M/s Greencone Environs Pvt. Ltd., Chandigarh V. DCIT, C-1(1), Chandigarh

ITA 1602/CHANDI/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1099 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-11-2019
• Assessment Year: 2008-2009
• Appeal Filed On: 24-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND SUDERSHAN
• Assessee Lawyers: ROHIT GOEL PROXY
• Keywords: Capital asset; Capital receipt; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A CHANDIGARH , !' # $ % &' , '( BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 1602/CHD/2017 / ASSESSMENT YEAR : 2008-09 M/S GREENCONE ENVIRONS PVT LTD., SCO 18-19, FIRST FLOOR, SECTOR 8C CHANDIGARH THE DCIT, CIRCLE 1(1), CHANDIGARH ./PAN NO: AACCG1175D / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI ROHIT GOEL, (PROXY COUNSEL) ' ! / REVENUE BY : SHRI ARVIND SUDERSHAN, SR. DR # $ % /DATE OF HEARING : 28.11.2019 &'() % / DATE OF PRONOUNCEMENT : 28.11.2019 ') / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 29.09.2017 OF THE COMMISSIONER OF INCO ME TAX (APPEALS)- 1, CHANDIGARH [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- ITA NO. 1602-CHD/2017- M/S GREENCONE ENVIRONS PVT LTD., CHANDIGARH 2 1. THAT THE ORDER PASSED DATED 29.9.2017 UNDER SECTION 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD. CIT(A)-1 CHANDIGARH IN APPEAL NO.583/10-11 IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) GRAVELY ERRED IN UPHOLDING THE ORDER OF THE LD. DCIT, CIRCLE 1(1) CHANDIGARH UNDER WHICH THE CAPITAL SUBSIDY WAS TREATED AS REVENUE RECEIPT AND MADE AN ADDITION OF RS. 2,50,00,000/- WHICH IS AGAINST THE SETTLED LAW. 3. THE SOLE ISSUE RAISED IN THIS APPEAL IS REGARDING THE NATURE OF SUBSIDY RECEIVED BY THE ASSESSEE VIDE LETTER NO. 1- 3/2205-CT DATED 26.3.2008, WHEREBY THE MINISTRY OF FINANCE HAS GRA NTED A SUBSIDY OF RS. 2,50,00,000/- TO THE ASSESSEE FOR SETTING UP A LEGNIN PRECIPITATION SYSTEM (LPS) TECHNOLOGY PROJECT FOR A TOTAL COST OF RS. 11,50,00,000/-. THE CONTENTION OF THE REVENUE IS THAT THE SAME IS A REVENUE RECEIPT, WHEREAS, THE CONTENTION OF THE ASSESSEE IS THAT IT IS A CAPITAL RECEIPT AS IT HAS BEEN RECEIVED BY THE ASSESSEE AS AN INCENTIVE F ROM THE GOVERNMENT FOR ESTABLISHMENT AND SETTING UP A LEGNIN PRECIPITA TION SYSTEM (LPS) TECHNOLOGY PROJECT. HOWEVER, BEFORE US, THE RESPECTIVE NOTIFICATION OF THE GOVERNMENT HAS NOT BEEN FURNISHED FROM WHICH THE NATURE OF SUB SIDY CAN BE ASCERTAINED. THE ISSUE, AS TO THE GRANTS / SUBSIDI ES OF WHICH NATURE ARE TO BE TREATED AS REVENUE RECEIPT, AND WHICH TYPE OF GRANTS / SUBSIDIES ITA NO. 1602-CHD/2017- M/S GREENCONE ENVIRONS PVT LTD., CHANDIGARH 3 ARE CAPITAL RECEIPT, OTHERWISE, HAS BEEN SETTLED BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT-I VS. M/S CHAPHALKAR BROT HERS, PUNE AND OTHERS IN CIVIL APPEAL NOS. 6513-6514 OF 2012 ORDE R DATED 7.12.2017 . THE HON'BLE SUPREME COURT WHILE DELIBER ATING ON THE OTHER DECISIONS OF THE SUPREME COURT IN THE CASES O F SAHNEY STEEL & PRESS WORKS LTD. HYDERABAD VS. CIT, A.P.-1, HYDERAB AD VS. 1997 (7) SCC 765, CIT, MADRAS VS. POONI SUGARS AND CHEM ICALS LIMITED 2009 (9) SCC 337 AND FURTHER OF THE HON'BLE J&K HIG H COURT IN THE CASE OF SHRI BALAJI ALLOYS VS. CIT (2011) 333 ITR 335, HAS HELD THAT TO GATHER ANY OF THE RECEIPTS AS TO THE SAME A RE CAPITAL OR REVENUE IN NATURE, PURPOSE TEST IS TO BE APPLIED. IF THE PURPOSE IS FOR THE SETTING UP OF NEW INDUSTRY, THEN THE RECEIP TS ARE TO BE CONSIDERED AS CAPITAL IN NATURE. HOWEVER, IF THE R ECEIPTS ARE IN THE NATURE OF FACILITATION / HELPING HAND OF THE TRADE, THE SAME IS CONSTRUED REVENUE IN NATURE. WHAT IS IMPORTANT, IS THE OBJECT FOR WHICH THE SUBSIDY / INCENTIVE IS GRANTED. THAT THE OBJECT IS CARRIED OUT IN A PARTICULAR MANNER IS IRRELEVANT. ONCE THE OBJECT OF THE SUBSIDY WAS TO INDUSTRIALIZE THE STATE AND TO GENER ATE EMPLOYMENT IN THE STATE, THE FACT THAT A SUBSIDY TOOK A PARTICULA R FORM AND THAT IT WAS GRANTED ONLY AFTER COMMENCING OF PRODUCTION, WO ULD NOT MAKE ANY DIFFERENCE. THE HON'BLE SUPREME COURT MADE REFE RENCE TO THE DECISION OF THE HON'BLE J&K HIGH COURT IN THE CAS E OF SHRI BALAJI ALLOYS V CIT (SUPRA), WHEREIN, THE HON'BLE HIGH CO URT HAS HELD, ITA NO. 1602-CHD/2017- M/S GREENCONE ENVIRONS PVT LTD., CHANDIGARH 4 WHILE CONSIDERING THE SCHEME OF REFUND OF EXCISE DU TY AND INTEREST SUBSIDY, HAS HELD THAT THE SCHEME WAS CAPITAL IN NA TURE DESPITE THE FACT THAT THE INCENTIVES WERE NOT AVAILABLE UNTIL AND UNLESS THE COMMERCIAL PRODUCTION HAS STARTED AND JUSTIFIED THE FACT THAT THESE INCENTIVES WERE NOT GIVEN TO THE ASSESSEE EXPRESSL Y FOR THE PURPOSE OF CAPITAL ASSETS. 4. BOTH THE LD. REPRESENTATIVES OF THE PARTIES SUBMITTED THAT T HE ISSUE IS REQUIRED TO BE RESTORED TO THE FILE OF THE CIT(A) TO LOOK INTO THE NATURE OF THE SUBSIDY RECEIVED IN THE LIGHT OF THE NOTIFICATION OF THE GOVERNMENT AS WELL AS IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT-I VS. M/S CHAPHAL KAR BROTHERS, PUNE AND OTHERS (SUPRA). ACCORDINGLY, THE IMPUGN ED ORDER OF THE CIT(A) IS HEREBY SET ASIDE AND THE MATTER IS RESTOR ED TO THE FILE OF THE CIT(A) FOR DECISION AFRESH AS PER THE OBSERVATIONS MADE ABOVE. THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FO R STATISTICAL PURPOSES. ORDER DICTATED AND PRONOUNCED IN THE OPEN COURT IMM EDIATELY ON COMPLETION OF HEARING ON 28.11.2019. SD/- SD/- ( # $ % &' / ANNAPURNA GUPTA) '( / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 28.11.2019 .. ITA NO. 1602-CHD/2017- M/S GREENCONE ENVIRONS PVT LTD., CHANDIGARH 5 '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR