DCIT, Central Circle - XXI, Kolkata, Kolkata V. M/s. Ankit India Ltd., Kolkata

ITA 1330/KOL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 5506 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2010
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 25-06-2010
• Court: TRIBUNAL
• Department Lawyers: B R PURAKAYASTHA
• Assessee Lawyers: S K TULSIYAN
• Keywords: Capital asset; Capital receipt
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA () BEFORE . . . . . . . . , , , , !'# !'# !'# !'# /AND . .. . . .. .' '' ' , $ [BEFORE HONBLE SRI D. K. TYAGI, JM & HONBLE SRI C. D. RAO, AM] #% #% #% #% / I.T.A NO. 1330/KOL/2010 &'( ')* &'( ')* &'( ')* &'( ')*/ // / ASSESSMENT YEAR : 2004-05 DEPUTY COMMISSIONER OF INCOME-TAX, -VS- M/S. ANKI T INDIA LTD. CIRCLE-XXI, KOLKATA. (PA NO.AADCA 2518 H ) (,- / APPELLANT ) (.,-/ RESPONDENT ) FOR THE APPELLANT: SRI B. R. PURAKAYASTHA FOR THE RESPONDENT : SRI S. K. TULSIYAN / / ORDER PER D. K. TYAGI, JM ( . . . . . . . . , , , , ) THE APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGA INST THE ORDER OF THE LD. CIT(A), KOLKATA DATED 22.12.2009 FOR THE ASSESSMENT YEAR 2 004-05 ON THE SOLE GROUND OF DELETING THE ADDITION OF RS.41,49,365/- MADE ON ACCOUNT OF REMIS SION OF SALES TAX ON FINISHED GOODS 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS ENGAGED IN THE PRODUCTION OF WHEAT PRODUCTS VIZ. ATTA, MAIDA, SUJI AND BRAN. THE ASSESSEE FILED ITS RETURN OF INCOME ON 1.11.2004 DISCLOSING A TOTAL INCOME OF RS.57,48, 960/-. THE ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 29.12.2006 AT A N ASSESSED INCOME OF RS.1,82,06,720/- WHICH, INTER ALIA, INCLUDED THE AD DITION OF RS.41,49,365/- AS SALES TAX REMISSION TREATED AS INCOME. SO FAR AS THIS ADDITI ON IS CONCERNED, THE ASSESSEE HAS CLAIMED THE SALES TAX REMISSION OF THE SAID AMOUNT TO BE CAPITAL IN NATURE AND HAS ACCORDINGLY CREDITED THE SAME TO THE CAPITAL RESERV E OF THE COMPANY. THE ASSESSEE EXPLAINED THAT THE SAID REMISSION OF SALES TAX HAS BEEN GRANTED BY THE GOVT. OF WEST BENGAL UNDER WEST BENGAL INCENTIVE SCHEME FOR PROMO TION OF THE INDUSTRIALIZATION OF THE BACKWARD AREAS OF THE STATE. THE INCENTIVES W ERE GIVEN FOR SETTING UP OR EXPANSION OF THE EXISTING UNITS AND, THEREFORE, IN CAPITAL FI ELD AND HENCE NOT INCLUDIBLE AS REVENUE RECEIPT/INCOME. IN SUPPORT OF ITS CLAIM, THE ASSESS EE RELIED ON SEVERAL JUDICIAL PRONOUNCEMENTS AS LISTED ON PAGE 2 OF THE ASSESSMEN T ORDER. IT WAS FURTHER STATED THAT 2 THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F SAHNEY STEEL & PRESS WORKS LTD. VS. CIT 228 ITR 253 IS NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE INASMUCH AS THE COMPANY HAS NOT RECEIVED ANY S UBSIDY AND ONLY THERE HAS BEEN REMISSION OF THE LIABILITY TO PAY SALES TAX. THE A SSESSING OFFICER EXPLAINING THE MEANING OF NEW UNIT IN THE SCHEME HAS HELD THAT T HE ASSESSEES CLAIM THAT THE PURPOSE FOR GIVING HIS INCENTIVE IS FOR SETTING UP OR EXPANSION OF THE EXISTING UNITS, WAS A GROSS MISINTERPRETATION OF FACTS AND HENCE TH E CLAIM THAT THE INCENTIVE IS IN THE CAPITAL FIELD IS WITHOUT ANY FACTUAL BASIS. IF THE PURPOSE OF AN INCENTIVE IS FOR SETTING UP OF A NEW UNIT OR EXPANSION OF AN EXISTING UNIT, THE N THAT PURPOSE WOULD HAVE BEEN SPECIFICALLY MENTIONED IN THE SCHEME ITSELF. HE, T HEREFORE, RELYING ON THE DECISION OF SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS W ORKS LTD. HELD THAT THE PURPOSE FOR GIVING THIS INCENTIVE IS NOT FOR SETTING UP OF A NEW UNIT OR CAPITAL EXPANSION OF A NEW UNIT. THE ASSESSING OFFICER, THEREFORE, TREATED TH E AMOUNT OF SALES TAX REMISSION AMOUNTING TO RS.41,49,365/- AS REVENUE RECEIPT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER APPEAL. IN APPEAL, THE LD. CIT(A) DELETED THE SAID ADDITION. AGGRIEVED BY THE SAID ORDER, THE REVENUE IS IN APPE AL BEFORE US. 3. AT THE TIME OF HEARING BEFORE US, THE LD. DR REL IED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.41,49,365/- BY HOLDING THAT THE RECEIPT SHOULD BE HELD TO BE CAPITAL IN NATURE WITHOUT APPRECIATING THAT SUCH RECEIPT WAS TREATED AS SUPPLEMENTARY TRADE RECEIPT, WHICH COULD BE FREELY USED FOR BUSINESS AND IT CAN THEREF ORE BE TREATED ONLY AS HELPING THE INDUSTRY TO RUN MORE PROFITABLY AND ENABLING IT TO COMPLETE WITH OTHER ESTABLISHED INDUSTRIES AS HELD BY THE HONBLE APEX COURT IN THE CASE OF SAHANEY STEEL & PRESS WORKS LTD. VS. CIT (1997) 228 ITR 253 (SC). IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. (SUPRA), THE SALES-TAX INCENTIVE WAS HELD TO B E REVENUE RECEIPT AND, THEREFORE, THE ABOVE DECISION IS CLEARLY IN FAVOUR OF THE REVENUE AND NO T THE ASSESSEE. HE HAS ALSO RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF C.I.T. VS. CHHINDWARA FUELS [245 I.T.R. 9] WHEREIN THE HONBLE JURISDICTIONAL H IGH COURT HAS HELD THE SALES-TAX SUBSIDY TO BE REVENUE RECEIPT FOLLOWING THE DECISION OF HON BLE APEX COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. (SUPRA). HE, THEREFORE, S UBMITTED THAT THE ORDER OF THE LD. CIT(A) MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER B E RESTORED. 3 4. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE WHILE RELYING ON THE ORDER OF THE LD. CIT(A) SUBMITTED THAT THIS ISSUE IS SQUARELY CO VERED BY THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. MAITHAN ALLOYS LTD. VS. DCIT IN ITA NOS.996 TO 1001/K/2006 FOR AYS 1998-99 TO 2003-04 DATED 4.8.20 06. HE FURTHER CONTENDED THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF SAHNE Y STEEL & PRESS WORKS LTD. [228 I.T.R. 253 (SC)] IS IN FAVOUR OF THE ASSESSEE, BECAUSE IN THAT CASE THE HONBLE APEX COURT DISTINGUISHED BETWEEN THE SUBSIDY GIVEN FOR RUNNING OF THE INDUSTRY AND SUBSIDY GIVEN TO THE ASSESSEE TO SET UP A BUSINESS. WHEN THE INCENT IVE IS GIVEN AS A HELPING HAND FOR RUNNING OF THE INDUSTRY IN A MORE PROFITABLE MANNER, THEN S UCH INCENTIVE IS TO BE TREATED AS REVENUE RECEIPT WHILE WHEN THE INCENTIVE IS GIVEN FOR SETTI NG UP OF THE INDUSTRY, THE SAME IS TO BE TREATED AS CAPITAL RECEIPT. IN THE CASE OF THE ASS ESSEE, THE INCENTIVE WAS GIVEN FOR SETTING UP OF THE INDUSTRY IN A SPECIFIED AREA. THE FACT THAT INCENTIVE WAS GRANTED EVEN PRIOR TO THE COMMENCEMENT OF THE PRODUCTION, CLEARLY PROVES THAT THE INCENTIVE WAS FOR SETTING UP OF THE INDUSTRY AND NOT BY WAY OF HELPING HAND FOR RUNNING THE INDUSTRY IN A MORE PROFITABLE MANNER. HE FURTHER STATED THAT THE HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF C.I.T. VS. BALRAMPUR CHINI MILLS LTD. [238 I.T.R. 445] HAS CONSIDERED THE DECISION OF HONBLE APEX COURT IN THE CASE OF SAHNEY STEEL & PRESS WORK S LTD. (SUPRA) AND HELD THAT WHEN THE INCENTIVE WAS GIVEN FOR THE EXPANSION OF THE PLANT BY WAY OF ADDITIONAL FREE SALE QUOTA OF SUGAR, THE INCENTIVE IS CAPITAL RECEIPT AND NOT REV ENUE RECEIPT. HE SUBMITTED THAT THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT W OULD BE SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE. HE, THEREFORE, URGED BEFORE THE B ENCH TO CONFIRM THE ACTION OF THE LD. CIT(A) 5. AFTER HEARING THE RIVAL PARTIES, PERUSING THE MA TERIAL AVAILABLE ON RECORD AND THE CASE LAWS CITED BY BOTH THE PARTIES, WE FIND THAT ISSUE ON HAND IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH IN THE CASE OF M/S . MAITHAN ALLOYS LTD. VS. DCIT CITED SUPRA, WHEREIN THE TRIBUNAL HAS HELD AS UNDER : WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. BOTH THE PARTIES HAVE R ELIED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF SAHNEY STEEL & PRESS WORK S LTD. (SUPRA) WHEREIN THE HONBLE APEX COURT HELD AS UNDER :- IF PAYMENTS IN THE NATURE OF SUBSIDY FROM PUBLIC FU NDS ARE MADE TO THE ASSESSEE TO ASSIST HIM IN CARRYING ON HIS TRADE OR BUSINESS, THEY ARE TRADE RECEIPTS. THE CHARACTER OF THE SUBSIDY IN THE HANDS OF THE RECIPI ENT-WHETHER REVENUE OR CAPITAL-WILL HAVE TO BE DETERMINED, HAVING REGARD T O THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. THE SOURCE OF THE FUND IS QUITE IMMATERIAL. HOWEVER, IF THE 4 PURPOSE IS TO HELP THE ASSESSEE TO SET UP ITS BUSIN ESS OR COMPLETE A PROJECT THE MONIES MUST BE TREATED AS HAVING BEEN RECEIVED FOR CAPITAL PURPOSES . BUT IF MONIES ARE GIVEN TO THE ASSESSEE FOR ASSISTING HIM IN CARRYING OUT THE BUSINESS OPERATIONS AND THE MONEY IS GIVEN ONLY AFTER AND CO NDITIONAL UPON COMMENCEMENT OF PRODUCTION, SUCH SUBSIDIES MUST BE TREATED AS ASSISTANCE FOR THE PURPOSE OF THE TRADE. [EMPHASIS SUPPLIED] 4.1. FROM THE ABOVE IT IS EVIDENT THAT THE HONBLE APEX COURT HAS CLASSIFIED THE SUBSIDY IN TWO CATEGORIES, VIZ. - (I) WHERE THE PURPOSE OF SUBSIDY IS TO HELP THE ASSESSEE TO SET UP ITS BUSINESS OR COMPLETE A PROJECT, THE SUBSIDY IS TO BE TREATED AS CAPITAL RECEIPT. (II) IF THE SUBSIDY IS GIVEN TO THE ASS ESSEE FOR ASSISTING HIM IN CARRYING OUT BUSINESS OPERATION, THE SAME IS TO BE TREATED AS REVENUE REC EIPT. 4.2. WE FIND THAT THE SPECIAL BENCH OF I.T.A.T., MUMBAI IN THE CASE OF RELIANCE INDS. LTD. (SUPRA) HAS ALSO ANALYSED THE SAID DECISION OF THE HONBLE APEX COURT AND HELD AS UNDER: THAT ON A CAREFUL READING OF THE ORDER OF THE TRIBU NAL IN THE CASE OF RELIANCE INDUSTRIES LTD. IT WAS CLEAR THAT THE RATIO OF THE JUDGMENT OF THE SUPREME COURT IN SAHNEY STEEL AND PRESS WORKS LTD. V. CIT [1997] 228 ITR 253 HAD BEEN CORRECTLY INTERPRETED AND APPLIED. THE SUPREME COU RT HAD LAID DOWN THE FOLLOWING PRINCIPLES : (I)THE CHARACTER OF THE SUBS IDY (WHETHER REVENUE OR CAPITAL) IN THE HANDS OF THE RECIPIENT WILL HAVE TO BE DETERMINED BY HAVING REGARD TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVE N; (II) IF THE SUBSIDY IS GIVEN AS ASSISTANCE TO THE ASSESSEE IN THE CARRYING ON OF HIS TRADE OR BUSINESS, IT IS A TRADING RECEIPT; (III) IN DETERMINING THE CHARACTER OF THE SUBSIDY, THE SOURCE OF THE FUND IS IMMATERIAL. THE SCHEME FRAMED BY THE G OVERNMENT OF MAHARASHTRA IN 1979 AND FORMULATED BY ITS RESOLUTION DATED JANU ARY 5, 1980, HAD BEEN ANALYSED IN DETAIL BY THE TRIBUNAL IN ITS ORDER IN RELIANCE INDUSTRIES LTD. FOR THE ASSESSMENT YEAR 1985-86. THE TRIBUNAL HAD COME TO THE CONCLUSION THAT THE THRUST OF THE SCHEME WAS THAT THE ASSESSEE WOULD BE COME ENTITLED FOR SALES TAX INCENTIVE EVEN BEFORE THE COMMENCEMENT OF THE PRODU CTION, WHICH IMPLIED THAT THE OBJECT OF THE INCENTIVE WAS TO FUND A PART OF T HE COST OF THE SETTING UP OF THE FACTORY IN THE NOTIFIED BACKWARD AREA. IT HAD BEEN FOUND THAT THE ENTITLEMENT OF THE INDUSTRIAL UNIT TO CLAIM ELIGIBILITY FOR THE IN CENTIVE AROSE EVEN WHILE THE INDUSTRY WAS IN THE PROCESS OF BEING SET UP. THE S CHEME WAS ORIENTED TOWARDS AND WAS SUBSERVIENT TO THE INVESTMENT IN FIXED CAPI TAL ASSETS. THE SALES TAX INCENTIVE WAS ENVISAGED ONLY AS AN ALTERNATIVE TO T HE CASH DISBURSEMENT AND BY ITS VERY NATURE WAS TO BE AVAILABLE ONLY AFTER PROD UCTION COMMENCED . THE TRIBUNAL HAD NOTED THAT UNDER THE MADHYA PRADESH SC HEME, AN ASSESSEE COULD SEEK ELIGIBILITY ONLY AFTER HAVING COMMENCED PRODUC TION, WHEREAS UNDER THE MAHARASHTRA SCHEME, AN ASSESSEE COULD SEEK ELIGIBIL ITY IMMEDIATELY UPON HAVING TAKEN SOME INITIAL STEPS TOWARDS SETTING UP OF THE INDUSTRIAL UNIT. THE TRIBUNAL WAS THUS AWARE OF THE DISTINCTION BETWEEN THE SUBSIDY GIVEN WITH THE OBJECT OF SETTING UP THE INDUSTRY AND THE SUBSIDY G IVEN AFTER THE INDUSTRY COMMENCES PRODUCTION AND CONDITIONAL UPON THE COMME NCEMENT OF PRODUCTION. FACTUALLY, THE TRIBUNAL FOUND THAT THE ASSESSEES C ASE WHICH FELL UNDER THE MAHARASHTRA SCHEME, WAS A CASE WHERE THE SUBSIDY WA S GIVEN FOR THE PURPOSE OF FACILITATING THE ASSESSEE TO SET UP AN INDUSTRY IN A NOTIFIED AREA. THE ACTUAL 5 DISBURSEMENT TOOK PLACE AFTER THE ASSESSEE COMMENCE D PRODUCTION, BUT IT WAS ONLY A MODE OF DISBURSEMENT AND HAD NOTHING TO DO W ITH THE OBJECT FOR WHICH THE SUBSIDY WAS GIVEN. IT WAS ALSO ONE OF THE CONDITIO NS OF THE ELIGIBILITY CERTIFICATE ORIGINALLY ISSUED THAT IN THE MATTER OF EMPLOYMENT OF PERSONNEL FOR THE UNIT, CANDIDATES FROM SCHEDULED CASTE AND SCHEDULED TRIBE S AND LOCAL PEOPLE SHOULD BE GIVEN PREFERENCE. [EMPHASIS SUPPLIED] 4.3. LET US EXAMINE THE FACTS OF THE CASE SO AS TO COME TO THE CONCLUSION WHETHER THE SUBSIDY IS GIVEN TO SET UP AN INDUSTRY OR IT IS PRO VIDED FOR HELPING THE ASSESSEE IN RUNNING ITS BUSINESS. GOVT. OF WEST BENGAL, DIRECT ORATE OF INDUSTRIES ISSUED REGISTRATION CERTIFICATE DATED 8.8.1995 TO THE ASSE SSEE. THE RELEVANT PORTION OF THE SAID CERTIFICATE READS AS UNDER :- (1) INCENTIVE MAY BE AVAILABLE SUBJECT TO THE CONDITION THAT THE PROPOSED PROJECT HAS THE SANCTION OF FINANCIAL INSTITUTIONS AND THE BANK S FOR FINANCIAL ASSISTANCE. (2) YOU SHOULD APPLY TO W.B.I.D.C. IN APPROPRIATE FORM FOR THE ISSUE OF ELIGIBILITY CERTIFICATE WITHIN ONE MONTH FROM THE DATE OF REGIS TRATION WITH THIS DIRECTORATE. (3) THIS REGISTRATION CERTIFICATE IS VALID FOR A PERIOD OF TWO YEARS FROM THE DATE OF REGISTRATION AND MAY BE REVALIDATED SUBJECT TO THE CONDITIONS STIPULATED IN THE SCHEME. (4) YOU SHOULD FURNISH DURING THE VALIDITY OF THIS CERT IFICATE - (A) PROGRESS REPORTS OF THE IMPLEMENTATION OF THE PROJE CT, PHYSICAL TARGETS ACHIEVED AND NEW FIXED CAPITAL INVESTMENT MADE FOR THE APPROVED PROJECT IN THE ENCLOSED FORM. (B) DATE OF COMMENCEMENT OF POWER SUPPLY FOR PRODUCTION PURPOSES. (C) DATE OF STARTING COMMERCIAL PRODUCTION. (D) TOTAL NUMBER AND DATE OF APPOINTMENT OF NEW/ADDITIO NAL FACTORY WORKERS IN THE UNIT AND (E) YEARLY REPORT ON THE WORKING AND PERFORMANCE OF THE UNIT. 4.4. FROM THE ABOVE IT IS EVIDENT THAT THE ASSESSE E BECAME ENTITLED TO INCENTIVE SUBJECT TO FULFILLMENT OF CERTAIN CONDITIONS. REGI STRATION CERTIFICATE WAS ISSUED BY DIRECTORATE OF INDUSTRIES ON 8.8.1995 WHICH WAS EVE N PRIOR TO THE COMMENCEMENT OF THE SETTING UP OF THE PROJECT. THE ASSESSEE APPLIED TO THE WEST BENGAL INDUSTRIAL DEVELOPMENT CORPN. FOR ALLOTMENT OF A LAND VIDE ITS LETTER DATED 1.9.1995. THUS, EVEN THE APPLICATION FOR ALLOTMENT OF LAND WAS SUBSEQUEN T TO THE REGISTRATION WITH THE DIRECTORATE OF INDUSTRIES BY WHICH THE ASSESSEE BEC AME ENTITLED TO INCENTIVE. ONE OF THE CONDITIONS IN THE REGISTRATION CERTIFICATE WAS TO A PPLY TO WEST BENGAL INDUSTRIAL DEVELOPMENT CORPN. FOR THE ISSUE OF ELIGIBILITY CER TIFICATE WITHIN ONE MONTH FROM THE DATE OF REGISTRATION WITH THE DIRECTORATE OF INDUST RIES. THE ASSESSEE OMITTED TO APPLY FOR THE SAID REGISTRATION WITHIN ONE MONTH AND THER EAFTER WITH AN APPLICATION FOR CONDONATION OF DELAY, IT APPLIED SUBSEQUENTLY WHICH IS EVIDENT FROM THE ASSESSEES LETTER DATED 30.1.1997, WHICH READS AS UNDER :- ENCLOSED HEREWITH PLEASE FIND A XEROX COPY OF ACKN OWLEDGEMENT NO.3158/SIA/ IMO/95 DATED 27.6.95 FOR OUR PROPOSED UNIT FOR THE MANUFACTURE OF FERRO 6 ?SILICON/FERRO CROME/SILICO MANGANEAS/FERRO MANGANE SE AND A XEROX COPY OF REGISTRATION WITH THE DIRECTORATE OF INDUSTRIES UND ER THE WEST BENGAL INCENTIVE SCHEME, 1993 NO.202/INTEL REGN/921/95 DATED 8 TH AUGUST, 1995. DUE TO OVERSIGHT, IT WAS NOT KNOWN THAT WITH REGIST RATION OF DIC WE HAVE TO APPLY FOR THE INCENTIVE WITHIN ONE MONTH FROM THE D ATE OF REGISTRATION. OUR PROJECT IS ALMOST 85% COMPLETE AND OUR PRODUCTION I S LIKELY TO BEGIN IN MARCH 1997/EARLY APRIL, 1997 . WE WOULD REQUEST YOU TO KINDLY TO PARDON US FOR THE MISTAKE AND WE WOULD REQUEST YOU TO KINDLY ISSUE US THE APPLICATION FORM (CAPITAL) FOR INCENTIVE SCHEME 1993 SO THAT IT MAY BE SUBMITTED YOU WITH CO MPLETE DETAILS WITHIN 15 DAYS AND WOULD REQUEST TO KINDLY CONSIDER OUR CASE LIBERALLY FOR SANCTION OF INCENTIVE. 4.5. THEREAFTER ON 24.4.1997, THE WEST BENGAL INDU STRIAL DEVELOPMENT CORPN. ISSUED ELIGIBILITY CERTIFICATE, THE RELEVANT PORTIO N OF WHICH READS AS UNDER :- WE ARE SENDING HEREWITH THE ELIGIBILITY CERTIFICAT E ISSUED UNDER WEST BENGAL INCENTIVE SCHEME, 1993 BEARING NO. INC (93)/EC-164( C) DATED APRIL 24, 1997 FOR THE FOLLOWING INCENTIVES ON THE TERMS AND CONDITION S AS THEREIN :- A. REMISSION OF SALES TAX : REMISSION OF SALES TAX ON SALES OF FINISHED GOOD S DUE FOR PAYMENT BY IT DURING THE PERIOD OF 7 YEARS SUBJECT TO A MAXIMUM OF 85% OF THE GROSS VALUE OF THE FIXED CAPITAL ASSETS ON THE APPR OVED PROJECT OR RS.50 CRORE, WHICH IS LESS, AS PER PARA 14.1.1 AND 14.1.5 OF THE SCHEME. B. EXEMPTION OF SALES TAX : EXEMPTION OF SALES TAX ON PURCHASE OF RAW MATERI ALS FROM THE REGISTERED DEALER(S) BY THE COMPANY FOR TH E COMMERCIAL PRODUCTION OF THE UNIT FOR A PERIOD 7 (SEVEN) YEARS AS PER PARA 1 4.2.1 AND 14.1.5 OF THE SCHEME SUBJECT TO THE CONDITION THAT THE SAID EXEMPTION WI LL BE WITHDRAWN ON THE UNIT REACHING THE CEILING PRESENTED FOR REMISSION OF SAL ES DUE ON FINISHED GOODS AS STIPULATED. C. STATE CAPITAL INVESTMENT SUBSIDY : STATE CAPITAL INVESTMENT @ 20% OF THE FIXED CAPITAL INVESTMENT MADE/TO BE MADE IN THE APPROVED PROJECT SUBJECT TO A LIMIT OR RS.20 LAKH AS PER PARA 12 OF THE SCHEME. D. WAIVER OF ELECTRICITY DUTY : WAIVER OF ELECTRICITY DUTY ON THE ELECTRICITY CO NSUMED FOR PRODUCTION PURPOSES FOR A PERIOD OF 5 YEARS FRO M THE DATE OF COMMERCIAL PRODUCTION OF THE UNIT AS PER PARA 11 OF THE SCHEME . 4.6. FROM THE ABOVE CERTIFICATE IT IS EVIDENT THAT SUBSIDY IS LIMITED TO 85% OF THE GROSS VALUE OF THE FIXED CAPITAL ASSET OR RS.50 CRO RES WHICHEVER IS LESS. THUS, A CEILING HAS BEEN IMPOSED ON THE SUBSIDY BASED ON THE PERCEN TAGE OF THE INVESTMENT IN FIXED ASSETS. ADMITTEDLY, COMMERCIAL PRODUCTION WAS STAR TED MUCH AFTER THE ISSUE OF ELIGIBILITY CERTIFICATE BY THE DIRECTORATE OF INDUS TRIES AND WEST BENGAL INDUSTRIAL DEVELOPMENT CORPN. LTD. IN THE CASE OF RELIANCE IN DUSTRIES LTD., THE SPECIAL BENCH OF I.T.A.T., MUMBAI HAD HELD THE SUBSIDY RECEIVED BY T HE RELIANCE INDUSTRIES LTD. TO BE CAPITAL RECEIPT ON THE GROUND THAT THE ASSESSEE BEC AME ENTITLED FOR SALES-TAX INCENTIVE EVEN BEFORE THE COMMENCEMENT OF PRODUCTION. THEREF ORE, THEY HELD THAT THE OBJECT OF 7 THE INCENTIVE WAS TO FUND A PART OF THE COST OF SET TING UP OF THE FACTORY IN THE NOTIFIED BACKWARD AREA. THE FACTS IN THE CASE UNDER APPEAL BEFORE US ARE IDENTICAL. THE ASSESSEE BECAME ENTITLED TO SALES-TAX INCENTIVE EVE N BEFORE THE COMMENCEMENT OF PRODUCTION WHILE THE INDUSTRY WAS IN THE PROCESS OF BEING SET UP. THEREFORE, THE ABOVE DECISION OF THE SPECIAL BENCH OF I.T.A.T., MUMBAI W OULD BE SQUARELY APPLICABLE TO THE CASE UNDER CONSIDERATION BEFORE US. 5. THE LD. DEPARTMENTAL REPRESENTATIVE HAS ALSO RE LIED UPON THE DECISION OF HONBLE JURISDICTION HIGH COURT IN THE CASE OF C.I .T. VS. CHHINDWARA FUELS (SUPRA). HOWEVER, WE FIND THAT IN THAT CASE AT PAGE-10 THEIR LORDSHIPS OBSERVED THE FACTS ARE NOT IN DISPUTE THAT THE SUBSIDY, I.E. IN THE FO RM OF REFUND OF SALES TAX IS RECEIVED AFTER PRODUCTION COMMENCED IN THE INDUSTRY OF THE ASSESSE E. ON THE ABOVE FACTS, THEIR LORDSHIPS RELYING UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. (SUPRA) HELD THAT THE SUBSIDY WA S REVENUE RECEIPT. HOWEVER, IN THE CASE UNDER CONSIDERATION BEFORE US, WE HAVE FOUND T HAT THE SUBSIDY WAS GIVEN FOR SETTING UP OF THE INDUSTRY IN A NOTIFIED AREA AND N OT BY WAY OF HELPING HAND FOR RUNNING THE INDUSTRY IN A PROFITABLE MANNER. THEREFORE, TH E DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHHINDWARA FUELS (SUPRA) WOULD NOT BE APPLICABLE. ON THE OTHER HAND, THE RATIO OF THE DECISION OF HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF BALRAMPUR CHINI MILLS LTD. (SUPRA) WOULD BE APPLICA BLE. IN THE CASE OF BALRAMPUR CHINI MILLS LTD. (SUPRA), THE GOVT. HAD INTRODUCED AN INCENTIVE SCHEME FOR THE MANUFACTURERS OF SUGAR. ONE OF THE INCENTIVES UNDE R THE SCHEME WAS TO INCREASE THE FREE SALE QUOTA OF SUGAR. TO AVAIL OF THE BENEFIT OF THIS SCHEME, THE ASSESSEE TOOK LOANS FROM THE GOVT. FINANCIAL INSTITUTIONS FOR EXPANSION OF THE FACTORY. ON THE BASIS OF EXPANSION OF THE EXISTING SUGAR FACTORY, THE ASSESS EE WAS ELIGIBLE FOR THE INCENTIVE BY WAY OF RELEASE OF ADDITIONAL FREE SALE QUOTA OF SUG AR. THE QUESTION WAS WHETHER THE REALIZATION FROM SALE OF ADDITIONAL FREE SALE QUOTA OF SUGAR IS CAPITAL RECEIVE OR REVENUE RECEIPT. THEIR LORDSHIPS RELYING UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. (SUPRA) HELD THE RECEIPT TO BE CAPITAL RECEIPT. THE RELEVANT FINDING IN THIS REGARD IS AT PAGE-449 OF T HE REPORT, WHICH READS AS UNDER :- THUS THEIR LORDSHIPS MADE IT CLEAR THAT WHETHER IT IS A REVENUE RECEIPT OR CAPITAL RECEIPT, IT IS TO BE SEEN FOR WHICH PURPOSE IT HAS BEEN GIVEN TO THE ASSESSEE? IF IT IS GIVEN FOR RUNNING THE DAY-TO-DA Y BUSINESS, THAT IS A REVENUE RECEIPT. IF IT IS GIVEN TO MEET THE CAPITAL COST O F ASSET, THEN IT IS A CAPITAL RECEIPT. THE ADMITTED FACT IN THIS CASE IS THAT THE INCENTIV E HAS BEEN RECEIVED BY THE ASSESSEE FOR PAYMENT OF THE LOAN, WHICH WAS TAKEN F OR EXPANSION OF PLANT AND MACHINERY A CAPITAL ASSET. THEREFORE, IN VIEW OF THE DECISION OF THEIR LORDSHIPS, THE RECEIPT IS A CAPITAL RECEIPT. 5.1. FROM THE ABOVE IT IS EVIDENT THAT WHETHER THE RECEIPT IS REVENUE RECEIPT OR CAPITAL RECEIPT WOULD DEPEND UPON THE PURPOSE FOR W HICH THE INCENTIVE IS GIVEN. IF IT IS GIVEN FOR RUNNING DAY-TO-DAY BUSINESS, IT WOULD BE A REVENUE RECEIPT. BUT IF IT IS GIVEN TO MEET THE CAPITAL COST OF ASSET, THEN IT WOULD BE CAPITAL RECEIPT. WE HAVE ALREADY EXAMINED THE FACTS OF THE ASSESSEES CASE AND HAS R ECORDED THE FINDING THAT THE INCENTIVE WAS NOT GIVEN TO THE ASSESSEE FOR RUNNING ITS DAY-T O-DAY BUSINESS, BECAUSE THE INCENTIVE WAS GRANTED EVEN PRIOR TO SETTING UP OF THE INDUSTR Y AND THE COMMENCEMENT OF COMMERCIAL PRODUCTION. THE INCENTIVE WAS RESTRICTE D TO 85% OF THE COST OF CAPITAL ASSET. THEREFORE, IN OUR OPINION, THE SALES-TAX INCENTIVE WAS GIVEN ONLY AS AN ALTERNATIVE TO CASH DISBURSEMENT TO MEET THE CAPITAL COST OF ASSET . THEREFORE, THE RATIO OF THE ABOVE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT W OULD BE IN FAVOUR OF THE ASSESSEE. 8 ACCORDINGLY, WE RESPECTFULLY FOLLOWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BALRAMPUR CHINI MILLS LTD. (SU PRA) AND ALSO THE SPECIAL BENCH DECISION OF I.T.A.T., MUMBAI IN THE CASE OF RELIANC E INDUSTRIES LTD. (SUPRA) HOLD THE SALES-TAX SUBSIDY TO BE CAPITAL RECEIPT. RESPECTFULLY FOLLOWING THE SAME, WE UPHOLD THE ACTI ON OF THE LD. CIT(A) AND DISMISS THE REVENUES GROUND OF APPEAL. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. 7. THE ORDER IS ANNOUNCED IN THE OPEN COURT ON 16.1 1.10 SD/- SD/- . .. . . .. .' '' ' , $ . . , (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER ( $ $ $ $) )) ) DATED :16 TH NOVEMBER, 2010 '01 &'23 &4' JD.(SR.P.S.) / 5 .&&6 76)8- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT DCIT, CIRCLE-XXI, KOLKATA 2 .,- / RESPONDENT, M/S. ANKIT INDIA LTD.,14A, 5 TH FLOOR, FMC FORTUNA, 234/3A, AJC BOSE ROAD, KOLKATA-20. 3 . &/' / THE CIT, KOLKATA. 4 . &/' ( )/ THE CIT(A), KOLKATA 5 . '?& .&' / DR, KOLKATA BENCHES, KOLKATA 6 .&/ TRUE COPY, /'@/ BY ORDER, A #3 /DEPUTY REGISTRAR .