOUNT OF SUCH QUALIFYING INVESTMENT. SUCH SALES-TAX BENEF IT WAS TO BE GIVEN IN SIX EQUAL INSTALMENTS OVER A PERIOD OF SIX YEARS, I.E. 1/6 TH OF THE QUALIFYING INVESTMENT AMOUNT EVERY YEAR ON THE CONDITION THAT THE PLANT SUCCESSFULLY OPERATES EVERY YEAR WITH A MINIMUM OF 12% PLANT LOAD FACTOR. IN TE RMS OF SUCH BROAD FRAMEWORK OF THE SALES-TAX BENEFIT, THE STATE GOVERNMENT ISSU ED SEPARATE DETAILED INSTRUCTIONS ABOUT THE MODUS OPERANDI TO AVAIL SUCH BENEFITS, BY WAY OF GOVERNMENT RESOLUTION DATED 1.10.1999 (SUPRA)S. THE RELEVANT PORTION OF THE SAID RESOLUTION DATED 1.10.1999 IS AS UNDER: PREAMBLE: WITH A VIEW TO ENCOURAGE INSTALLATION OF WIND ENERG Y GENERATOR UNITS, STATE GOVERNMENT HAS PUBLISHED A POLICY VIDE ABOVE MENTIONED GOVERNM ENT RESOLUTION. ACCORDING TO THE SAID POLICY SALES TAX BENEFIT IS AVAILABLE, EQUIVAL ENT TO THE QUALIFYING INVESTMENT ON WIND ENERGY GENERATION PROJECTS. TO AVAIL THE SALES TAX BENEFIT A PROCEDURE HAS BEEN LAID DOWN BY THE FINANCE DEPARTMENT VIDE NOTIFICATION NO. STA 1098/CR-45/TAXATION 2, DA TED 24.8.1998 AND NOTIFICATION NO VKN-1298/CR-33/TAXATION-1 DATED 24.8.1998. HOWEVER, EVEN AFTER RELEASE OF THE SAID NOTIFICATIONS THE INDUSTRIALISTS HAVE EXPRESSED CER TAIN DIFFICULTIES WHICH HAVE BEEN BROUGHT TO THE NOTICE OF THE GOVERNMENT. TAKING INT O CONSIDERATION THE REQUESTS OF THE WIND POWER PROMOTERS AS WELL AS THEIR DIFFICULTIES, THE PROPOSAL FOR MODIFIED DETAILED PROCEDURE FOR AVAILING SALES TAX BENEFIT WAS UNDER CONSIDERATION OF THE GOVERNMENT. GOVERNMENT RESOLUTION : CONSIDERING THE DIFFICULTIES OF THE INDUSTRIALISTS AND WITH A VIEW TO MAKE AVAILABLE SALES TAX BENEFIT, GOVERNMENT HAS DECIDED TO SIMPLIFY THE PROCEDURE AS FOLLOWS: 1. THE SALES TAX BENEFIT WILL BE AVAILABLE ON ELECT RICITY GENERATING UNITS IN RELATION TO ACHIEVEMENT OF PLANT LOAD FACTOR AS FOLLOWS: S.NO. PLANT LOAD FACTOR SALES TAX BENEFIT EQUIVALENT OF 1//6 TH OF QUALIFYING INVESTMENT WITHOUT BANK GUARANTEE WITH BANK GUARANTEE 1 12% 60% 50% 2 13% 70% 60% 3 14% 80% 70% 4 15% 90% 80% 5 16% 100% 90% 6 17% 100% 100% THE SALES TAX BENEFIT CAN BE AVAILED BY ALL PROJECT S WHICH ARE COMMISSIONED AS WELL AS CONNECTED TO THE TRANSMISSION LINES FROM TWO MONTHS AFTER THE DATE OF PUBLICATION OF THE GOVERNMENT RESOLUTION. SALES TAX BENEFIT WILL BE AV AILABLE FOR CONTINUOUS 6 YEARS AFTER OBTAINING THE ENTITLEMENT CERTIFICATE FROM THE SA LES TAX DEPARTMENT. 2. WHILE DETERMINING THE PLANT LOAD FACTOR, THE AVA ILABILITY OF THE TRANSMISSION LINES DURING THE MONTHS FROM MAY TO SEPTEMBER OF THAT FIN ANCIAL YEAR AVERAGE AVAILABILITY OF TRANSMISSION LINES SHALL BE TAKEN INTO CONSIDERA TION AND THIS PERCENTAGE WILL BE INCREASED PROPORTIONATELY TO 100%, AND THEN THE PLA NT LOAD FACTOR WILL BE DETERMINED. FOR EXAMPLE, IF TRANSMISSION LINES AVAI LABILITY IS 85%, THEN THAT YEARS AVERAGE PLANT LOAD FACTOR WILL BE INCREASED PROPORT IONATELY TO CORRESPOND TO 100% AVAILABILITY OF TRANSMISSION LINES AND THE SALES TA X BENEFIT WILL BE INCREASED PROPORTIONATELY. THE AVAILABILITY OF THE TRANSMISSI ON LINES DURING THE MONTHS FROM MAY TO SEPTEMBER OF THAT FINANCIAL YEAR WILL BE DECIDED BY MAHARASHTRA ENERGY DEVELOPMENT AGENCY (MEDA), PUNE. 3. SALES TAX BENEFIT WILL BE AVAILABLE FOR THE PROM OTERS FROM THE DATE OF OBTAINING OR ENTITLEMENT CERTIFICATE, FOR A PERIOD OF CONTINUO US 6 YEARS. AND FOR EVERY YEAR, SUCH BENEFIT WILL BE LIMITED TO 1/6 TH OF THE QUALIFYING INVESTMENT. HOWEVER, IN ANY ONE YEAR, PLANT LOAD FACTOR OF 12% IS NOT ACHIEVED THEN THAT YEARS SALES TAX BENEFIT WILL GET CANCELLED AND THAT UNIT WILL HAVE TO LOSE SALES TAX BENEFIT FOR THAT YEAR FOREVER. ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 13 ANY TWO YEARS SALES TAX BENEFIT WILL NOT BE ALLOWE D TO DEDUCT TOGETHER TO CLAIM IN ONE YEAR. TO AVAIL THE SALES TAX BENEFITS THE PERIOD WI LL BE COUNTED FOR CONTINUOUS 6 (SIX) YEARS. THE FINANCIAL YEAR PERIOD WILL BE FROM 1 ST APRIL TO 31 ST MARCH. 4. THE FACILITY OF TRANSFERRING THE SALES TAX BENEF IT TO THE THIRD PARTY THE PROMOTERS OF THE PROJECT, IF SELL ELECTRICITY T O THE THIRD PARTY, FOR SUCH THIRD PARTY, TRANSFERRING OF SALES TAX BENEFIT WILL BE PERMITTED . THE PROMOTERS OF THE PROJECT CAN CHOOSE THE THIRD PARTY FOR THIS FACILITY AND IT WIL L BE APPLICABLE FOR THAT YEAR ONLY. HOWEVER, NO PERMISSION WILL BE GIVEN DURING THAT PERIOD TO C HANGE THE NAME OF THE THIRD PARTY. THIRD PARTY UNITS CAN AVAIL THE BENEFIT UPTO THE AMOUNT M ENTIONED IN PARAGRAPH 1. FOR THIS, ELIGIBILITY CERTIFICATE WILL BE GIVEN BY DIRECTOR , MAHARASHTRA ENERGY DEVELOPMENT AGENCY. PROMOTERS OF THE PROJECT WILL BE ALLOWED TO CHOOSE, A THE MOST TWO NAMES OF THE THIRD PARTY UNITS TO GET THE SALES TAX BENEFIT. THE ENTITLEMENT CERTIFICATE FOR UNITS OF THIRD PARTY WILL E CERTIFIED BY COMMISSIONER OF SALES TAX . AMOUNT OF SALES TAX BENEFIT IS RELATED TO THE WIND ENERGY GENERATION AND THEY ARE NOT RELA TED TO THE AMOUNT OF ELECTRICITY SOLD TO THE THIRD PARTY. AFTER OBTAINING THE ENTITLEMENT C ERTIFICATE FOR SALES TAX BENEFIT THE PROMOTERS OF THE PROJECT CAN TRANSFER TO THE THIRD PARTY TO WHOM THEY HAVE SOLD THE ELECTRICITY. AMOUNT OF SALES TAX BENEFIT IS RELATED TO THE QUALIFYING INVESTMENT AND PLANT LOAD FACTOR. THE ELECTRICITY SOLD TO THE UNIT/UNITS OF THIRD PARTY CAN AVAIL SALES TAX BENEFIT LIMITED ONLY TO THE QUALIFYING INVESTMENT AND PLANT LOAD FACTOR. THE ELECTRICITY SOLD TO THE UNIT/UNITS OF THIRD PARTY CAN AVAIL SALES TAX BENEF IT LIMITED ONLY TO THE QUALIFYING INVESTMENT AS MENTIONED IN PARAGRAPH 1. 5. AFTER SATISFYING THE CONDITION OF AVERAGE PLANT LOAD FACTOR, SALES TAX BENEFIT CAN BE AVAILED BY THE ELIGIBLE WIND ENERGY GENERATION UNIT IN THE IMMEDIATE FOLLOWING YEAR. HOWEVER, IF SOME PROMOTERS DESIRE TO AVAIL THIS BEN EFIT IN THE CURRENT FINANCIAL YEAR IMMEDIATELY ON COMMISSIONING OF WIND ENERGY PROJECT , THEY CAN AVAIL THE BENEFIT ON THE FOLLOWING CONDITIONS: A) BANK GUARANTEE EQUIVALENT TO QUALIFYING INVESTME NT WILL HAVE TO BE GIVEN EVERY YEAR FOR AVAILING SALES TAX BENEFIT OF FOLLOWING FINANCI AL YEAR. B) IF THE CONDITION OF PLANT LOAD FACTOR IS NOT FUL FILLED, THE BANK GUARANTEE AMOUNT WILL BE FORFEITED AT THE END OF THE YEAR. THE FORFEITED AMO UNT OF BANK GUARANTEE WILL BE TRANSFERRED TO SALES TAX DEPARTMENT BY MAHARASHTRA ENERGY DEVELOPMENT AGENCY. 6. FACILITY TO BULK LICENSEES IF THE BULK LICENSEE HAS INSTALLED WIND ENERGY GENE RATION UNIT, PERMISSION WILL BE GRANTED TO AVAIL BY ADJUSTMENT IN THE TAX ON SALE OF ELECTR ICITY, SALES TAX BENEFIT DETERMINED ON QUALIFYING INVESTMENT IN THE PROJECT. FOR THAT PURP OSE ENTITLEMENT CERTIFICATE WILL BE GIVEN BY ENERGY DEPARTMENT OF GOVERNMENT OF MAHARAS HTRA AND ELIGIBILITY CERTIFICATE WILL BE ISSUED BY MAHARASHTRA ENERGY DEVELOPMENT AG ENCY. 7. IF THE PROMOTERS DO NOT ABIDE BY TERMS AND CONDI TIONS OF MAHARASHTRA ENERGY DEVELOPMENT AGENCY AND SALES TAX DEPARTMENT, THEN T HE DIRECTOR OF MAHARASHTRA ENERGY DEVELOPMENT AGENCY AND COMMISSIONER OF SALES TAX RESERVE THE RIGHT TO CANCEL THE ENTITLEMENT CERTIFICATE AND THE ELIGI BILITY CERTIFICATE. 8. SALES TAX BENEFIT CAN BE AVAILED ON THE FINISHED PRODUCT AS WELL AS ON THE RAW MATERIALS USED AND ITS PROCEDURE SHALL BE AS PER PA CKAGE SCHEME OF INCENTIVE (PSI), 1993 AND AMENDMENT THEREON FROM TIME TO TIME. 9. THE PROMOTER WILL NOT BE ELIGIBLE FOR SALES TAX BENEFIT FOR USE OF SECOND HAND MACHINERY AND ON OLD WIND ELECTRIC GENERATOR. IF SU CH CASES ARE NOTICED, THEN THE DIRECTOR, MAHARASHTRA ENERGY DEVELOPMENT AGENCY HAS RIGHT TO CANCEL ENTITLEMENT CERTIFICATE AND ELIGIBLE CERTIFICATE. 10. THE SITES APPROVED BY MINISTRY OF NON-CONVENTIO NAL ENERGY SOURCES, GOVERNMENT OF INDIA, NEW DELHI WILL BE ELIGIBLE FOR SALES TAX BEN EFIT. THE NO OBJECTION CERTIFICATE WILL BE ISSUED BY MA HARASHTRA ENERGY DEVELOPMENT AGENCY ONLY AFTER SUBMISSION OF UNDERTAKING FROM TH E CONCERNED MANUFACTURER AND PROMOTER THAT THE MACHINERY USED FOR WIND GENERATIO N PROJECT IS NEW. 11. THERE IS NO RESTRICTION FOR EXPANSION OF PROJEC TS. HOWEVER, CAPACITY OF THE WIND ENERGY GENERATOR SHOULD BE MINIMUM 200 KW 12. PROCEDURE FOR AVAILING THE SALES TAX BENEFIT WI LL BE APPLICABLE TO ALL PROJECTS SUCH AS THE WIND ENERGY GENERATOR UNITS/WIND SPV DIESEL HYBRID, SELF STARTING GENERATOR (HYBRID STAND ALONE SYSTEM) AND AS PER MA HARASHTRA GOVERNMENTS DECLARED POLICY PUBLISHED IN THIS CONNECTION. ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 14 BY THE ORDER ANDS ON BEHALF OF GOVERNOR OF MAHARASHTRA SD/- (P.D. KARKHANIS) SECTION OFFICER (ENERGY). 11. AS IS EVIDENT, THE SAID RESOLUTION DEALS WITH T HE MANNER IN WHICH THE INTENDED SALES-TAX BENEFITS CAN BE AVAILED OF BY TH E PROMOTERS. IT IS CLEAR THAT THE SALES-TAX BENEFITS CAN BE AVAILED BY ALL PROJECTS W HICH ARE COMMISSIONED AS WELL AS CONNECTED TO THE TRANSMISSION LINES FROM TWO MON THS AFTER THE DATE OF PUBLICATION OF THE SAID RESOLUTION. IT IS ALSO PRO VIDED THAT THE SALES-TAX BENEFIT IS AVAILABLE ON ELECTRICITY GENERATING UNITS IN RELATI ON TO ACHIEVEMENT OF PLANT LOAD FACTOR. THE PROCEDURAL REQUIREMENT ALSO ENTAILS THA T THE SALES-TAX BENEFIT WILL BE AVAILABLE FOR THE PROMOTERS FROM THE DATE OF OBTAIN ING OF ENTITLEMENT CERTIFICATE FOR A PERIOD OF CONTINUOUS SIX YEARS, AND FOR EVERY YEAR SUCH BENEFIT WILL BE LIMITED TO 1/6 TH OF THE QUALIFYING INVESTMENT. IT IS ALSO PROVIDED THAT IN ANY ONE YEAR, IF PLANT LOAD FACTOR OF 12% IS NOT ACHIEVED, THEN THAT YEARS SALES-TAX BENEFIT WILL GET CANCELLED AND THAT SUCH UNIT WOULD LOOSE S ALES-TAX BENEFIT OF THAT YEAR FOR EVER. ANOTHER PERTINENT PROCEDURE OUTLINED IN THE R ESOLUTION PERMITTED THE FACILITY OF TRANSFERRING THE SALES-TAX BENEFIT TO THIRD PART IES. IN TERMS OF SUCH FACILITY, THE PROMOTERS OF THE PROJECT WERE PERMITTED TO TRANSFER SALES-TAX BENEFIT TO THIRD PARTY, IF IT SOLD ELECTRICITY TO SUCH THIRD PARTY. SUCH T RANSFER WAS SUBJECT TO ISSUANCE OF THE ENTITLEMENT CERTIFICATE TO BE ISSUED BY THE COM MISSIONER OF SALES-TAX. THE SAID RESOLUTION ALSO PROVIDED THAT THE SALES-TAX BE NEFIT CAN BE AVAILED ON THE FINISHED PRODUCT AS WELL AS ON THE RAW MATERIALS US ED. IT IS FURTHER NOTIFIED BY THE STATE GOVERNMENT THAT THE PROMOTER WILL NOT BE ELIG IBLE FOR SALES-TAX BENEFIT FOR USE OF SECOND HAND MACHINERY AND ON OLD WIND ELECTR IC GENERATOR. THE POLICY FURTHER PROVIDED THAT THERE WAS NO RESTRICTION FOR EXPANSION OF PROJECT. HOWEVER, THE MINIMUM CAPACITY OF WIND MILL GENERATION WAS ST ATED TO BE 200 KW. IN TERMS OF THE AFORESAID SCHEME, THE ASSESSEE OBTAINED THE ENTITLEMENT CERTIFICATE AND TRANSFERRED THE SALES-TAX BENEFIT TO A THIRD PARTY. THE ASSESSEE AVAILED THE SALES- TAX BENEFIT FOR ITS WIND POWER PROJECT INSTALLED AT VILLAGE KUSHI (VANKUSAWADE) TAL. SATARA, DIST. SATARA AND SUCH BENEFIT AMOUNTIN G TO RS 63,74,291/- PERTAINING TO THE YEAR UNDER CONSIDERATION HAS BEEN CLAIMED AS A CAPITAL RECEIPT. FACTUALLY SPEAKING, ON THE ASPECT OF THE ASSESSEE HAVING RECE IVED THE SAID AMOUNT IN TERMS OF THE SCHEME OF THE STATE GOVERNMENT AS SALE S-TAX BENEFIT UNDER THE AFORESAID GOVERNMENT RESOLUTIONS, IS NOT IN DISPUTE . 12. IN ORDER TO EXAMINE THE TAXABILITY OF SUCH AMOU NT, IT WOULD BE APPROPRIATE TO REFER TO THE PROPOSITIONS BASED ON THE CASE LAWS REFERRED TO US. IN THE CASE OF SAHNEY STEELS (SUPRA), THE QUESTION BEFORE THE HON BLE SUPREME COURT WAS WHETHER THE SUBSIDY RECEIVED BY THE ASSESSEE THEREI N FROM ANDHRA PRADESH GOVERNMENT WAS TAXABLE AS A REVENUE RECEIPT OR NOT. THE ANDHRA PRADESH GOVERNMENT HAD NOTIFIED CERTAIN FACILITIES AND INCE NTIVES FOR ALL THE NEW INDUSTRIAL UNDERTAKINGS COMMENCING PRODUCTION ON OR AFTER 1.9. 1969 WITH INVESTMENT CAPITAL (EXCLUDING WORKING CAPITAL) NOT EXCEEDING RS 5 CROR ES. THE INCENTIVES WERE TO BE ALLOWED FOR A PERIOD OF FIVE YEARS FROM THE DATE OF COMMENCEMENT OF PRODUCTION AND SUCH CONCESSION WAS ALSO AVAILABLE FOR SUBSEQUE NT EXPANSION OF 50% AND ABOVE OF THE EXISTING CAPACITIES, PROVIDED SUCH EXP ANSION WAS LOCATED IN A CITY OR TOWN OR PANCHAYAT AREA OTHER THAN THAT IN WHICH THE EXISTING UNIT WAS LOCATED. THE HONBLE SUPREME COURT NOTICED THAT THE SALIENT FEATURE OF THE SCHEME FORMULATED BY THE ANDHRA PRADESH GOVERNMENT WAS THA T THE INCENTIVES WERE NOT AVAILABLE UNLESS AND UNTIL PRODUCTION HAD COMMENCED AND THAT THE SAME WAS LIMITED TO A PERIOD OF 5 YEARS FROM THE DATE OF COM MENCEMENT OF PRODUCTION. THE HONBLE SUPREME COURT NOTED THAT ALL THE INCENTIVES ARE PRODUCTION INCENTIVES IN THE SENSE THAT THE COMPANY WOULD BE ENTITLED TO THE SE INCENTIVES ONLY AFTER IT GOES INTO PRODUCTION AND THAT THE SCHEME WAS NOT TO MAKE ANY PAYMENT DIRECTLY OR INDIRECTLY FOR THE SETTING UP OF INDUSTRIES. ON FACTUAL ANALYSIS OF THE SCHEME, IT WAS INFERRED THAT THE SUBSIDIES WERE OPERATIONAL SU BSIDIES, INASMUCH AS THEY WERE GIVEN TO ENCOURAGE SETTING UP OF INDUSTRIES I N THE STATE OF ANDHRA PRADESH BY MAKING THE BUSINESS OF PRODUCTION AND SALE OF GO ODS IN THE STATE MORE PROFITABLE. THE HONBLE SUPREME COURT OBSERVED TH AT THE CHARACTER OF SUBSIDY WHETHER REVENUE OR CAPITAL WILL HAVE TO BE DETERMIN ED, HAVING REGARD TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. THE FOLLOWI NG OBSERVATIONS ARE RELEVANT: ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 15 IF ANY SUBSIDY IS GIVEN, THE CHARACTER OF THE SUBS IDY IN THE HANDS OF THE RECIPIENT WHETHER REVENUE OR CAPITAL WILL HAVE TO BE DETE RMINED BY HAVING REGARD TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. IF IT IS GI VEN Y WAY OF ASSISTANCE TO THE ASSESSEE IN CARRYING ON OF HIS TRADE OR BUSINESS, IT HAS TO E TREATED AS TRADING RECEIPT. THE SOURCE OF THE FUND IS QUITE IMMATERIAL. FOR EXAMPLE, IF THE SCHEME WAS THAT THE ASSESSEE WI LL BE GIVEN REFUND OF SALES TAX ON PURCHASE OF MACHINERY AS WELL AS ON RAW MATE RIALS TO ENABLE THE ASSESSEE TO ACQUIRE NEW PLANT AND MACHINERY FOR FURTHER EXPANSI ON OF ITS MANUFACTURING CAPACITY IN A BACKWARD AREA, THE ENTIRE SUBSIDY MUST BE HELD TO B E A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. IT WILL NOT BE OPEN TO THE REVENUE TO CON TEND THAT THE REFUND OF SALES TAX PAID ON RAW MATERIALS OR FINISHED PRODUCTS MUST BE TREAT ED AS REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE. IN BOTH THE CASES, THE GOVERNMENT IS PAYING OUT OF PUBLIC FUNDS TO THE ASSESSEE FOR A DEFINITE PURPOSE. IF THE PURPOSE IS TO HELP THE ASSESSEE TO SET UP ITS BUSINESS OR COMPLETE A PROJECT AS IN SEAHAM HARBOUR DOCK CO.S CASE (1931) 16 TC 333 (HL), THE MONIES MUST BE TREATED AS HAVING BEEN REC EIVED FOR A CAPITAL PURPOSE. BUT IF MONIES ARE GIVEN TO THE ASSESSEE FOR ASSISTING HIM IN CARRYING OUT THE BUSINESS OPERATION AND THE MONEY IS GIVEN ONLY AFTER AND CONDITIONAL U PON COMMENCEMENT OF PRODUCTION, SUCH SUBSIDIES MUST BE TREATED AS ASSISTANT FOR THE PURPOSE OF THE TRADE.. IN THE CASE BEFORE US, THE SUBSIDIES HAVE NOT BEEN GRANTED FOR PRODUCTION OR FOR BRINGING INTO EXISTENCE ANY NEW ASSET. THE SUBSIDIE S WERE GRANTED YEAR AFTER YEAR ONLY AFTER SETTING UP OF THE NEW INDUSTRY AND COMMENCEME NT OF PRODUCTION. SUCH A SUBSIDY COULD ONLY BE TREATED AS ASSISTANCE GIVEN FOR THE P URPOSE OF CARRYING ON OF THE BUSINESS OF THE ASSESSEE. APPLYING THE TEST OF VISCOUNT SIMO N IN THE CASE OF OSTIME (1946) 14 ITR (SUPPL) 45 (HL), IT MUST BE HELD THAT THESE SUBSIDI ES ARE OF REVENUE CHARACTER AND WILL HAVE TO BE TAXED ACCORDINGLY. 13. ANOTHER DECISION WHICH HAS BEEN REFERRED TO IS THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD. (SUPRA). IN THIS CASE ALSO, THE ISSUE RELATED TO THE CHARACTER OF SUBSIDY RECEIVED BY SUGAR FACTORIES . THE HONBLE SUPREME COURT REITERATED TH E PARAMETERS APPLIED IN THE EARLIER JUDGMENT OF SAHNEY STEEL (SUPRA). AS PER TH E HONBLE SUPREME COURT, THE CHARACTER OF THE RECEIPT OF A SUBSIDY IN THE HANDS OF THE RECIPIENT HAS TO BE DETERMINED WITH REGARD TO THE PURPOSE FOR WHICH THE SUBSIDY HAS BEEN GRANTED. THE FOLLOWING DISCUSSION IS IMPORTANT TO NOTICE: ON THE FACTS OF THAT CASE, IT WAS HELD THAT THE SU BSIDY GIVEN WAS TO MEET RECURRING EXPENSES. IT WAS NOT FOR ACQUIRING THE CAPITAL ASSE T. 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 6 AF TER SETTING UP OF THE NEW INDUSTRY AND ONLY AFTER COMMENCEMENT OF PRODUCTION AND, THEREFOR E, SUCH A SUBSIDY COULD ONLY BE TREATED AS ASSISTANCE GIVEN FOR THE PURPOSE OF CARR YING ON THE BUSINESS OF THE ASSESSEE. CONSEQUENTLY THE CONTENTIONS RAISED ON BEHALF OF TH E ASSESSEE ON THE FACTS OF THAT CASE STOOD REJECTED AND IT WAS HELD THAT THE SUBSIDY REC EIVED BY SAHNEY STEEL COULD NOT BE REGARDED AS ANYTHING BUT A REVENUE RECEIPT. ACCORDI NGLY, THE MATTER WAS DECIDED AGAINST THE ASSESSEE. THE IMPORTANCE OF THE JUDGMENT OF THI S COURT IN SAHNEY STEEL CASE LIES IN THE FACT THAT IT HAS DISCUSSED AND ANALYSED THE ENT IRE CASE LAW AND IT HAS LAID DOWN THE BASIC TEST TO BE APPLIED IN JUDGING THE CHARACTER O F A SUBSIDY. THAT TEST IS THAT THE CHARACTER OF THE RECEIPT IN THE HANDS OF THE ASSESS EE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. IN O THER WORDS, IN SUCH CASES, ONE HAS TO APPLY THE PURPOSE TEST. THE POINT OF TIME AT WHICH THE SUBSIDY IS PAID IS NOT RELEVANT. THE SOURCE IS IMMATERIAL. THE FORM OF SUBSIDY IS IMMATE RIAL. THE MAIN ELIGIBILITY CONDITION IN THE SCHEME WITH WHICH WE ARE CONCERNED IN THIS CASE IS THAT THE INCENTIVE MUST BE UTILIZED FOR REPAYMENT OF LOANS TAKEN BY THE ASSES SEE TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF EXISTING UNITS. ON THIS AS PECT THERE IS NO DISPUTE. IF THE OBJECT OF THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO RU N THE BUSINESS MORE PROFITABLY THEN THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAN D, IF THE OBJECT OF THE ASSISTANCE UNDER THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT THEN THE RECEIPT OF THE SUBSIDY W AS ON CAPITAL ACCOUNT. THEREFORE, IT IS THE OBJECT FOR WHICH THE SUBSIDY/ASSISTANCE IS GIVEN WH ICH DETERMINES THE NATURE OF THE INCENTIVE SUBSIDY. THE FORM OR THE MECHANISM THROUG H WHICH THE SUBSIDY IS GIVEN ARE IRRELEVANT ONE MORE ASPECT NEEDS TO BE MENTIONED. IN SAHNEY S TEEL AND PRESS WORKS LTD. THIS COURT FOUND THAT THE ASSESSEE WAS FREE TO USE THE MONEY IN ITS BUSINESS ENTIRELY AS IT LIKED. IT WAS NOT OBLIGED TO SPEND THE MONEY FOR A PARTICULAR PURPOSE. IN THE CASE OF SEAHAM HARBOUR DOCK CO. THE ASSESSEE WAS OBLIGED TO SPEND THE MONEY FOR EXTENSION OF ITS DOCKS. THIS ASPECT IS VERY IMPORTANT. IN THE PRESENT CASE ALSO, RECEIPT OF THE SUBSIDY WAS CAPITAL IN NATURE AS THE ASSESSEE WAS OBLIGED T O UTILIZE THE SUBSIDY ONLY FOR ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 16 REPAYMENT OF TERM LOANS UNDERTAKEN BY THE ASSESSEE FOR SETTING UP NEW UNITS/EXPANSION OF EXISTING BUSINESS. APPLYING THE ABOVE TESTS TO THE FACTS OF THE PRESE NT CASE AND KEEPING IN MIND THE OBJECT BEHIND THE PAYMENT OF THE INCENTIVE SUBSIDY, WE ARE SATISFIED THAT SUCH PAYMENT RECEIVED BY THE ASSESSEE UNDER THE SCHEME WAS NOT I N THE COURSE OF A TRADE BUT WAS OF CAPITAL NATURE. 14. ANOTHER DECISION RELIED UPON BY THE APPELLANT I S IN THE CASE OF RELIANCE INDUSTRIES LTD. (SUPRA). IN THIS CASE, THE FACTS WE RE THAT THE PATALGANGA UNIT OF THE ASSESSEE WAS LOCATED IN A NOTIFIED BACKWARD AREA. T HE SALES-TAX LIABILITY OF THE ASSESSEE WAS EXEMPTED BY THE STATE GOVERNMENT AND U NDER THE SCHEME OF INCENTIVES, ASSESSEE WAS NOT REQUIRED TO PAY ANY SA LES-TAX TO THE GOVERNMENT. THE CONTENTION OF THE ASSESSEE WAS THAT NON-PAYMENT OF SALES-TAX BE CONSIDERED AS A SUBSIDY BY THE GOVERNMENT, WHICH IS OF CAPITAL IN NATURE. THE SPECIAL BENCH OF THE TRIBUNAL FOUND THAT THE INCENTIVES WERE PROV IDED FOR FOLLOWING FOUR OBJECTS, NAMELY, DEVELOPMENT OF BACKWARD REGIONS OF THE STAT E OF MAHARASHTRA; DISPERSAL OF INDUSTRIES; PROMOTION OF INDUSTRIES FOR EMPLOYME NT ORIENTED UNITS; AND, PROVIDING LOCAL EMPLOYMENT TO SC/ST. THE TRIBUNAL OBSERVED THAT IN ORDER TO DECIDE THE CHARACTER OF RECEIPT THE PURPOSE OF GRAN TING SUBSIDY WAS RELEVANT, WHILE THE MODE OF PAYMENT AND THE APPLICATION OF MO NEY FOR CAPITAL OR REVENUE PURPOSES WAS IRRELEVANT. THEREFORE, AS PER THE SPEC IAL BENCH THE DECISIVE FACTOR WAS THE OBJECTS WITH WHICH THE INCENTIVE WAS GIVEN AND, THEREFORE, SUCH SUBSIDY WAS HELD TO BE A CAPITAL RECEIPT. THE SAID DECISION HAS ALSO BEEN FURTHER APPROVED BY THE HONBLE HIGH COURT VIDE ORDER DATED 15.4.2009 (SUPRA). THE HONBLE HIGH COURT APPLIED THE PURPOSE TEST AND FOU ND THAT THE OBJECT OF THE SUBSIDY BEING TO SET UP UNITS IN BACKWARD AREAS FOR GENERATION OF EMPLOYMENT, COULD CONSTRUE THE SUBSIDY AS A CAPITAL RECEIPT. 15. ON THE BASIS OF THE AFORESAID DECISIONS AN UNDI SPUTED PREMISE WHICH CAN BE DEDUCED IS THAT IN ORDER TO DETERMINE THE CHARAC TER OF THE IMPUGNED RECEIPT WHETHER CAPITAL OR REVENUE, THE SAME HAS TO BE DEC IDED IN THE LIGHTS OF THE OBJECTS AND PURPOSE FOR WHICH THE SCHEME HAS BEEN F ORMULATED BY THE STATE GOVERNMENT. IT IS QUITE CLEAR THAT THE POINT OF TIM E AT WHICH THE SUBSIDY IS PAID OR THE FORM OF INCENTIVE GRANTED UNDER A SCHEME ARE IM MATERIAL CONSIDERATIONS. IN A CASE WHERE THE SUBSIDY/INCENTIVE UNDER A SCHEME IS GRANTED TO ENCOURAGE SETTING UP OF NEW INDUSTRIES THE SAME IS LIABLE TO BE CHARACTERIZED AS A CAPITAL RECEIPT, WHILE AN INCENTIVE/SUBSIDY GRANTED IN THE COURSE OF TRADE FOR THE PURPOSE OF CARRYING ON THE BUSINESS OF THE ASSESSEE, THE SA ME IS LIABLE TO BE REGARDED AS A REVENUE RECEIPT. 16. IN THIS BACKGROUND, WE MAY NOW REVERT BACK AND EXAMINE THE SCHEME UNDER WHICH THE ASSESSEE HAS AVAILED OF THE SALES-T AX BENEFIT. IN THE PRESENT CASE, AS NOTED EARLIER, THE STATE GOVERNMENT VIDE ITS RESOLUTION DATED 12.3.1998 MODIFIED ITS EXISTING POLICY FOR THE PURP OSES OF PROMOTING WIND ENERGY GENERATION IN THE STATE OF MAHARASHTRA. THIS POLICY HAS BEEN FORMULATED IN THE BACKGROUND OF THE FACT THAT THE EARLIER POLICY OF T HE STATE GOVERNMENT ON GENERATION THROUGH NON CONVENTIONAL SOURCES IN JANU ARY, 1996 DID NOT ACHIEVE THE DESIRED RESULTS. IN THE SAID POLICY, NINE DIFFE RENT INCENTIVES HAVE BEEN LAID OUT, WHICH HAVE BEEN EXTRACTED BY US IN EARLIER PART OF THIS ORDER. THE DISPUTE BEFORE US IS IN RELATION TO THE SALES-TAX BENEFITS. THE PR EAMBLE OF THE POLICY ITSELF REFLECTS THE AREA WHICH IS SOUGHT TO BE ADDRESSED BY THE POL ICY WHICH IS THE PROBLEMS BEING FACED BY PROMOTERS OF WIND ENERGY GENERATION . IT IS QUITE CLEAR THAT THE SALES-TAX BENEFIT IS NOT INTENDED TO BE GRANTED FOR CREATION OF OR BRINGING INTO EXISTENCE ANY NEW ASSET. IT IS ALSO CLEAR THAT THER E IS NO PRESCRIBED CRITERIA AS TO THE MANNER IN WHICH SUCH INCENTIVES ARE TO BE UTILI ZED. THE CLAIM OF THE ASSESSEE IS THAT THE SALES-TAX BENEFIT IS GRANTED HAVING REG ARD TO THE QUALIFYING INVESTMENT, WHICH IS STATED TO BE TOWARDS INVESTMENTS IN PLANT AND MACHINERY, NEW BUILDING, LAND DEVELOPMENT, TECHNICAL DEVELOPMENT AND DESIGN OF WIND PRODUCTS. ACCORDING TO THE APPELLANT, THE INCENTIVE BEING LIN KED TO THE QUALIFYING INVESTMENT SHOWS THAT IT IS INTENDED AS A RECOUPMENT OF THE FI XED COST ALREADY INCURRED BY THE ASSESSEE AND, THEREFORE, SUCH INCENTIVES ARE TO BE REGARDED AS CAPITAL IN NATURE. IN OUR CONSIDERED OPINION, SUCH PURPOSE, A S ARTICULATED ON BEHALF OF THE APPELLANT IS NOT EMERGING FROM THE SCHEME OF THE ST ATE GOVERNMENT. RATHER, ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 17 THE EMPHASIS ON OF THE GRANT OF SALES-TAX BENEFIT I S ON ACTUAL RUNNING OF THE PLANT AND THAT TOO UNDER PRESCRIBED EFFICIENCY LEVELS. IN FACT, IN THE RESOLUTION DT 1.10.1999 STAGGERED PLANT LOAD FACTORS ACHIEVED BY THE UNIT ENTITLED THE UNIT TO VARYING LEVELS OF SALES-TAX BENEFIT. THEREFORE, I T COULD NOT BE SAID THAT THE SALES- TAX BENEFIT IS AVAILABLE MERELY ON COMMENCEMENT OF GENERATION. WE ARE CONSCIOUS THAT MERE TIMING OF THE GRANT OF SUBSIDY IS NOT RELEVANT. HOWEVER, IN THE PRESENT CASE, IT IS NOT THE TIMING OF THE SUBSI DY ALONE BUT THE GRANT IS LINKED TO ACHIEVING OPERATIONAL EFFICIENCIES AND THAT TOO FOR ONLY SIX CONTINUOUS YEARS. IF A UNIT WHICH IS OTHERWISE ELIGIBLE FOR INCENTIVE, DOE S NOT ACHIEVE THE PLANT LOAD FACTOR OF 12% OR ABOVE, IT WOULD NOT BE ENTITLED TO RECEIVE THE SALES TAX BENEFIT. THEREFORE, IN OUR CONSIDERED OPINION, THOUGH THE OB JECT OF THE SCHEME IS TO PROMOTE GENERATION OF ENERGY THROUGH NON CONVENTION AL SOURCES BUT THE SAME IS SOUGHT TO BE ACHIEVED BY THE GOVERNMENT IN THE FORM OF SUPPORTING THE UNITS TO PERFORM MORE EFFICIENTLY AND PROFITABLY. 17. IN FACT THE HONBLE SUPREME COURT IN THE CASE O F PONNI SUGARS & CHEMICALS LTD. (SUPRA) CLEARLY NOTED THAT THE SUBSI DY RECEIVED THEREIN WAS TO BE UTILIZED ONLY FOR REPAYMENT OF TERM LOANS TAKEN BY THE ASSESSEE FOR SETTING UP NEW UNITS/EXPANSION OF EXISTING BUSINESS. IN THE PR ESENT CASE, THERE IS NO SUCH RESTRICTION OR OBLIGATION ON THE PART OF THE ASSESS EE TO UTILIZE THE INCENTIVES AVAILED. IN FACT, ON THIS ASPECT THE INSTANT SCHEME IS AKIN TO THE SCHEME NOTED BY THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STE ELS (SUPRA) WHEREIN THE ASSESSEE WAS FOUND FREE TO USE THE MONEY IN ITS BUS INESS ENTIRELY AS IT LIKED. IN THE PRESENT CASE ALSO, THE ASSESSEE IS NOT OBLIGED TO SPEND THE MONEY FOR ANY PARTICULAR PURPOSE. THUS, APPLYING THE PURPOSE TEST TO THE FACTS OF THE PRESENT CASE AND KEEPING IN MIND THE OBJECTS BEHIND THE PAY MENT OF INCENTIVE SUBSIDY, WE ARE SATISFIED THAT THE SALES-TAX BENEFITS RECEIV ED BY THE ASSESSEE UNDER THE INSTANT SCHEME ARE IN THE COURSE OF CARRYING ON ITS TRADE MORE PROFITABLY AND THEREFORE SUCH RECEIPT CANNOT BE CHARACTERIZED AS C APITAL IN NATURE. THUS, THE ASSESSEE FAILS ON THIS GROUND. 20. THE ISSUE ARISING BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN RASIKLAL M. DHARIWAL (HUF) VS. DCIT (SUPRA) AND FOL LOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE ASSESSEE IS NOT ENTITLE D TO THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT ON THE SALES TAX BENE FIT / ENTITLEMENT RECEIVED BY THE ASSESSEE FROM THE GOVT. OF MAHARASHTRA. THUS, THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS DISMISSED. 21. NOW, COMING TO THE ISSUES RAISED BY THE REVENUE IN RELATION TO THE ELIGIBILITY OF CLAIM OF DEDUCTION UNDER SECTION 80I A(5) OF THE ACT. THE PROVISIONS OF SECTION 80IA(2) OF THE ACT ARE CLEAR AS TO THE O PTION OF THE ASSESSEE TO CHOOSE THE INITIAL ASSESSMENT YEAR, IN ORDER TO CLAIM DEDU CTION. THE STATUTE GIVES SAID OPTION TO THE ASSESSEE TO CHOOSE INITIAL ASSESSMENT YEAR, WHICH MAY BE DIFFERENT FROM THE YEAR IN WHICH THE OPERATIONS OF THE BUSINE SS HAVE INITIATED. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAD OPTED TO CHOO SE INITIAL ASSESSMENT YEAR FROM ASSESSMENT YEAR 2007-08 AND HAD CLAIMED THE DE DUCTION UNDER SECTION ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 18 80IA OF THE ACT FROM THE SAID YEAR AND IN THE SUBSE QUENT YEARS. IN THE YEAR UNDER APPEAL, THE ASSESSEE HAD CLAIMED THE SAID DED UCTION UNDER SECTION 80IA OF THE ACT. THE OBJECTION OF THE ASSESSING OFFICER IN THIS REGARD WAS THAT BEFORE ALLOWING THE DEDUCTION UNDER SECTION 80IA OF THE AC T, THE LOSSES, IF ANY INCURRED BY THE ASSESSEE IN THE YEARS WHICH WERE PRIOR TO TH E INITIAL ASSESSMENT YEAR, HAVE TO BE ADJUSTED AGAINST THE PROFITS OF UNDERTAK ING, IRRESPECTIVE OF THE FACT THAT WHETHER THE SAID LOSSES HAVE BEEN ADJUSTED AGAINST OTHER INCOME OF THE UNDERTAKING IN THE RESPECTIVE ASSESSMENT YEARS. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE PUNE BENCH OF TRIBUNAL IN POONAWALA ESTA TE STUD & AGRO FARM (P) LTD. VS. ACIT (SUPRA), WHEREIN IT WAS HELD THAT THE INITIAL YEAR IS THE YEAR WHEN THE ASSESSEE CHOOSES TO EXERCISE HIS OPTION TO CLAI M DEDUCTION UNDER SECTION 80IA(5) OF THE ACT. 22. FURTHER, MUMBAI BENCH OF TRIBUNAL IN SHEVIE EXP ORTS VS. JCIT (SUPRA) HELD THAT IN TERMS OF PROVISIONS OF SECTION 80IA(5) OF THE ACT, IT IS ONLY LOSS INCURRED IN INITIAL YEAR THAT HAS TO BE CARRIED FOR WARD AND ADJUSTED AGAINST PROFITS OF SUBSEQUENT ASSESSMENT YEARS, FOR THE PURPOSE OF COMPUTING AMOUNT OF DEDUCTION UNDER SECTION 80IA OF THE ACT. IT WAS AL SO HELD THAT THE OPTION OF CHOOSING INITIAL ASSESSMENT YEAR WAS WHOLLY UPON TH E ASSESSEE IN POST AMENDMENT PERIOD I.E. AFTER 01.04.2000 BY VIRTUE OF SECTION 80IA(2) OF THE ACT. THE TRIBUNAL FURTHER HELD THAT THE LOSS INCURRED PR IOR TO INITIAL ASSESSMENT YEAR WAS NOT REQUIRED TO BE NOTIONALLY CARRIED FORWARD A ND ADJUSTED WITHIN THE MEANING OF SECTION 80IA(5) OF THE ACT SO AS TO DISALLOW PAR T OF DEDUCTION CLAIMED. 23. THE ISSUE ARISING BEFORE US IS IDENTICAL TO THE ISSUE BEFORE MUMBAI BENCH OF TRIBUNAL SHEVIE EXPORTS VS. JCIT (SUPRA) AND FOL LOWING THE SAME PARITY OF REASONING, WE HOLD THAT WHERE THE ASSESSEE HAD EXER CISED THE OPTION OF CHOOSING INITIAL ASSESSMENT YEAR, THE SAME CANNOT B E OBJECTED TO AND ALSO THE LOSSES, IF ANY INCURRED IN THE INITIAL YEAR AND THE REAFTER HAVE TO BE CARRIED FORWARD AND ADJUSTED AGAINST THE PROFITS OF SUBSEQUENT YEAR S. THE LOSSES INCURRED PRIOR ITA NOS.1250 & 1469/PN/2013 M/S. PARANJAPE METAL SHAPERS PVT. LTD. 19 TO THE INITIAL ASSESSMENT YEAR ARE NOT REQUIRED TO BE NOTIONALLY CARRIED FORWARD AND ADJUSTED WITHIN THE MEANING OF SECTION 80IA(5) OF THE ACT. IN VIEW THEREOF, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS BOTH THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 24. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 19 TH DAY OF AUGUST, 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) # / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 19 TH AUGUST, 2015 . GCVSR/SUJEET ' ( )*+, -,* / COPY OF THE ORDER IS FORWARDED TO : THE APPELLANT; THE RESPONDENT; ) ) * () THE CIT(A)-V, PUNE; ) ) * / THE CIT-V, PUNE; -./ 00 12, ) 12, 4 / DR B, ITAT, PUNE; /56 7 / GUARD FILE. '% / BY ORDER - 0 // TRUE COPY // 89: 0 ; 1< / SR. PRIVATE SECRETARY ) 12 , ITAT, PUNE