M/s M/s Trident Alco Chem Ltd., Ludhiana V. ACIT, Ludhiana

ITA 26/CHANDI/1999

• Counselvise Citation: 2621514 RSA 1999
• Duration Of Justice: 16 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-10-2015
• Assessment Year: 1995-1996
• Appeal Filed On: 08-01-1999
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: ADITYA KUMAR
• Keywords: Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.26/CHD/1999 (ASSESSMENT YEAR : 1995-96) M/S TRIDENT ALCO-CHEM LTD., VS. THE A.C.I.T., 85, IAA, LUDHIANA. CC-III, LUDHIANA. PAN: ITA NO.683/CHD/1999 (ASSESSMENT YEAR : 1996-97) M/S TRIDENT ALCO-CHEM LTD., VS. THE D.C.I.T., 85, IAA, LUDHIANA. CC-III, LUDHIANA. PAN: ITA NO.658/CHD/2000 (ASSESSMENT YEAR : 1997-98) M/S TRIDENT ALCO-CHEM LTD., VS. THE D.C.I.T., 85, IAA, LUDHIANA. CC-III, LUDHIANA. PAN: AND ITA NO.938/CHD/2005 (ASSESSMENT YEAR : 1999-2000) M/S TRIDENT ALCO-CHEM LTD., VS. THE A.C.I.T., (NOW INDUSTRIAL ORGANICS LTD.) CC-III, LUDHIANA. 85, IAA, LUDHIANA. PAN: (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ADITYA KUMAR RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 06.10.2015 DATE OF PRONOUNCEMENT : 29.10.2015 2 O R D E R PER RANO JAIN, A.M . : THIS BUNCH OF FOUR APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS), RELATING TO ASSESSMENT YEARS 1995-96, 1996-97, 1997-98 AND 1999 - 2000. IN ALL THE APPEALS, THE ISSUE IS COMMON AND , THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND AR E BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. SINCE THE FACTS AND CIRCUMSTANCES ARE IDENTICAL IN ALL THE APPEALS, WE MAY REFER TO THE DISCUSSION IN THE ORDERS OF THE INCOME TAX AUTHORI TIES IN THE CASE OF ASSESSEE IN ITA NO.26/CHD/1999. TH IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-III, LUDHIANA DATED 14.10.1998. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE RECEIVED SALES TAX SUBSIDY DURING THE YEAR. THE AS SESSING OFFICER TREATING THE SAME AS REVENUE RECEIPT TAXED IT UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ACTION OF THE ASSESSING OFFICER WAS CONFIRMED BY THE LEARNED CIT (APPEALS). 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE I.T.A.T., WHEREBY THE APPEAL OF THE ASSESSEE WAS 3 DISMISSED, MAINLY RELYING ON THE JUDGMENT OF THE HO N'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD., 286 ITR 1 (P&H). THE HO N'BLE HIGH COURT BY ITS ORDER IN APPEAL NO.421 OF 2007 DA TED 14..5.2014 RESTORED THE APPEAL TO THE TRIBUNAL. T HIS WAS BASICALLY BASED ON THE FACTS THAT THOUGH THE I.T.A. T. HAD DISMISSED THE APPEAL OF THE ASSESSEE ON THE BASIS O F ABHISHEK INDUSTRIES LTD. (SUPRA), HOWEVER IN THE CA SE OF CIT VS. PONNY SUGARS & CHEMICALS LTD., 306 ITR 39 ( SC), THE HON'BLE APEX COURT HAS HELD THAT WHETHER THE SU BSIDY IS A REVENUE OR CAPITAL RECEIPT WOULD DEPEND UPON T HE NATURE AND PURPOSE OF THE SUBSIDY. IN THIS VIEW, T HE APPEALS ARE RESTORED TO THE TRIBUNAL TO ADJUDICATE THE NATURE AND PURPOSE OF SALES TAX SUBSIDY AND, THEREA FTER RECORD THEIR OPINION WHETHER IT IS A CAPITAL OR REV ENUE EXPENDITURE AFTER TAKING INTO CONSIDERATION THE JUD GMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF PONNY SUGARS & CHEMICALS LTD. (SUPRA). 5. NOW, THE ONLY ISSUE TO BE DECIDED BY US IS WHETHER THE SALES TAX SUBSIDY RECEIVED BY THE ASSES SEE FROM THE PUNJAB GOVERNMENT IS CAPITAL OR REVENUE IN NATURE. THE LEARNED COUNSEL FOR THE ASSESSEE AT TH E VERY OUTSET MENTIONED THAT THESE WERE A BUNCH OF APPEALS BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT TOGE THER WITH THE APPEAL OF THE ASSESSEE, OUT OF WHICH THERE WAS A CASE OF BHUSHAN LIMITED, WHICH WAS ALSO SIMILARLY RESTORED TO THE FILE OF THE TRIBUNAL TO DECIDE THE SAME 4 AFRESH. THE ORDER OF THE CHANDIGARH BENCH OF THE I.T.A.T. IN THE CASE OF BHUSHAN LIMITED IN ITA NO.744/CHD/2 006 & OTHERS DATED 16.6.2015 HAS BEEN DELIVERED, WHEREB Y AFTER DELIBERATING THE ISSUE ON THE NATURE OF SALE S TAX SUBSIDY, THE SAME HAS BEEN HELD TO BE REVENUE IN NA TURE. 6. THE LEARNED D.R. DID NOT CONTROVERT THE SAID SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. 7. WE OBSERVE THAT THE SIMILAR ISSUE HAS BEEN DECIDED BY US IN ITA NO.392/CHD/2007 (VARDHMAN TEXTILES LIMITED), ITA NO.592/CHD/2007, ITA NO.824/CHD/2007, ITA NO.773/CHD/2012, ITA NO.283/CHD/2014, ITA NO.911/CHD/2013 (VARDHMAN ACRYLIC LIMITED), ITA NO.987/CHD/2006, ITA NO.341/CBHD./2007, ITA NO.756/CHD/2011 (M/S STEEL STRIPS WHEELS LIMITED) AND ITA NO.896/CHD/2006 (M/ S INDIAN ACRYLICS LIMITED) VIDE CONSOLIDATED ORDER DA TED 21.10.2015, WHEREBY THE ISSUE RELATED TO SALES TAX SUBSIDY RECEIVED FROM THE PUNJAB GOVERNMENT WAS DECIDED IN FAVOUR OF THE ASSESSEE, RELYING ON THE ORDER IN THE CASE OF BHUSHAN LIMITED (SUPRA). RELEVANT FINDINGS ARE AS UNDER : 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY PERUSED THE ORDER OF I.T.A.T. IN THE 5 CASE OF BHUSHAN LIMITED (SUPRA) AND COME TO A CONCLUSION THAT THIS IS ONE OF THE CASES WHICH WAS BEFORE THE HON'BLE HIGH COURT ON THE SAME ISSUE OF SALES TAX SUBSIDY. HOWEVER, THE ONLY DIFFERENCE IN THE FACTS OF THE CASE OF BHUSHAN LIMITED (SUPRA) AND THE CURRENT ASSESSEE IS THAT IN THE CASE OF BHUSHAN LIMITED (SUPRA), THE SALES TAX SUBSIDY WAS RECEIVED FROM THE GOVERNMENT OF WEST BENGAL UNDER WEST BENGAL INCENTIVE SCHEME 1999, WHILE IN THE CASE OF THE ASSESSEE IN QUESTION, THE SUBSIDY HAS BEEN RECEIVED FROM THE GOVERNMENT OF GUJARAT UNDER THE NEW INCENTIVE POLICY-CAPITAL INVESTMENT INCENTIVE TO PREMIER/PRESTIGIOUS UNIT SCHEME 1995-2000. THEREFORE, IN ORDER TO COMPARE THE POLICIES OF TWO DIFFERENT STATES, WE HAVE VERY CAREFULLY GONE THROUGH THE SCHEMES OF BOTH THE GOVERNMENTS PRODUCED BEFORE US. SINCE AS PER THE DIRECTIONS OF THE HON'BLE HIGH COURT, WE HAVE TO JUDGE THE NATURE AND PURPOSE OF THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE. WE SEE THAT THE SCHEME OF THE GUJARAT GOVERNMENT HAS AIMED TO TRIGGER OFF ACCELERATED INDUSTRIAL DEVELOPMENT AND ECONOMIC GROWTH. FOR THIS PURPOSE, TO PROVIDE SPECIAL PACKAGE TO CERTAIN TYPES OF INDUSTRIES, THE SCHEME WAS FORMULATED. TO BE ELIGIBLE TO GET THE BENEFIT OF THIS SCHEME MAINLY THE CRITERIA HAS BEEN LAID DOWN WITH REGARD TO THE FIXED CAPITAL INVESTMENT, PROJECT RELATED INFRASTRUCTURAL INVESTMENT, SOCIAL INFRASTRUCTURAL INVESTMENT AND COMMON AND PUBLIC PURPOSE INFRASTRUCTURE. ALL THESE REQUIREMENTS ARE TOWARDS CAPITAL INVESTMENTS. FURTHER A CLOSER LOOK AT THE CLAUSE RELATING TO INELIGIBLE INVESTMENT SHOWS THAT SHORT TERM INVESTMENT OR INVESTMENT OF REVENUE NATURE ARE NOT ELIGIBLE FOR THIS SCHEME. A CERTIFICATE OF 6 BEING DECLARED AS PERMANENT PRESTIGIOUS UNIT HAS BEEN GIVEN TO THE ASSESSEE DATED 18.5.2002, WHEREBY THE DETAILS OF INVESTMENT OF THE PROJECT AND EMPLOYMENT ARE GIVEN. WE HAVE ALSO GONE THROUGH THE SCHEME OF THE BENGAL GOVERNMENT WHICH WAS IN QUESTION BEFORE THE CHANDIGARH BENCH OF THE I.T.A.T. IN THE CASE OF BHUSHAN LIMITED (SUPRA). THOUGH BOTH THE SCHEMES OF GUJARAT GOVERNMENT AND WEST BENGAL GOVERNMENT ARE NOT VERBATIM, THE SUM AND SUBSTANCE OF BOTH THE SCHEMES ARE SAME. AS DIRECTED BY THE HON'BLE HIGH COURT ON THE BASIS OF JUDGMENT IN THE CASE OF PONNY SUGARS & CHEMICALS LTD. (SUPRA), THE NATURE OF THE SALES TAX SUBSIDY IS TO BE DECIDED ON THE BASIS OF CHARACTER OF THE RECEIPT IN THE HANDS OF THE ASSESSEE. WE SEE THAT THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS CAPITAL IN NATURE AND IS NOT SUBJECTED TO TAX. IN ARRIVING AT THIS CONCLUSION, WE ARE GUIDED BY THE ORDER OF THE I.T.A.T. IN THE CASE OF BHUSHAN LIMITED (SUPRA), IN WHICH THE COORDINATE BENCH OF THE I.T.A.T. IN THE SAME SET OF FACTS AND CIRCUMSTANCES HAS HELD AS UNDER: 24. THE HON'BLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD. (SUPRA) CONSIDERING ITS EARLIER DECISION IN THE CASE OF SAHNEY STEELS & PRESS WORKS LTD.(SUPRA) DIRECTED THAT THE TEST IS THAT THE CHARACTER OF THE RECEIPT IN THE HANDS OF ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH SUBSIDY IS GIVEN. IN OTHER WORDS, IN SUCH CASES, ONE HAS TO APPLY THE PURPOSE TEST. THE POINT OF TIME AT WHICH SUBSIDY IS PAID, IS NOT RELEVANT. THE SOURCE IS IMMATERIAL. THE FORM OF SUBSIDY IS IMMATERIAL. 7 25. CONSIDERING THE FACTS OF THE CASE AND THE WEST BENGAL INCENTIVE SCHEME, 1999 IN THE LIGHT OF THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD. (SUPRA), IT IS CLEAR THAT THE UNIT OF ASSESSEE WAS SET UP AS PER SCHEME FORMULATED BY GOVERNMENT OF WEST BENGAL AND ASSESSEE HAS BEEN ALLOWED REMISSION OF SALES TAX FOR 12 YEARS UPTO 100% OF GROSS FIXED CAPITAL INVESTMENT/ASSET OF THE APPROVED PROJECT. THE INCENTIVE SCHEME WAS AVAILABLE FOR LOCATION OF THE UNIT. NO INCENTIVE IS AVAILABLE TO UNITS LOCATED IN GROUP A. THE UNIT OF ASSESSEE IS LOCATED IN GROUP B (HOOGHLY). THE SUBSIDY WOULD HELP THE GROWTH OF INDUSTRY AND NOT TO SUPPLEMENT PROFIT. SUBSIDY IS DETERMINED WITH REFERENCE TO THE FIXED CAPITAL INVESTMENT/ASSET AND NOT PROFIT. NO WORKING CAPITAL IS CONSIDERED IN THE SCHEME. THE LD. DR SAYS THAT THE SUBSIDY IS GIVEN FOR 12 YEARS AFTER PRODUCTION AND AS SUCH IT IS REVENUE IN NATURE. THE ARGUMENTS OF LD. DR CANNOT BE ACCEPTED IN VIEW OF THE ABOVE FACTS BECAUSE THE SCHEME IS MADE TO ENCOURAGE THE PROMOTION OF INDUSTRIES/SETTING UP IN THE STATE OF WEST BENGAL. THE INCENTIVES ARE PROVIDED TO APPROVED PROJECTS ONLY. THE PURPOSE OF GIVING SUBSIDY IS THUS, TO PROMOTE AND SET UP INDUSTRIES IN STATE OF WEST BENGAL. THE ELIGIBILITY CERTIFICATE WAS ISSUED BEFORE COMMENCEMENT OF PRODUCTION, THEREFORE SUBSIDY BASED ON FIXED CAPITAL INVESTMENT. THE TIME OF 12 YEARS AFTER COMMENCEMENT OF THE PRODUCTION IS NOT RELEVANT. THE SOURCE OF SUBSIDY OUT OF SALES TAX IS IMMATERIAL. THE FORM OF SUBSIDY IS ALSO NOT RELEVANT. THE OBJECT/PURPOSE OF ASSISTANCE UNDER THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO SET UP NEW UNIT IN STATE 8 OF WEST BENGAL. THEREFORE, THE RECEIPT OF THE SALES TAX SUBSIDY IN THE HANDS OF ASSESSEE WAS CAPITAL IN NATURE. THE DECISIONS RELIED ON BY LD. DR WOULD NOT SUPPORT THE CASE OF THE REVENUE. THE DECISION CITED BY LD. COUNSEL FOR THE ASSESSEE CLEARLY SUPPORT THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE THAT THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE ARE CAPITAL IN NATURE. WE MAY ALSO NOTE HERE THAT THE SAME SCHEME UNDER WEST BENGAL INCENTIVE SCHEME, 1999 UNDER REFERENCE WAS SUBJECT MATTER OF CONSIDERATION BEFORE ITAT KOLKATTA BENCH IN THE CASE OF KEVENTER AGRO LTD. (SUPRA) AND THE TRIBUNAL ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE WEST BENGAL INCENTIVE SCHEME, 1999 CATEGORICALLY ENCOURAGE THE PROMOTION OF INDUSTRIES IN THE STATE OF WEST BENGAL. 26. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE LIGHT OF DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD. (SUPRA) AND CONSIDERING THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS CAPITAL RECEIPT IN NATURE AND ARE NOT SUBJECTED TO TAX. THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF RECEIPT OF SALES TAX SUBSIDY ARE ACCORDINGLY DELETED IN ALL THE ASSESSMENT YEARS IN APPEALS. THE ISSUE REMANDED TO THE TRIBUNAL IS THUS, DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN ALL THE APPEALS UNDER REFERENCE. 8. RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL, WE HEREBY HOLD THAT THE SALES TAX SUBSIDY RECEIVED BY THE 9 ASSESSEE IS CAPITAL IN NATURE AND, THEREFORE, NOT TAXABLE. 9. THE APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO.392/CHD/2007 : ITA NO.592/CHD/2007 : ITA NO.824/CHD/2007 : ITA NO.283/CHD/2014 : ITA NO.911/CHD/2013 : 10. IT IS RELEVANT TO OBSERVE HERE THAT THE FACTS AND CIRCUMSTANCES OF THESE CASES ARE SIMILAR TO THAT OF VARDHMAN ACRYLICS LIMITED IN ITA NO.773/CHD/2012 AND THE FINDINGS GIVEN IN ITA NO.773/CHD/2012 SHALL APPLY TO THESE CASES ALSO WITH EQUAL FORCE. ITA NO.897/CHD/2006 : ITA NO.341/CHD/2007 : ITA NO.756/CHD/2011 : (M/S STEEL STRIPS WHEELS LIMITED,) & ITA NO.896/CHD/2006 : (M/S INDIAN ACRYLICS LIMITED) 9. THE APPEAL OF THE ASSESSEE IS ALLOWED. 11. IN THESE CASES, THE ASSESSES HAVE RECEIVED SALES TAX SUBSIDY FROM PUNJAB GOVERNMENT UNDER THE SCHEME NAMED, INDUSTRIAL POLICY & INCENTIVE CODE, 1996. WE HAVE GONE THROUGH THE SAID POLICY AND FOUND THAT THE SCHEME THOUGH NOT VERBATIM AS THAT OF WEST BENGAL OR GUJARAT SCHEMES, BUT THE SUM AND SUBSTANCE OF ALL THESE SCHEMES ARE THE SAME, THEREFORE, RELYING ON OUR FINDING GIVEN IN ITA NO.773/CHD/2012, WE HOLD THAT THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS CAPITAL IN NATURE. 8. DURING THE COURSE OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE PREFERRED NOT TO PRESS ANY OTHER 10 GROUND RAISED BY THE ASSESSEE IN THE GROUND OF APPE AL. 9. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH DAY OF OCTOBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 29 TH OCTOBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH