The Asstt.Comm.of Income Tax,Wardha Circle, Wardha V. M/s. Raj Agro Industries, Wardha

ITA 127/NAG/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9656 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 31-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D P T IWARI
• Assessee Lawyers: M MANI
• Keywords: Capital asset

Judgement Text

ITA NO 127/NAG/2010 RAJ AGRO INDUSTRIES, WARDHA IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH , NAGPUR BEFORE: SHRI P.K. BANSAL , ACCOUNTANT MEMBER AND SHRI D.T. GARASIA , JUDICIAL MEMBER ITA NO. 127 / NAGPUR / 20 10 ASSESSMENT YEAR : 2007 - 08 ACIT, WARDHA CIRCLE WARDHA VS. RAJ A GRO INDUSTRIES WARDHA (APPELLANT) (RESPONDENT) PAN NO.AAFFR 3039K APPELLANT BY: SHRI D.P. TIWARI, JCIT RESPONDENT BY: SHRI M. MANI, ADVOCATE DATE OF HEARING: 15.10.2012 DATE OF PRONOUNCEMENT: 16.10.2012 ORDER PER P.K. BANSAL, ACCOUNTANT MEMBER: - THI S APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.11,51,521/ - BY NOT TR EATING THE RECEIPT AS A REVENUE RECEIPT AND IGNORING THE FACT THAT THE ASSESSEE HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THE SUBSIDY HAS NEXUS WITH CAPITAL INVESTMENT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A MANUFACTURER OF TH E DAL. THE ASSESSING OFFICER NOTED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS RECEIVED A SPECIAL CAPITAL INCENTIVE OF RS.11,51,521/ - FROM GOVERNMENT OF MAHARASHTRA UNDER THE PACKAGE SCHEME OF INCENTIVE, 2001. THE ASSESSEE HAS D EDUCTED THE AMOUNT FROM OPENING WRITTEN DOWN VALUE OF THE CONCERNED FIXED ASSETS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INCENTIVE WAS A REVENUE RECEIPT. ITA N O127/NAG/2010 RAJ AGRO INDUSTRIES, WARDHA 2 3. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) DELETED THE ADDITION IN VIEW OF THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF PONNI SUGAR AND CHEMICALS LTD. 306 ITR 392 BY OBSERVING AS UNDER: I HAVE PERUSED THE FACTS OF THE CASE, THE STAND TAKEN BY THE A.O. IN THE ASSESSMENT ORDER, THE GROUNDS OF APPEAL AND THE WRITT EN SUBMISSIONS MADE BY THE APPELLANT. IT IS SEEN THAT THE GOVERNMENT OF MAHARASHTRA HAS SPECIFICALLY PASSED AN ORDER DATED 3.5.2002 IN THE CASE OF THE APPELLANT WHEREIN THE ASSETS OTHER THAN LAND HAVE BEEN TAKEN AS A BASIS FOR GRANTING A SPECIAL CAPITAL I NCENTIVE. IT IS COMPUTED IN THE ORDER THAT THE TOTAL CAPITAL OUTLAY, OTHER THAN LAND, IS AT RS.46,06,085/ - AND ON THAT BASIS THE MAXIMUM ENTITLEMENT OF SPECIAL CAPITAL INCENTIVE HAS BEEN DETERMINED AT RS.11,51,521/ - , WHICH IS 25% OF THE CAPITAL OUTLAY. T HIS ORDER OF THE GOVERNMENT OF MAHARASHTRA HAS BEEN ISSUED UNDER THE SPECIAL CAPITAL INCENTIVE UNDER PSI - 1993 SCHEME. THIS ASPECT HAS ALSO BEEN NOTED BY A.O. IN THE ASSESSMENT ORDER. ALTHOUGH THE ORDER OF SANCTION OF CAPITAL INCENTIVE WAS DATED 3.5.2002, THE SAME WAS RECEIVED BY THE APPELLANT DURING THE F.Y. 2006 - 07. APPELLANT HAS RELIED UPON EXPLANATION 10 OF SECTION 43 OF THE I.T. ACT WHICH READS AS UNDER: WHERE A PORTION OF THE COST OF AN ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIR ECTLY BY CENTRAL GOVT. OR STATE GOVT. OR ANY AUTHORITY ESTABLISHED UNDER ANY LAW IN THE FORM OF SUBSIDY OR GRANT OR REIMBURSEMENT THEN, SO MUCH OF COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL COST OF AS SET TO THE ASSESSEE. BASED ON THE ABOVE PROVISION, THE ASSESSEE HAS DEDUCTED THE SUBSIDY AMOUNT OF RS.11,51,521/ - FROM THE COST OF THE ASSETS. ON A CAREFUL EXAMINATION OF THE FACTS OF THE CASE AND THE METHODOLOGY FOLLOWED BY THE APPELLANT WITH REGARD TO THE TREATMENT GIVEN TO THE IN HIS BOOKS OF ACCOUNTS, I FIND THAT THERE WAS NO CASE TO TREAT THE RECEIPT OF RS.11,51,521/ - AS A REVENUE RECEIPT. A.O. HAS TAKEN A STAND IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT ESTABLISHED THAT THE SUBSIDY RECEIPT HAS ANY NEXUS WITH THE CAPITAL INVESTMENT. THE ORDER OF THE GOVERNMENT OF MAHARASHTRA CLEARLY STATES THAT THE SPECIAL CAPITAL INCENTIVE IS WITH REFERENCE TO THE CAPITAL OUTLAY MADE BY THE APPELLANT IN ASSETS, OTHER THAN LAND, WHICH IS SHOWN AT 25% OF THE VALUE OF THE CAPITAL ASSETS. THE PURPOSE TEST LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF PONNI SUGAR AND CHEMICALS LTD. (306 ITR 392) IS CLEARLY ESTABLISHED IN FAVOUR OF THE APPELLANT. THEREFORE, I HEREBY DIRECT THE A.O. TO RESTORE THE METHODO LOGY FOLLOWED BY THE APPELLANT WITH REGARD TO THE TREATMENT OF THE SPECIAL CAPITAL INCENTIVE AND ACCORDINGLY RE - COMPUTE THE INCOME. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. IN OUR OPINION, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE CIT(A). CIT(A) CLEARLY OBSERVED THAT THE INCENTIVES HAVE BEEN RECEIVED BY THE ASSESSEE UNDER THE SPECIAL CAPITAL INCENTIVE SCHEME OF GOVERNMENT OF MAHARASHTRA PSI - 1993 SCHEME. THIS ITA N O127/NAG/2010 RAJ AGRO INDUSTRIES, WARDHA 3 INCENTIVE IS WITH REFERENCE TO THE CAPITAL OUTLAY MADE BY THE ASSESSEE IN ASSETS OTHER THAN LAND WHICH IS SHOWN AND IS AVAILABLE @ 25% OF THE VALUE OF CAPITAL ASSETS. NO CONTRARY EVIDENCE OR COGENT MATERIAL HAS BEEN FILED BEFORE US WHICH MAY COMPEL US TO TAKE A DIFFERENT VIEW. SINCE THE SUBSIDY HAS BEEN GIVE N UNDER THE SPECIAL CAPITAL INCENTIVE SCHEME AND IS RELATED WITH THE INVESTMENT IN THE CAPITAL ASSETS, THEREFORE, IN OUR OPINION, THERE IS NO ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A) AS THE PURPOSE OF THE SUBSIDY IS CAPITAL IN NATURE. WE, THEREF ORE, CONFIRM THE ORDER OF THE CIT(A). 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 1 6.10 .20 1 2 SD/ - SD/ - ( D.T. GARASIA ) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS NAGPUR DATED 1 6 TH OCTOBER , 20 1 2 COPY TO 1 ACIT, WARDHA CIRCLE, WARDHA, BAJAJ BUILDING, KRISHNA NAGAR, WARDHA 2 M/S. RAJ AGRO INDUSTRIES, SURVEY NO.8/12, UBDA, TQ. SAMUDRAPUR, DIST. WARDHA. 3 CIT - 2, NAGPUR 4 THE CIT (A) , NAGP UR 5 THE DR, ITAT, NAGPUR 6 GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL NAGPUR