M/s. John Deere Equipment Pvt. Ltd. (now merged with John Deere India Pvt. Ltd.), Pune V. ACIT, Circle 11(1), Pune

ITA 2/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88972 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 01-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PRAVEENA
• Keywords: Source of fund; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO . 02 /PN/20 1 3 ASSESSMENT YEAR: 200 8 - 09 M/S. JOHN DEERE EQUIPMENT PVT. LTD., (NOW MERGED WITH JOHN DEERE INDIA PVT. LTD. ), TOWER IV, CYBERCITY, MAGARPATTA CITY, HADAPSAR, PUNE - 411028 VS. ASST. CIT, CIRCLE - 11(1), PUNE (APPELLANT) (RESPONDENT) PAN NO. AAAC J4233B REVENUE BY: SMT. S. PRAVEENA ASSESSEE BY: SHRI NIKHIL PATHA K ORDER PER R.S . PADVEKAR , JM : - TH IS APPEAL IS FILED BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDER S OF THE LD. CIT(A) - I, PUNE DATED 12 - 10 - 2012 FOR THE A.Y. 2008 - 09. THE ASSESSEE HAS TAKEN THE FOLLOWING EF FECTIVE GROUND: 1. THE LEARNED CIT(A) ERRE D IN HOLDING THE SALE TAX / P URCHASE TAX SUBSIDY OF RS. 114,965,973/ - RECEIVED BY THE ASSESSEE FROM SICOM AS A REVENUE RECEIPT ON THE GROUND THAT THE SUBSIDY GIVEN WAS FOR INCREASING THE PROFITABILITY OF THE ASSESSEE. 2. THE FACTS WHICH REVEALED FROM THE R ECORD ARE AS UNDER. THE ASSESSEE COMPANY WAS ESTABLISHED IN 1998 AND HAS SET UP ITS UNIT AT SANASWADI NEAR PUNE. THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR THE A.Y. 2008 - 09 DECLARING NIL TOTAL INCOME. THE ASSESSING OFFICER HAS COMPLETED THE ASSESS MENT BY DETERMINING THE TOTAL INCOME AT RS.108,89,27,770/ - . THE GOVT. OF MAHARASHTRA HAD INTRODUCED '1993 PACKAGE SCHEME OF INCENTIVES'. THIS SCHEME WAS INTRODUCED FOR GIVING INCENTIVE TO THE UNITS FOR SETTING UP UNITS IN NOTIFIED BACKWARD AREAS. AS 2 ITA NO . 02/PN/2013, M/S. JOHN DEERE EQUIPMENT PVT. LTD., P UNE PER T HE SAID SCHEME, THE ASSESSEE COMPANY WAS ELIGIBLE FOR EITHER SALES TAX AND PURCHASE TAX EXEMPTION OR DEFERMENT OF THE SALES TAX AND PURCHASE TAX COLLECTED FOR A PERIOD OF 15 YEARS. INITIALLY, THE ASSESSEE OPTED FOR DEFERRAL SCHEME AS PER WHICH, THE ASSESSE E WAS AUTHORIZED FOR COLLECTION OF SALES TAX BUT PAYMENT WAS TO BE MADE AFTER 15 YEARS. LATER ON, IN SEPTEMBER, 2001, THE ASSESSEE SHIFTED FROM DEFERRAL SCHEME TO E XEMPTION SCHEME. ACCORDINGLY, THE ASSESSEE WAS ENTITLED TO THE EXEMPTION FROM SALES TAX AND PURCHASE TAX. THUS, THE ASSESSEE BY OPTING FOR EXEMPTION OPTION WAS EXEMPTED FROM ITS SALES TAX AND PURCHASE TAX LIABILITY. THE ASSESSEE HAS TREATED THE SALES TAX AND PURCHASE TAX SUBSIDY OF RS.11,49,65,973/ - AS A CAPITAL RECEIPT IN ITS RETURN OF INCOME F OR A.Y 2008 - 09. ACCORDINGLY, THE ASSESSEE SUBMITTED THAT THE SAID SUBSIDY WAS GIVEN BY GOVT. OF MAHARASHTRA FOR SETTING UP OF THE NEW UNIT IN THE BACKWARD AREA. THE ASSESSEE HAD SUBMITTED THAT AS PER THE SCHEME OF GOVT. OF MAHARASHTRA, THE SUBSIDY IS GRAN TED IN ORDER TO ENCOURAGE SETTING UP OF A UNIT IN BACKWARD AREA. THE SUBSIDY WAS GIVEN IN ORDER TO ENCOURAGE SETTING UP OF UNITS IN BACKWARD AREA. IT IS NOT A CASE THAT THIS INCENTIVE WAS AVAILABLE TO ANY INDUSTRY. IT WAS AVAILABLE ONLY TO CERTAIN INDUSTRI ES DEPENDING UPON THE FULFILLMENT OF THE CONDITIONS. THE ASSESSING OFFICER HAS NOTED THAT THE SUBSIDY WAS GRANTED IN ORDER TO INCREASE THE PROFITABILITY OF THE ASSESSEE COMPANY AND TO RUN THE BUSINESS MORE PROFITABLY. HE HAS OBSERVED THAT THE INCENTIVE W AS GRANTED TO THE ASSESSEE TO ASSIST THE COMPANY IN CARRYING OUT THE BUSINESS OPERATIONS IN THE BACKWARD AREA. EVEN THOUGH THE ASSESSING OFFICER HAS ACCEPTED THAT THE SUBSIDY IS GRANTED FOR SETTING UP A UNIT IN BACKWARD AREA , BUT STILL HE HAS HARPED ON TH E ISSUE THAT THE BENEFIT IS GRANTED TO ASSIST IN THE BUSINESS OPERATIONS AND NOT TO HELP IN SETTING UP OF THE BUSINESS. THE ASSESSING OFFICER HAS ALSO EMPHASIZED THAT THE SUBSIDY IS CALCULATED ON THE BASIS OF THE CAPITAL EMPLOYED. THE ASSESSE E HAS SUBMITT ED THAT THE FORM OR THE MECHANISM THROUGH WHICH THE SUBSIDY IS GIVEN IS IMMATERIAL. THE ASSESS EE ALSO REFERRED TO THE 3 ITA NO . 02/PN/2013, M/S. JOHN DEERE EQUIPMENT PVT. LTD., P UNE JUDGMENT OF SUPREME COURT IN THE CASE OF PONNI SUGARS AND CHEMICALS LTD. TO SUPPORT ITS CONTENTION . THE ASSESS EE ALSO RELIED ON THE DECIS ION IN THE CASE OF RELIANCE INDUSTRIES LTD. 88 ITD 273 (SB) W HEREIN THE SPECI AL BENCH HAS ACCEPTED THE CONTENTION RAISED BY THE ASSESSES AND HELD THAT IF THE SUBSIDY IS GIVEN FOR SETTING UP A NEW UNIT OR EXPANSION OF THE INDUSTRY, IT WOULD BE A CAPITAL REC EIPT IRRESPECTIVE OF MODALITY OR SOURCE OF FUNDS THROUGH OR FROM WHICH IT WAS GIVEN. IT WAS ALSO SUBMITTED THAT THE SCHEME FOR SUBSIDY IN THE CASE OF RELIANCE INDUSTRIES LTD. (SUPRA) IS SIMILAR/IDENTICAL TO THE SCHEME UNDER WHICH THE ASSESSEE COMPANY HAS R ECEIVED THE S UBSIDY. 3. THE ONLY ISSUE IS IN RESPECT OF THE TREATMENT OF THE SALES TAX/PURCHASE TAX SUBSIDY RECEIVED BY THE ASSESSEE UNDER THE 1993 PACKAGE SCHEME OF INCENTIVES PROMULGATED BY THE GOVT. OF MAHARASHTRA. THE ONLY DIFFERENCE IN THIS YEAR IS THIS ISSUE IS ROOTED THROUGH THE LD. CIT(A). WE HAVE ALREADY ADJUDICATED IDENTICAL ISSUE IN THE PRECEDING TWO YEARS I.E. A.YS. 2006 - 07 AND 2007 - 08 IN THE ASSESSEES OWN CASE BEING ITA NOS. 1476/PN/2010 AND 1686/PN/2011 . AS THE FACTS ARE IDENTICAL IN THIS YEAR , HENCE, TO AVOID REPETITION S, WE ADOPT OUR REASONING GIVEN IN THE A.Y. 2006 - 07 FOR HOLDING THAT THE SALES TAX/PURCHASE TAX SUBSIDY RECEIVED BY THE ASSESSEE UNDER THE 1993 PACKAGE SCHEME OF INCENTIVE IS A CAPITAL IN NATURE AND CANNOT BE TAXED. IN T HIS YEAR ALSO THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE RELEVANT GROUND IS ALLOWED. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 20 - 0 2 - 201 5 SD/ - SD/ - ( G . S . PAN NU ) ( R.S. PADVE KAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED : 20 TH FEBRUARY, 2015 RK/PS 4 ITA NO . 02/PN/2013, M/S. JOHN DEERE EQUIPMENT PVT. LTD., P UNE COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, PUNE 4 THE CIT - I, PUNE 5 6 THE DR, ITAT, B BENCH, PUNE. GUARD FILE. //TRU E COPY// BY ORDER ASSISTANT REGISTRAR , INCOME TAX APPELLATE TRIBUNAL , PUNE