ACIT, Nanded V. Indo Enterprises P Ltd, Latur

ITA 2389/PUN/2012

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6996 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-11-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 03-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Assessee Lawyers: DR PRAYAG JHAPRATEEK JHA
• Keywords: Capital asset; Capital receipt
• Section: 80IB; 6; 56; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 1362 /P U N/201 1 / ASSESSMENT YEAR : 20 0 8 - 09 DY. COMMISSIONER OF INCOME TAX, CIRCLE 3, NANDED ....... / APPELLANT / V/S. INDO ENTERPRISES PVT. LTD., B - 44, MIDC, LATUR - 413531 PAN : AABCI1869B / RESPONDENT . / ITA NO . 2389/PUN/2012 / ASSESSMENT YEAR : 2009 - 10 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3, NANDED ....... / APPELLANT / V/S. INDO ENTERPRISES PVT. LTD., B - 44, MIDC, LATUR - 413531 PAN : AABCI1869B / RESPONDENT . / ITA NO . 169/PUN/2016 / ASSESSMENT YEAR : 2003 - 04 M/S. PATANKAR WIND FARM PVT. LTD., SHIKKA MANSION, AT & PO : PATAN, TAL : PATAN, SATARA PAN : AABCP1365R ....... / APPELLANT / V/S. DY. COMMISSIONER OF INCOME TAX, SATARA CIRCLE , SATARA / RESPONDENT 2 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 . / ITA NO . 170/PUN/2016 / ASSESSMENT YEAR : 2006 - 07 M/S. PATANKAR WIND FARM PVT. LTD., SHIKKA MANSION, TALUKA - PATAN, DISTT. - SATARA PAN : AABCP1365R ....... / APPELLANT / V/S. ASSISTANT COMMISSIONER OF INCOME TAX, SATARA CIRCLE , SATARA / RESPONDENT ASSESSEE BY : S /S HRI RAJAN VORA & DR. PRAYAG JHA/PRATEEK JHA REVENUE BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 23 - 11 - 2017 / DATE OF PRONOUNCEMENT : 22 - 1 2 - 2017 / ORDER PER VIKAS AWASTHY, JM : TH ESE FOUR APPEALS RELATING TO TWO DIFFERENT ASSESSEES ARE TAKEN UP TOGETHER FOR ADJUDICATION AS THEY INVOLVE IDENTICAL ISSUE I.E. TAXABILITY OF SALES TAX SUBSIDY RECEIVED BY ASSESSEE ON G ENERATION OF POWER THROUGH WIND MILL . 3 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 ITA NO. 1362/PUN/2011 (A.Y. 2008 - 09) ITA NO. 2389/PUN/2012 (A.Y. 2009 - 10) 2. THESE TWO APPEALS HAVE BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD. ITA NO. 1362/PUN/2011 IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) DATED 04 - 08 - 2011 FOR THE ASSESSMENT YEAR 2008 - 09. THE GROUND S RAISED BY THE DEPARTMENT IN THE SAID APPEAL READ AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE HONBLE CIT(A), AURANGABAD HAS ERRED IN DELETING THE ADDITION OF RS.86,37,639/ - ON ACCOUNT OF DISALLOWANCE SEC. 80IA. AS THE ASSESSING OFFICER DISALLOWED AT RS.86,37,638/ - ON THE BASIS OF DECISION OF HONORABLE SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD. VS. CIT (2009) 225 CTR 233 (SC). THE CIT(A) HAS IGNORED THE FACT THAT THE SOURCE OF SUBSIDY & INCENTIVE IS THE GOVT. LAW & DECISION & ORDERS ISSUED BY THE GOVT. FURTHER, HE HAS IGNORED THAT SUB - SECTION 80IA(5) STARTS WITH OBSTINATE CLAUSE. 2. THE APPELLANT CRAVES TO LEAVE TO ADD, AMEND OR ALTER ANY GROUNDS OF APPEAL ON OR BEFORE HEARING OF THE CASE . 3. IN ITA NO. 2389/PUN/2012 THE DEPARTMENT HAS ASSAILED THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) DATED 21 - 09 - 2012 FOR THE ASSESSMENT YEAR 2009 - 10 BY RAISING FOLLOWING GROUNDS OF APPEAL : 1. THE CIT (A), AURANGABAD HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER, ON ACCOUNT OF DISALLOWANCE OF 80IA AT RS.97,99,999/ - . 2. THE CIT (A), AURANGABAD HAS ERRED IN CONSIDERING THAT T HE SALES TAX INCENTIVE RECEIVED BY THE ASSESSEE, IS THE INCOME FROM ELIGIBLE BUSINESS AND TREATING THAT THERE IS 1 ST DEGREE NEXUS BETWEEN RECEIVING SALES TAX INCENTIVE AND SALES OF ELECTRICITY IGNORING THE FACT THAT, THE SALES TAX INCENTIVE IS OUTCOME OF G OVT. ORDERS AND NOT SALES OF ELECTRICITY AS TREATED BY THE ASSESSEE. 1 ST DEGREE NEXUS EXISTS IN SALES TAX INCENTIVE AND GOVT. ORDERS. 3. THE ORDER OF THE A.O. BE RESTORED AND THE CIT (A), AURANGABAD BE VACATED. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEN D OR ALTER ANY GROUNDS OF APPEAL. 4 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 4. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PRINTING AND PUBLISHING NEWSPAPERS, AND GENERATION OF ELECTRICITY BY WINDMILL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAS RECEIVED SALES TAX INCENTIVE IN THE FORM OF SUBSIDY FROM THE MAHARASHTRA STATE ELECTRICITY BOARD. THE ASSESSEE TREATED THE SUBSIDY AS REVENUE RECEIPT AND CLAIMED DEDUCTION U/S. 80IA THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). THE ASSESSING OFFICER REJECTED THE CONTENTIONS OF ASSESSEE AND HELD THAT THERE IS NO FIRST DEGREE NEXUS BETWEEN THE SALE OF POWER AND SALES TAX INCENTIVE, THEREFORE, THE SALES TAX INCENTIVE CANNOT FORM PART OF THE PROFIT DERIVED FROM ELIGIBLE BUSINESS AND HENCE, THE SAME IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT. AGGRIEVED BY THE FINDINGS OF ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDERS FOR THE RESPECTIVE ASSESSMENT YEARS HELD THAT THE SUBSIDY RECEIVED BY ASSESSEE ON GENERATION OF POWER HAS FIRST DEGREE NEXUS WITH THE ACTIVITY OF POWER GENERATION AND HENCE, ELIGIBLE FOR DEDUCTION U/S. 80IA(4) OF THE ACT. AG AINST THE SAID FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPEAL. 5. SHRI RAJAN VORA APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE STATE GOVERNMENT IN ORDER TO PROMOTE ELECTRICITY AND POWER SECTOR AND TO PROVIDE ELECTRI CITY TO FACTORIES AND HOUSE HOLDS AT CHEAPER RATE FLOATED THE SCHEME UNDER WHICH SUBSIDY IS PROVIDED TO THE ENTREPRENEURS/ COMPANIES FOR SETTING UP UNITS FOR GENERATION OF ELECTRICITY THROUGH WINDMILL. AS PER SCHEME THE ELECTRICITY GENERATED BY WINDMILL UNI TS HAS TO BE SOLD THROUGH MAHARASHTRA STATE ELECTRICITY BOARD (MSEB). BASED ON QUANTUM OF 5 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 ELECTRICITY PRODUCED AND OTHER RELEVANT CRITERIA, AS PER THE SCHEME, VARIOUS CATEGORIES/GROUPS HAVE BEEN FORMED. THE POWER GENERATION UNIT OF ASSESSEE FALLS UNDER GROUP - II POWER PROJECT AS DETERMINED BY THE MAHARASHTRA ELECTRICITY REGULATORY COMMISSION. THE ASSESSEE IS ELIGIBLE TO RECEIVE TARIFF @ RS.2.50 PER UNIT , SUBJECT TO RATE REVISION OF 10 PAISA EVERY YEAR. THE ASSESSEE FALLS IN AFORESAID TARIFF RATE AS THE ASSESSEE OPTED FOR SALES TAX SUBSIDY FOR POWER GENERATION. IF THE ASSESSEE WOULD NOT HAVE RECEIVED ANY SUBSIDY , THEN THE ASSESSEE WOULD HAVE BEEN IN GROUP - II I AND ELIGIBLE FOR TARIFF @ RS.3.50 PER UNIT , SUBJECT TO RATE REVISION OF 15 PAISA PER YEAR. THE LD. AR POINTED THAT FROM THE FRAME WORK OF SCHEME IT IS AMPLY CLEAR THAT THE SALES TAX SUBSIDY RECEIVED BY ASSESSEE IS PART OF SALE PRICE PAID BY THE STATE GOVERNMENT FOR PURCHASE OF ELECTRICITY. THE SALES TAX SUBSIDY RECEIVED IS IN A WAY REIMBURSEMENT OF COST OF ELECTRICITY PRODUCED. THIS CLEARLY SHOWS THAT SALES TAX SUBSIDY IS INEXTRICABLE LIN KED TO THE ACTIVITY OF GENERATION OF POWER AND HENCE, ELIGIBLE FOR DEDUCTION UNDER THE PROVISIONS OF SECTION 80IA(4) OF THE ACT. THE LD. AR VEHEMENTLY SUPPORT ING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ASSERTED THAT SUBSIDY HAS FIRST DEGREE NEXUS WITH THE ACTIVITY OF POWER GENERATION. 5.1 THE LD. AR FURTHER SUBMITTED THAT THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MEGHALAYA STEELS LTD. REPORTED AS 3 83 ITR 217 HAS HELD THAT SUBSIDY WHICH GOES TO REIMBURSEMENT OF COST IN PRODUCTION OF GOODS IN A PARTICULAR BUSINESS WOULD ALSO HAVE TO BE INCLUDED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, AND NOT UN DER THE HEAD INCOME FROM OTHER SOURCES . T HUS, FOLLOWING THE PRINCIPLE LAID DOWN BY THE HONBLE SUPREME COURT, THE SALES TAX SUBSIDY RECEIVED BY ASSESSEE QUALIFIES FOR DEDUCTION U/S. 80IA OF THE ACT. 6 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 5.2 THE LD. AR FURTHER PLAC ING RELIANCE ON CBDT CIRCU LAR NO. 39/2016 DATED 29 - 11 - 2016 SUBMITTED , THAT THE CBDT HAS ISSUED AFORESAID CIRCULAR ACCEPTING THE POSITION THAT VARIOUS SUBSIDIES (TRANSPORT, POWER, INTEREST AND INSURANCE) ARE OPERATIONAL IN NATURE AND THEREFORE, ELIGIBLE FOR INCENTIVE DEDUCTION U/S. 80IB AND 80IC OF THE ACT. THE CBDT HAS ISSUED AFORESAID CIRCULAR TO REMOVE AMBIGUITIES AND TO MAKE THE PROVISIONS IN LINE WITH THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF COMMISSIONER O F INCOME TAX VS. MEGHALAYA STEELS LTD. (SUPRA). 5. 3 THE LD. AR ALSO PLACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF RUPINDER SINGH ARORA VS. ITO IN ITA NO. 204/MUM/2011 FOR ASSESSMENT YEAR 2006 - 07 DECIDED ON 10 - 02 - 2017. T HE LD. AR SUBMITTED THAT THE MUMBAI BENCH OF THE TRIBUNAL HAS RESTORED THE MATTER BACK TO THE ASSESSING OFFICER WITH A DIRECTION TO APPLY THE RATIO LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MEGHALAYA STEELS LTD. (SUP RA). 5. 4 THE ASSESSEE HAS FILED AN APPLICATION UNDER RULE 27 OF THE INCOME TAX APPELLATE TRIBUNAL RULES, 1963 RAISING AN ALTERNATE CONTENTION THAT THE SALES TAX INCENTIVE RECEIVED BY ASSESSEE BE TREATED AS CAPITAL RECEIPT AND HENCE NOT CHARGEABLE TO TAX. THE LD. AR SUBMITTED THAT SINCE, THE FIRST APPELLATE AUTHORITY HAD DECIDED THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S. 80IA OF THE ACT IN FAVOUR OF THE ASSESSEE , T HIS ALTERNATE GROUND TO TREAT SUBSIDY AS CAPITAL RECEIPT WAS NOT ADJUDICATED. THE LD. AR SUBMITTED THAT SINCE, BENEFIT OF DEDUCTION U/S. 80IA WAS GRANTED, THE ASSESSEE DID NOT PREFER ANY APPEAL BEFORE THE TRIBUNAL. THE LD. AR CONTENDED THAT HONBLE GUJARAT HIGH COURT IN THE CASE OF GARDEN SILK MILLS VS. COMMISSIONER OF INCOME TAX AND ANOTH ER 7 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 REPORTED AS 394 ITR 192 HAS HELD THAT SUBSIDY IN THE FORM OF SALES TAX INCENTIVE IS A CAPITAL RECEIPT. THE LD. AR TO FURTHER SUPPORT HIS ALTERNATE CONTENTION DRAWS STRENGTHEN FROM THE FOLLOWING DECISIONS : I . COMMISSIONER OF INCOME TAX VS. CHAPHALKAR BROT HERS, 351 ITR 309 (BOM); II . DCIT VS. INOX LEISURE LTD., 351 ITR 309 (GUJ). 5.5 THE LD. AR FURTHER POINTED THAT THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S. SHREE BALAJI ALLOYS IN CIVIL APPEAL NO. 10061 OF 2011 DECID ED ON 19 - 04 - 2016 APPROVING THE DECISION OF HONBLE JAMMU & KASHMIR HIGH COURT IN THE CASE OF SHREE BALAJI ALLOYS & ORS. VS. COMMISSIONER OF INCOME TAX & ORS. REPORTED AS 333 ITR 335 HAS HELD THAT SUBSIDY/GRANT IS CAPITAL IN NATURE HENCE, IT IS NOT CHARGEABLE TO TAX. 6. ON THE OTHER HAND SHRI VIVEK AGGARWAL REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF ASSESSING OFFICER IN DISALLOWING T HE BENEFIT OF DEDUCTION U/S. 80IA ON THE SUBSIDY RECEIVED BY ASSESSEE IN THE FORM OF SALES TAX INCENTIVE. THE LD. DR SUBMITTED THAT THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. PATANKAR WIND FARM PVT. LTD. V S . DY. COMMISSIONER OF INCOME TAX I N ITA NOS. 2225 & 2226/PN/2013 FOR ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 DECIDED ON 10 - 04 - 2015 HAS DEALT WITH IDENTICAL ISSUE. THE LD. DR POINTED THAT THE TRIBUNAL WHILE ADJUDICATING THE ISSUE IN M/S. PATANKAR WIND FARM PVT. LTD. VS. DY. COMMISSIONER OF IN COME TAX (SUPRA) HAS CONSIDERED THE RATIO LAID DOWN BY THE HONBLE GAUHATI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S. MEGHALAYA STEELS LTD. IN ITA 7/2010 DECIDED ON 29 - 05 - 2013 (356 ITR 235) . THE TRIBUNAL HELD THAT THE SALES TAX SUBSIDY IS REVENUE RECEIPT IN THE HANDS OF ASSESSEE AND IS NOT ELIGIBLE FOR DEDUCTION UNDER THE 8 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 PROVISIONS OF SECTION 80IA OF THE ACT. THUS, THE TRIBUNAL ANSWERED BOTH THE ISSUES IN FAVOUR OF R EVENUE I.E. (I) SALES TAX SUBSIDY IS NOT CAPITAL IN NATURE ; AND (II) S ALES TAX SUBSIDY IS NOT ELIGIBLE FOR DEDUCTION U/S. 80IA. THE LD. DR FURTHER SUBMITTED THAT EVEN OTHERWISE ISSUE INVOLVED IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MEGHALAYA STEELS LTD. (SUPRA) WAS WITH RESPECT TO TRANSPORT SUBSIDY, POWER SUBSIDY, INT EREST SUBSIDY AND INSURANCE SUBSIDY. THE ISSUE WHETHER SALES TAX SUBSIDY REDUCED THE COST OF PRODUCTION OF INDUSTRIAL UNDERTAKING AND THUS, THERE IS FIRST DEGREE NEXUS BETWEEN SALES TAX INCENTIVE AND PROFITS AND GAINS DERIVED BY INDUSTRIAL UNDERTAKING WAS NOT BEFORE THE HONBLE HIGH COURT. THE LD. DR FURTHER SUBMITTED THAT CBDT CIRCULAR NO. 39/2016 DATED 29 - 11 - 2016 ON WHICH THE ASSESSEE HAS PLACED RELIANCE IS IN CONTEXT OF TRANSPORT, POWER AND INTEREST SUBSIDIES. IT DOES NOT DEAL WITH SALES TAX SUBSIDY. 6.1 THE LD. DR SUBMITTED THAT ONCE, THE CO - ORDINATE BENCH OF THE TRIBUNAL IN IDENTICAL SET OF FACTS IN THE CASE OF M/S. PATANKAR WIND FARM PVT. LTD. VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) HAS HELD THAT THE SALES TAX SUBSIDY IS REVENUE IN NATURE , THE A PPLICATION FILED BY THE ASSESSEE UNDER RULE 27 RAIS ING AN ALTERNATE GROUND TO TREAT THE SALES TAX SUBSIDY AS CAPITAL RECEIPT , IS LIABLE TO BE REJECTED OUT RIGHTLY. 6.2 THE LD. DR FURTHER SUBMITTED THAT THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF RASIK LAL M. DHARIWAL (HUF) VS. DY. COMMISSIONER OF INCOME TAX IN ITA NO S . 575/PN/2007 & 150/PN/2008 FOR ASSESSMENT YEARS 2003 - 04 AND 2004 - 05 DECIDED ON 31 - 03 - 2011 AFTER ANALYZING THE SALES TAX SUBSIDY SCHEME FLOATED BY STATE OF MAHARASHTRA HAS HELD THAT SALES T AX SUBSIDY UNDER THE SAID SCHEME IS NOT CAPITAL IN NATURE. THE LD. DR IN SUPPORT OF HIS SUBMISSIONS ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS : 9 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 I . SHRI UMESH M. JOSHI VS. INCOME TAX OFFICER IN ITA NO. 4287/MUM/2010 FOR ASSESSMENT YEAR 2006 - 07 DECIDED O N 23 - 12 - 2011 (MUM. - TRIB.); II . LAP FINANCE AND CONSULTANCY P. LTD. VS. ADDL. COMMISSIONER OF INCOME TAX IN ITA NO. 1292/PN/2010 FOR ASSESSMENT YEAR 2006 - 07 DECIDED ON 28 - 02 - 2012 (PUNE - TRIB.); III . CHANDU LAXMAN CHAVAN VS. ITO IN ITA NO. 371/PN/2012 FOR ASSESSMENT Y EAR 2005 - 06 DECIDED ON 28 - 05 - 2013 (PUNE - TRIB.). 7 . W E HAVE HEARD EXTENSIVE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . WE HAVE ALSO CONSIDERED VARIOUS DECISIONS ON WHICH RELIANCE HAS BEEN PLACED BY RESPECTIVE SIDES. THE DEPARTMENT IN BOTH THE APPEALS HAS RAISED SOLITARY ISSUE ASSAILING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING BENEFIT OF DEDUCTION U/S. 80IA(4) OF THE ACT TO THE ASSESSEE ON SALES TAX SUBSIDY RECEIVED ON POWER GENERATION. THE QUESTIONS THAT HAVE EMERGED FOR ADJUDICATION FROM THE SUBMISSIONS MADE BY BOTH THE SIDES ARE : (I) WHETHER SALES TAX SUBSIDY RECEIVED BY ASSESSEE ON GENERATION OF POWER IS CAPITAL OR REVENUE IN NATURE ? AND (II) IF THE SALES TAX SUBSIDY IS HELD TO BE REVENUE RECEIPT, WHETHER IT IS ELIGIBLE FOR DEDUCTION U/S. 80IA(4) OF THE ACT ? 8. THE ASSESSEE HAS RECEIVED SALES TAX SUBSIDY FROM STATE GOVERNMENT UNDER A SCHEM E FOR A PERIOD OF 6 YEARS AS AN INCENTIVE FOR ESTABLISHING / RUNNING WINDMILL POWER GENERATION UNITS. 9. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. PONNI SUGARS & CHEMICALS LTD. & ORS. REPORTED AS 306 ITR 392 HAS H ELD THAT FOR DETERMINING THE NATURE OF SUBSIDY PURPOSE TEST HAS 10 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 TO BE APPLIED. IF THE OBJECT OF SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE TO RUN BUSINESS MORE PROFITABLY THEN THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND, IF THE OBJECT OF INCENTI VE UNDER THE SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT THEN THE RECEIPT OF THE SUBSIDY IS ON CAPITAL ACCOUNT. THE HONBLE APEX COURT FURTHER HELD THAT FORM OR THE MECHANISM THROUGH WHICH THE SUBSIDY IS DI SBURSED IS IRRELEVANT. 10. THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF RASIKLAL M. DHARIWAL (HUF) VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) HAD OCCASION TO CONSIDER THE NATURE OF SUBSIDY RECEIVED IN THE FORM OF SALES TAX INCENTIVE FOR GENERATION OF POWER IN THE STATE OF MAHARASHTRA. THE TRIBUNAL AFTER ANALYZING THE SCHEME OF SUBSIDY THREADBARE CONCLUDED THAT THE SUBSIDY RECEIVED UNDER THE SCHEME IS REVENUE RECEIPT. THE RELEVANT EXTRACT OF THE FINDINGS OF TRIBUNAL ON THIS ISSUE ARE AS UNDER : 1 6. IN THIS BACKGROUND, WE MAY NOW REVERT BACK AND EXAMINE THE SCHEME UNDER WHICH THE ASSESSEE HAS AVAILED OF THE SALES - TAX BENEFIT. IN THE PRESENT CASE, AS NOTED EARLIER, THE STATE GOVERNMENT VIDE ITS RESOLUTION DATED 12.3.1998 MODIFIED ITS EXISTING POLICY FOR THE PURPOSES 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 THE STATE GOVERNMENT ON GENERATION THROUGH NON CONVENTIONAL SOURCES IN JANUARY, 1996 DID NOT ACHIEVE THE DESIRED RESULTS. IN THE SAID POLICY, NINE DIFFERENT 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 PREAMBLE OF THE POLIC Y ITSELF REFLECTS THE AREA WHICH IS SOUGHT TO BE ADDRESSED BY THE POLICY 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 THERE IS NO PRESCRIBED CRITERIA AS TO THE MANNER IN WHICH SUCH INCENTIVES ARE TO BE UTILIZED. THE CLAIM OF THE ASSESSEE IS THAT THE SALES - TAX BENEFIT IS GRANTED HAVING REGARD TO THE QUALIFYING INVESTMENT, WHI CH 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 LINKED TO THE 11 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 QUALIFYING INVESTMENT SHOWS THAT IT IS INTENDED AS A RECOUPMENT OF THE FIXED COST ALREADY INCURRED BY THE ASSESSEE AND, THEREFORE, SUCH INCENTIVES ARE TO BE REGARDED AS CAPITAL IN NATURE. IN OUR CONSIDERED OPINION, SUCH PURPOSE, AS ARTICULATED ON BEHALF OF THE APPELLANT IS NOT EMERGING FROM THE SCHEME OF THE STATE GOVERNMENT. RATHER, THE EMPHASIS ON OF THE GRANT OF SALES - TAX BENEFIT IS 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, IT 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 T HE PRESENT CASE, IT IS NOT THE TIMING OF THE SUBSIDY 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, DOES 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 OBJECT OF THE SCHEME IS TO PROMOTE GENERATION OF ENERGY THROUGH NON CONVENTIONAL 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 OF PONNI SUGARS & CHEMICALS LTD. (SUPRA) CLEARLY NOTED THAT THE SUBSIDY RECEIVED THEREIN WAS TO BE UTILIZED O NLY FOR REPAYMENT OF TERM LOANS TAKEN BY THE ASSESSEE FOR SETTING UP NEW UNITS/EXPANSION OF EXISTING BUSINESS. IN THE PRESENT CASE, THERE IS NO SUCH RESTRICTION OR OBLIGATION ON THE PART OF THE ASSESSEE TO UTILIZE THE INCENTIVES AVAILED. IN FACT, ON THIS A SPECT THE INSTANT SCHEME IS AKIN TO THE SCHEME NOTED BY THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEELS (SUPRA) WHEREIN THE ASSESSEE WAS FOUND FREE TO USE THE MONEY IN ITS BUSINESS 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 PAYMENT OF INCENTIVE SUBSIDY, WE ARE SATISFIED THAT THE SALES - TAX BENEFITS RECEIVED BY THE AS SESSEE UNDER THE INSTANT SCHEME ARE IN THE COURSE OF CARRYING ON ITS TRADE MORE PROFITABLY AND THEREFORE SUCH RECEIPT CANNOT BE CHARACTERIZED AS CAPITAL IN NATURE . THUS, THE ASSESSEE FAILS ON THIS GROUND. THE AFORESAID DECISION OF CO - ORDINATE BENCH ANSWE RED THE FIRST ISSUE RAISED IN THE PRESENT SET OF APPEAL I.E. THE SALES TAX SUBSIDY RECEIVED BY ASSESSEE ON GENERATION OF POWER IS REVENUE IN NATURE. IN THE LIGHT OF ABOVE 12 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 FINDINGS THE ALTERNATE PLEA RAISED BY ASSESSEE BY WAY OF APPLICATION UNDER RULE 27 I S REJECTED. 11. THE LD. AR HAS PLACED RELIANCE ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF GARDEN SILK MILLS VS. COMMISSIONER OF INCOME TAX AND ANOTHER (SUPRA) TO CONTEND THAT THE SUBSIDY IN THE FORM OF SALES TAX INCENTIVE IS CAPITAL RE CEIPT. THE LD. AR HAS NOT DRAWN ANY PARITY BETWEEN THE SALES TAX SUBSIDY HELD AS CAPITAL IN THE SAID CASE AND THE SALES TAX SUBSIDY IN QUESTION IN THE APPEALS IN HAND. MERELY FOR THE REASON THAT THAT THE SUBSIDY THEREIN WAS IN THE NATURE OF SALES TAX INC ENTIVE WOULD NOT IPSO FACTO LEAD TO CONCLUSION THAT ALL S ALES T AX S UBSID IES WOULD BE CAPITAL IN NATURE. THE PURPOSE TEST AS EXPOUNDED BY HONBLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. PONNI SUGARS & CHEMICALS LTD. & ORS. (SUPRA) HAS TO BE APPLIED TO DETERMINE THE NATURE OF SUBSIDY. GARDEN SILK MILLS VS. COMMISSIONER OF INCOME TAX AND ANOTHER (SUPRA), THE ASSESSEE HAD SET UP THE UNIT IN A BACKWARD AREA, WHICH MADE IT ENTITLED TO RECEIVE 75% OF THE CAPITAL INVESTMENT OVER A PERIOD OF EIG HT YEARS FROM THE DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION. THE SALES TAX EXEMPTION WAS FIXED AT RS.50.07 CRORES BEING 75% OF CAPITAL INVESTMENT. THE HONBLE GUJARAT HIGH COURT HELD THAT SCHEME IS ORIENTED TOWARDS AND WAS SUBSERVIENT TO THE INVESTME NT IN FIXED CAPITAL ASSETS. THE PURPOSE OF THE SALES TAX INCENTIVE WAS NOT TO GIVE ASSESSEE ASSISTANCE IN CARRYING OUT THE BUSINESS OPERATIONS BUT TO ENCOURAGE HE SETTING UP OF INDUSTRY IN BACKWARD AREA. THUS, IN THE FACTS OF THE CASE, THE HONBLE HIGH C OURT HELD SALES TAX INCENTIVE AS CAPITAL RECEIPT. SINCE, FACTS IN PRESENT CASE ARE DISTINGUISHABLE, THE RATIO LAID DOWN IN GARDEN SILK MILLS VS. COMMISSIONER OF INCOME TAX AND ANOTHER (SUPRA) WOULD NOT APPLY. 13 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 SIMILARLY, IN THE CASE S OF COMMISSIONER OF INCOME TAX VS. CHAPHALKAR BROTHERS (SUPRA) AND DCIT VS. INOX LEISURE LTD. (SUPRA) ENTERTAINMENT SUBSIDY/EXEMPTION OF SALES TAX AS SUBSIDY WAS GIVEN TO PROMOTE CONSTRUCTION OF MULTIPLEX THEATRES. THE SUBSIDY WAS GIVEN TO RECOUP CAPITAL INVESTMENT AND THUS, WAS HELD TO BE CAPITAL RECEIPT. SINCE, THE FACTS OF THE ABOVE REFERRED CASES ARE ENTIRELY DIFFERENT, THEY WOULD NOT IN ANY MANNER SUPPORT THE CONNECTIONS OF THE ASSESSEE. 12. NOW, WE PROCEED TO DECIDE THE SECOND ISSUE I.E. WHETHER THE SALES TAX SUBSIDY RECEIVED BY ASSESSEE ON GENERATION OF POWER THROUGH WINDMILL IS ELIGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT. SIMILAR ISSUE WAS RAISED BEFORE THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. PATANKAR WIND FARM PVT. LTD. VS. D Y. COMMISSIONER OF INCOME TAX (SUPRA). THE TRIBUNAL AFTER CONSIDERING THE DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S. MEGHALAYA STEELS LTD. (SUPRA) HELD AS UNDER : 24. ANOTHER RELIANCE PLACED UPON BY THE LEAR NED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS ON THE RATIO LAID DOWN BY HONBLE GAUHATI HIGH COURT IN CIT VS. MEGHALAYA STEELS LTD. (SUPRA), WHEREIN THE HONBLE HIGH COURT HELD THAT THE TRANSPORT SUBSIDY, POWER SUBSIDY, INTEREST SUBSIDY AND INSURANCE SUBSIDY REDUCED THE COST OF PRODUCTION OF AN INDUSTRIAL UNDERTAKING AND SINCE THERE WAS FIRST DEGREE NEXUS BETWEEN THE SAID SUBSIDIES AND THE PROFITS AND GAINS DERIVED BY AN INDUSTRIAL UNDERTAKING, THEREFORE, IT WAS ENTITLED TO THE DEDUCTION UNDER SECTION 80IB / 80IC OF THE ACT IN RESPECT OF THE SAID SUBSIDIES SO RECEIVED. THE PROPOSITION PROPOUNDED BY THE HONBLE GAUHATI HIGH COURT IN THE SAID CASE WAS THAT THE SUBSIDIES RECEIVED BY THE ASSESSEE WERE INTER - LINKED AND HAD DIRECT NEXUS WITH THE MANUFACTURING ACTIVITIES OF THE INDUSTRIAL UNDERTAKING AND HAD REDUCED THE COST OF PRODUCTION OF THE SAID UNDERTAKING AND HENCE, THERE WAS NEXUS BETWEEN THE SAID SUBSIDIES AND PROFITS AND GAINS DERIVED BY THE INDUSTRIAL UNDERTAKING AND HENCE, THE SAME WERE HELD TO BE E LIGIBLE FOR DEDUCTION UNDER SECTION 80IB / 80IC OF THE ACT. HOWEVER, IN THE FACTS OF THE CASE BEFORE US, THE ASSESSEE IS IN RECEIPT OF SALES TAX SUBSIDY, WHICH UNDOUBTEDLY, IS A REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE, BUT THE SAID SUBSIDY DOES NOT 14 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 IN ANY MANNER REDUCE THE COST OF PRODUCTION OF INDUSTRIAL UNDERTAKING. IT IS A BENEFIT GIVEN TO THE INDUSTRIAL UNDERTAKING FOR ESTABLISHING THE WIND ENERGY GENERATION UNITS IN THE STATE OF MAHARASHTRA, BUT THE SAME DOES NOT HAVE A DIRECT NEXUS BETWEEN THE SU BSIDY ON THE ONE HAND AND THE MANUFACTURING ACTIVITY OF THE INDUSTRIAL UNDERTAKING ON THE OTHER HAND. IN THE ABSENCE OF A DIRECT AND FIRST DEGREE NEXUS BETWEEN THE SUBSIDY ON THE ONE HAND AND PROFITS OF THE INDUSTRIAL UNDERTAKING ON THE OTHER HAND, WHERE S UCH SUBSIDY DOES NOT REDUCE THE COST OF PRODUCTION, WE HOLD THAT THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS NOT ELIGIBLE TO THE DEDUCTION UNDER SECTION 80IA OF THE ACT. THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS AN INCENTIVE SUBSIDY AND IS NOT AN OPERATIONAL SUBSIDY AND CONSEQUENTLY, DOES NOT AFFECT PROFITS OF THE BUSINESS AND IS NOT LINKED TO THE PROFITS OF INDUSTRIAL UNDERTAKING AND HENCE, IS NOT DEDUCTIBLE IN TERMS OF PROVISIONS OF SECTION 80IA OF THE ACT. [EMPHASIZED BY US.] 13. THE CO NTENTION OF THE ASSESSEE IS THAT THE HONBLE SUPREME COURT OF INDIA IN AN APPEAL BY THE DEPARTMENT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MEGHALAYA STEELS LTD. (SUPRA) HAS HELD THAT SUBSID IES WHICH GOES TO REIMBURSEMENT OF COST PRODUCTION OF GOODS OF A PARTICULAR BUSINESS WOULD ALSO HAVE TO BE INCLUDED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES. THE CONTENTION OF THE LD. AR IS THAT THE WORD SUBSID IES USED BY THE HONBLE APEX C OURT IN PARA 28 OF THE JUDGMENT INCLUDES ALL SORTS OF SUBSIDIES INCLUDING SALES TAX SUBSIDY AND IS NOT MERELY RESTRICTED TO TRANSPORT, POWER AND INTEREST SUBSIDIES. THEREFORE, THE APPEALS MAY BE REMITTED BACK TO COMMISSIONER OF INCOME TAX (APPEALS) FOR RE CONSIDERATION OF THE ISSUE IN THE LIGHT OF DECISION OF HONBLE APEX COURT IN THE SAID CASE. TO FURTHER SUPPORT HIS CONTENTIONS THE LD. AR PLACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF RUPINDER SINGH ARORA VS. ITO (SUPRA). 15 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 14. THE HONBLE APEX COURT IN APPEAL BY THE DEPARTMENT HAS MERELY AFFIRMED THE DECISION OF HONBLE GAUHATI HIGH COURT. THERE IS NO REFERENCE OR DISCUSSION ON SALES TAX SUBSIDY EITHER BY HONBLE HIGH COURT OR BY THE HONBLE SUPREME COURT OF INDIA IN THE J UDGMENT AFFIRMING THE DECISION OF HONBLE HIGH COURT. IN OUR CONSIDERED VIEW, THE OBSERVATIONS OF HONBLE APEX COURT IN PARA 28 ON WHICH THE LD. AR HAS PLACED ARE IN CONTEXT OF SUBSIDIES WHICH WERE SUBJECT MATTER OF DISPUTE IN THE CASE OF COMMISSIONER O F INCOME TAX VS. MEGHALAYA STEELS LTD. (SUPRA). THE SUBSIDIES THAT WERE SUBJECT MATTER OF ADJUDICATION IN THE AFORESAID CASE WERE TRANSPORT, INTEREST AND POWER SUBSIDIES. THE RELEVANT PARA 28 OF THE JUDGMENT BY HONBLE APEX COURT IN THE CASE OF COMMISSIO NER OF INCOME TAX VS. MEGHALAYA STEELS LTD. (SUPRA) READ AS UNDER : 28. IT ONLY REMAINS TO CONSIDER ONE FURTHER ARGUMENT BY SHRI RADHAKRISHNAN. HE HAS ARGUED THAT AS THE SUBSIDIES THAT ARE RECEIVED BY THE RESPONDENT, WOULD BE INCOME FROM OTHER SOURCES REF ERABLE TO SECTION 56 OF THE INCOME TAX ACT, ANY DEDUCTION THAT IS TO BE MADE, CAN ONLY BE MADE FROM INCOME FROM OTHER SOURCES AND NOT FROM PROFITS AND GAINS OF BUSINESS, WHICH IS A SEPARATE AND DISTINCT HEAD AS RECOGNISED BY SECTION 14 OF THE INCOME TAX AC T. SHRI RADHAKRISHNAN IS NOT CORRECT IN HIS SUBMISSION THAT ASSISTANCE BY WAY OF SUBSIDIES WHICH ARE REIMBURSED ON THE INCURRING OF COSTS RELATABLE TO A BUSINESS, ARE UNDER THE HEAD INCOME FROM OTHER SOURCES, WHICH IS A RESIDUARY HEAD OF INCOME THAT CAN BE AVAILED ONLY IF INCOME DOES NOT FALL UNDER ANY OF THE OTHER FOUR HEADS OF INCOME. SECTION 28(III)(B) SPECIFICALLY STATES THAT INCOME FROM CASH ASSISTANCE, BY WHATEVER NAME CALLED, RECEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVERNMENT OF INDIA, WILL BE INCOME CHARGEABLE TO INCOME TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. IF CASH ASSISTANCE RECEIVED OR RECEIVABLE AGAINST EXPORTS SCHEMES ARE INCLUDED AS BEING INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, IT IS OBVIOUS THAT SUBSIDIES WHICH GO TO REIMBURSEMENT OF COST IN THE PRODUCTION OF GOODS OF A PARTICULAR BUSINESS WOULD ALSO HAVE TO BE INCLUDED UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, AND NOT UNDER THE HE AD INCOME FROM OTHER SOURCES. A PERUSAL OF ABOVE OBSERVATIONS OF HONBLE SUPREME COURT OF INDIA UNAMBIGUOUSLY SHOW THAT THE SUBSIDIES REFER TO SUBSIDIES THAT WERE SUBJECT MATTER OF APPEAL AND NOT SALES TAX SUBSIDY. IF THE PRINCIPLE IS TO BE APPLIED IT WOULD BE APPLICABLE ON OPERATI ONAL SUBSIDY. 16 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 THE TRIBUNAL IN THE CASE OF M/S. PATANKAR WIND FARM PVT. LTD. VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) HAS HELD THAT SALES TAX SUBSIDY IS NOT AN OPERATIONAL SUBSIDY AND IS NOT LINKED TO THE PROFITS OF INDUSTRIAL UNDERTAKING. THE SCHEME UNDER WHICH THE PRESENT ASSESSEE HAS RECEIVED SALES TAX SUBSIDY IS SAME , THEREFORE, THERE IS NO REASON TO TAKE A DIFFERENT VIEW. 15. THE RELIANCE PLACED BY THE LD. AR ON CBDT CIRCULAR NO. 39/2016 DATED 29 - 11 - 2016 IS AGAIN MISPLACED. THE SAID CIRCULAR SPECIFICALLY DEALS WITH TRANSPORT, POWER AND INTEREST SUBSIDIES RECEIVED BY INDUSTRIAL UNDERTAKING. THE LD. AR HAS DRAWN OUR ATTENTION T O THE WORDS BUSINESS SUBSIDIES USED IN PARA 2 OF THE SAID CIRCULAR TO CONTEND THAT BUSINESS SUBSID IES INCLUDES SALES TAX SUBSIDY. WE ARE NOT IN CONSONANCE WITH LD. AR IN INTERPRETATION OF EXPRESSION BUSINESS SUBSID IES AS USED IN PARA 2 OF THE SAID CIR CULAR. THE CBDT CIRCULAR IS WITH SPECIFIC REFERENCE TO TRANSPORT, POWER AND INTEREST SUBSIDIES . THE EXPRESSION BUSINESS SUBSID IES USED IN THE BODY OF CIRCULAR REFER TO ONLY THOSE SUBSIDIES THAT ARE CONTAINED IN SUBJECT OF CIRCULAR. THUS, THE EXPRESSION BUSINESS SUBSIDIES IN BODY OF CIRCULAR CANNOT BE LINKED TO ANY OTHER SUBSIDY. 16. THE LD. AR HAS DRAWN OUR ATTENTION TO THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF RUPINDER SINGH ARORA VS. ITO (SUPRA). IN THE SAID CASE THE TRIBUNAL HA S RESTORED THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO CONSIDER ASSESSEES CLAIM OF DEDUCTION U/S. 80IA(4) IN THE LIGHT OF DECISION OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MEGHALAYA STEELS LTD. (SUPRA) AND IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S. SHREE BALAJI ALLOYS (SUPRA). IT WOULD BE RELEVANT TO MENTION HERE THAT PERHAPS THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. PATANKAR WIND FARM PVT. LTD. VS. DY. 17 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 COMMISSIONER OF INCOME TAX ( SUPRA) WAS NOT BROUGHT TO THE NOTICE OF MUMBAI BENCH . AS WE HAVE OBSERVED EARLIER , THE ISSUE WHETHER THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION U/S. 80IA IN THE LIGHT OF DECISION RENDERED BY HONBLE HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TA X VS. MEGHALAYA STEELS LTD. (SUPRA) HAS ALREADY BEEN CONSIDERED AND HAS BEEN DECIDED AGAINST THE ASSESSEE . ACCORDINGLY, WE FIND NO REASON TO REMIT THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER. 17. THUS, IN THE VIEW OF OUR ABOVE FINDINGS AND THE DEC ISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. PATANKAR WIND FARM PVT. LTD. VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) WE HOLD THAT THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS REVENUE IN NATURE AND NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S. 80 IA OF THE ACT. ACCORDINGLY, THE SECOND QUESTION IN APPEALS IS ANSWERED IN NEGATIVE AND AGAINST THE ASSESSEE. THE IMPUGNED ORDERS ARE SET ASIDE AND BOTH THE APPEALS BY REVENUE ARE ALLOWED. ITA NO S. 169 & 170/PUN/2016 (A.YS. 2003 - 04 & 2006 - 07) 1 8 . ITA NOS. 169 & 170/PUN/2016 ARE DIRECTED AGAINST THE ORDER S OF COMMISSIONER OF INCOME TAX (APPEALS) - 2, PUNE FOR THE ASSESSMENT YEARS 2003 - 04 AND 2006 - 07, RESPECTIVELY . BOTH THE IMPUGNED ORDERS ARE DATED 18 - 01 - 2016 . IN BOTH THE APPEALS THE ASSESSEE HAS IMPUGN ED THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN REJECTING ASSESSEES CLAIM OF DEDUCTION U/S. 80IA ON THE S ALES T AX BENEFIT (SUBSIDY) . 1 9 . DR. PRAYAG JHA & SHRI PRATEEK JHA APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE AUTHORITIES BEL OW HAVE FAILED TO APPRECIATE THAT THE SALES TAX BENEFIT IS INEXTRICABLY LINKED TO INDUSTRIAL UNDERTAKING AND IS AN INTEGRAL PART OF PROFIT DERIVED FROM POWER GENERATION BY THE SAID 18 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 UNDERTAKING AND HENCE, ELIGIBLE FOR DEDUCTION U/S. 80IA OF THE ACT. THE LD . AR SUPPORTED THE SUBMISSIONS MADE BY SHRI RAJAN VORA AND PRAYED FOR ALLOWING THE APPEAL OF ASSESSEE. HOWEVER, THE LD. AR FAIRLY ADMITTED THAT IDENTICAL ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OW N CASE IN ITA NOS. 2225 & 2226/PN/2013 FOR ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 DECIDED ON 10 - 04 - 2015. 20 . THE LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS). THE LD. DR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEA LS) HAS REJECTED THE CONTENTIONS OF ASSESSEE BY FOLLOWING THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2004 - 05 AND 2005 - 06. 2 1 . W E HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW . WE FIND THAT THE ISSUE, WHETHER THE S ALES T AX SUBSIDY RECEIVED BY ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80IA HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 (SUPRA). WHILE CONSI DERING THE APPEALS BY THE DEPARTMENT IN THE CASE OF INDO ENTERPRISES PVT. LTD. , WE HAVE REPRODUCED THE FINDINGS OF TRIBUNAL FROM THE APPEAL OF M/S. PATANKAR WIND FARM PVT. LTD. VS. DY. COMMISSIONER OF INCOME TAX (SUPRA) IN PARA 12 ABOVE . THERE IS NOTHING ON RECORD TO SUGGEST THAT THERE HAS BEEN ANY MATERIAL CHANGE IN THE FACTS AND CIRCUMSTANCES IN THE ASSESSMENT YEARS UNDER APPEAL. THEREFORE, WE FIND NO REASON TO TAKE A CONTRARY VIEW. 2 2 . AS FAR AS THE SUBMISSIONS MADE BY SHRI RAJAN VORA WE HAVE ALREAD Y DEALT WITH THE SAME WHILE ADJUDICATING THE APPEALS IN THE CASE OF INDO 19 ITA NO S. 1362/PUN/2011, 2389/PUN/2012, 169 & 170/PUN/2016 ENTERPRISES PVT. LTD. , T HE SAME WOULD MUTATIS MUTANDIS APPLY IN THE PRESENT SET OF APPEALS. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN DISAL LOWING ASSESSEES CLAIM OF DEDUCTION U/S. 80IA ON THE SALES TAX SUBSIDY. ACCORDINGLY, THE IMPUGNED ORDERS ARE UPHELD AND BOTH THE APPEALS OF ASSESSEE ARE DISMISSED. 2 3 . TO SUM UP, ITA NO. 1362/PUN/2011 & ITA NO. 2389/PUN/2012 BY THE DEPARTMENT ARE ALLOWE D AND ITA NOS. 169 & 170/PUN/2016 BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 22 ND DAY OF DECEMBER, 2017 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 22 ND DECEMBER, 2017 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) , AURANGABAD 4. / THE CIT , AURANGABAD 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE