Vardhman Acrylics Limited, Ludhiana V. ACIT, Ludhiana

ITA 283/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77120 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 19-03-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJINDER SINGH
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Business income; Source of fund; Question of law; Capital receipt; Revised return
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.283/CHD/2014 ASSESSMENT YEAR : 2007-08 M/S VARDHMAN ACRYLICS LTD., VS THE A.C.I.T., CHANDIGARH ROAD, CIRCLE 1 LUDHIANA. LUDHIANA. PAN : AAACV7602E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARWAL RESPONDENT BY : SHRI RAJINDER SINGH, DR DATE OF HEARING : 12.05.2014 DATE OF PRONOUNCEMENT : 29.05.2014 ORDER PER SUSHMA CHOWLA, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, LUDHIANA D ATED 10.01.2014 RELATING TO ASSESSMENT YEAR 2007-08 AGAI NST THE ORDER PASSED UNDER SECTION 143(3) OF THE ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL : 1. THAT THE ORDER PASSED BY THE LD.CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS WHILE TAXING THE SALES TAX SUBSIDY AMOUNTING TO RS.12,58,32,691/- RE CEIVED FROM GOVERNMENT OF GUJARAT AS THE REVENUE RECEIPT AND NO T CAPITAL RECEIPT AS DONE BY THE APPELLANT. 3. THE LD. AR FOR THE ASSESSEE AT THE OUTSET POINTE D OUT THAT THE ISSUE IN THE PRESENT APPEAL IS COVERED AGAINST THE ASSESSEE IN VIEW OF 2 THE RATIO LAID DOWN BY THE TRIBUNAL IN ASSESSEE'S OWN CASE IN EARLIER YEARS. 4. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELAT ION TO THE TREATMENT OF THE SALES TAX SUBSIDY. DURING THE YEAR UNDER CO NSIDERATION, THE ASSESSEE HAD RECEIVED SALES TAX SUBSIDY OF RS. 12,5 8,32,695/-WHICH WAS DECLARED AS CAPITAL RECEIPTS IN THE COMPUTATION OF INCOME. THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE AS TO WH Y THE SAID RECEIPTS SHOULD NOT BE TREATED AS REVENUE RECEIPTS IN THE HANDS OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE JURI SDICTIONAL HIGH COURT IN CIT VS ABHISHEK INDUSTRIES LTD. 286 ITR 1 (P&H). REPLY OF THE ASSESSEE BEFORE THE ASSESSING OFFICER IS INC ORPORATED AT PAGES 2 TO 4 OF THE ASSESSMENT ORDER. THE ASSESSING OFFI CER, THEREAFTER HAS GONE THROUGH THE CLAIMS OF SUBSIDY GRANTED BY THE G OVERNMENT OF GUJRAT AND HAD HELD THE SAME TO BE REVENUE RECEIPTS TAXABLE IN THE HANDS OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOW N BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS ABHISHEK INDU STRIES LTD. (SUPRA). 6. WE FIND THAT THE ISSUE OF TREATMENT OF SALES TAX SUBSIDY IN THE HANDS OF THE ASSESSEE AROSE BEFORE THE TRIBUNAL IN ITA NO. 773/CHD/2012 M/S VARDHMAN ACRYLICS LTD. V ADDL. CIT , LUDHIANA, A.Y. 2006-07 WHEREIN VIDE ORDER DATED 02.08.2013 IT WAS HELD AS UNDER : 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN REL ATION TO THE ASSESSABILITY OF SALES TAX SUBSIDY RECEIVED FROM THE GOVERNMENT OF GUJARAT AMOUNTING TO RS.5,47,60,997/- . 3 4. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE WAS ENGAGED IN THE MANUFACTURING OF ACRYLI C FABRIC AND HAD PRODUCTION UNIT AT JHAGADIA, DISTRIC T BHARUCH IN GUJARAT. THE ASSESSEE WAS ELIGIBLE FOR SALES TAX EXEMPTION FOR 12 YEARS UNDER THE NEW INCENTIVE POLICY CAPITAL INVESTMENT INCENTIVE TO PREMIER/PRESTIGIO US UNIT SCHEME 1995-2000. THE SALE TAX SUBSIDY OF RS. 5.47 CRORES RECEIVED BY THE ASSESSEE WERE TREATED AS CAP ITAL RECEIPT BY THE ASSESSEE IN THE REVISED RETURN FILED . THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY THE SAID SALES TAX SUBSIDY SHOULD NOT BE TREATED AS REV ENUE RECEIPT IN VIEW OF THE JUDGMENT OF THE JURISDICTION AL HIGH COURT IN CIT VS. ABHISHEK INDUSTRIES [286 ITR 1(P&H )]. THE REPLY OF THE ASSESSEE IS INCORPORATED AT PAGES 2 AND 3 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER COM PARED THE SCHEME OF SUBSIDY UNDER THE GUJARAT GOVERNMENT WITH THE SCHEME OF SUBSIDY UNDER THE PUNJAB GOVERNMENT A ND ALSO CONSIDERED THE PRINCIPLE LAID DOWN BY THE PUNJ AB & HARYANA HIGH COURT IN CIT VS. ABHISHEK INDUSTRIES (SUPRA). THE ASSESSING OFFICER TOOK NOTE OF THE RA TIO LAID DOWN BY THE HON'BLE APEX COURT IN M/S SAHNEY STEEL & PRESS WORKS LTD. & OTHERS VS. CIT [228 ITR 253 (SC )] AND ALSO DISTINGUISHED THE RATIO LAID DOWN BY THE S PECIAL BENCH OF MUMBAI TRIBUNAL IN DCIT VS. RELIANCE INDUSTRIES LTD. REPORTED IN 88 ITD 273 (SB)(MUM) AN D HELD THAT THE NATURE OF THE SALES TAX SUBSIDY WAS R EVENUE AND THE SAME WAS TO BE INCLUDED AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. 5. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSESS ING OFFICER IN VIEW OF THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN CIT VS. ABHISHEK INDUS TRIES (SUPRA) AND THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2005-06 IN ITA NO.232/CHD/2011 ORDER DATED 25.11.2011. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE CIT (APPEALS). THE LEARNED A.R. FOR THE ASSESSEE F AIRLY POINTED OUT THAT THE ISSUE OF CHARGEABILITY OF SALE S TAX SUBSIDY WAS DECIDED AGAINST THE ASSESSEE IN THE PRE CEDING YEARS FOLLOWING THE RATIO LAID DOWN IN CIT VS. ABHI SHEK INDUSTRIES (SUPRA). HOWEVER IT WAS POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE LEGAL POSITI ON IS UNCERTAIN AND THERE ARE DECISIONS OF OTHER HIGH COU RTS AND JURISDICTIONAL PUNJAB & HARYANA HIGH COURT UNDE R WHICH THE SALES TAX SUBSIDY HAS BEEN HELD TO BE CAP ITAL RECEIPTS. OUR ATTENTION WAS DRAWN TO THE SCHEME DA TED 11.9.1995 PLACED AT PAGES 56 TO 77 OF THE PAPER BOO K AND IT WAS POINTED OUT BY THE LEARNED A.R. FOR THE ASSE SSEE THAT THE SUBSIDY WAS GIVEN FOR ESTABLISHING NEW PREMIER/PRESTIGIOUS UNITS IN THE STATE OF GUJARAT. CLAUSE 5(II,(IV) AND (X) LAYS DOWN CRITERIA OF THE INDUSTR Y WHICH QUALIFIES FOR THE SAID SCHEME IT WAS FURTHER POINT ED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE SALES TAX SUBSIDY AVAILABLE TO A UNIT ESTABLISHED IN GUJARAT VARIES ON ACCOUNT OF THE AMOUNT OF INVESTMENT AND ALSO THE AREA WHERE IT WAS LOCATED. CERTAIN CONDITIONS OF THE SA ID 4 SCHEME AS PER THE LEARNED A.R. FOR THE ASSESSEE WER E NOT THERE IN ANY OTHER SCHEME. ONE SUCH CONDITION WAS WHEREIN THE ASSESSEE HAD TO CONTRIBUTE 2% OF THE SA LES TAX INCENTIVES AVAILED AND 3% OF DEFERRED AMOUNT TO GOK UL GRAM YOJNA. ANOTHER CONDITION PRESCRIBED WAS THAT UNIT AVAILING THE INCENTIVES UNDER THE SCHEME TO EMPLOY 85% OF THE LOCAL PERSONS AS ITS EMPLOYEES. FURTHER IT WAS PROVIDED UNDER THE SCHEME THAT THE UNIT SHALL REINV EST AN AMOUNT EQUAL TO 50% OF THE SALES TAX INCENTIVES GRA NTED UNDER THE SCHEME IN NEW PROJECTS IN THE STATE WITHI N 15 YEARS AFTER COMMENCING COMMERCIAL PRODUCTION. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT THE UNIT ESTABLISHED BY THE ASSESSEE WAS PRESTIGIOUS UNIT AN D REGISTRATION CERTIFICATE WAS GRANTED ON 18.5.2002 A ND THE DATE OF START OF COMMERCIAL PRODUCTION WAS 6.3.1999 . THE LEARNED A.R. FOR THE ASSESSEE REFERRED TO THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN CIT VS. ABHISHEK INDUSTRIES (SUPRA) AND POINTED OUT THAT TH E SAME IS NOT BINDING PRECEDENT AS THE POLICY OF THE STATE GOVERNMENT OF PUNJAB WAS NOT BEFORE THE HON'BLE HIG H COURT AND THE ENTIRE CASE BEFORE THE HON'BLE HIGH C OURT MOVED IN THE ABSENCE OF THE POLICY, DOCUMENTS OF ST ATE OR INDUSTRIAL POLICY. IT IS POINTED OUT BY THE LEAR NED A.R. FOR THE ASSESSEE THAT FOR DECIDING THE ISSUE THE SC HEME NEEDS TO BE BROUGHT ON RECORD. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE CALCUTTA HIGH CO URT IN CIT VS. RASOI LTD. [335 ITR 438 (CAL)], WHICH HAD CONSIDERED THE SCHEME AND HAD ALSO REFERRED TO THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COUR T IN CIT VS. ABHISHEK INDUSTRIES (SUPRA) AND HELD THA T THE CENTRAL SUBSIDY RECEIVED TOWARDS THE COST OF PLANT & MACHINERY WAS A CAPITAL RECEIPT. THE LEARNED A.R. FOR THE ASSESSEE FURTHER PLACED RELIANCE IN CIT VS. SHAM LA L BANSAL REPORTED IN (2011) 200 TAXMAN 14 (P&H) AND C IT VS. SIYA RAM GARG (HUF) (2011) 237 CTR (P&H) 321. FURTHER RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HON'BLE GUJARAT HIGH COURT IN CIT VS. BIRLA VXL REPORTED IN TAX APPEAL NOS.316 TO 318 OF 2012 JUD GMENT DATED 12.2.2013, WHEREIN THE HON'BLE COURT HAD CONSIDERED THE SCHEME OF SUBSIDY IN THE STATE OF GU JARAT AND HAD HELD THAT IN ORDER TO DETERMINE THE CHARACT ER OF SUBSIDY IN THE HANDS OF THE RECIPIENT, PURPOSE OF T HE SUBSIDY IS TO BE CONSIDERED AND SOURCE OF FUND AND MECHANISM OF GIVING THE SUBSIDY WAS IMMATERIAL. TH E HON'BLE COURT FURTHER HELD THAT WHERE THE SCHEME WA S PRINCIPALLY AIMED TO COVER CAPITAL OUTLAY OF THE AS SESSEE FOR UNDERTAKING MODERNIZATION OF EXISTING INDUSTRY, IT WAS CAPITAL IN NATURE AND IT WAS NOT TAXABLE IN THE HAN DS OF THE ASSESSEE. THE LEARNED A.R. FOR THE ASSESSEE PO INTED OUT THAT THE SCHEME BEFORE THE HON'BLE GUJARAT HIGH COURT WAS FOR THE MODERNIZATION OF EXISTING UNIT. 7. FURTHER CONTENTION OF THE LEARNED A.R. FOR THE ASSESSEE WAS THAT UNDER THE SCHEME FORMULATED BY TH E GOVERNMENT OF GUJARAT, THERE WAS NO OUTFLOW OF GOVERNMENT AND THE SCHEME WAS FORMULATED TO PROMOTE INDUSTRIAL GROWTH IN THE STATE OF GUJARAT. THE BAS IC IDEA 5 WAS TO ESTABLISH UNITS IN THE STATE IN ORDER TO PRO VIDE EMPLOYMENT TO THE LOCAL PERSON FOR WHICH THE GOVERN MENT FORMULATED THE SCHEME UNDER WHICH THE SALES TAX WAS COLLECTED BY THE ASSESSEE, WHICH WAS NOT DEPOSITED IN THE ACCOUNTS OF THE GOVERNMENT. THIS INCENTIVE WAS GIV EN AFTER START OF THE UNIT BUT THE SAME COULD NOT BE S TATED TO BE FOR RUNNING THE UNIT, AS PER THE LEARNED COUNSEL . THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANCE ON TH E RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN PONNI SUG ARS & CHEMICALS LTD. VS. CIT [306 ITR 392 (SC)] AND POI NTED OUT THAT THE PURPOSE OF THE SCHEME WAS A POLICY ENA CTMENT FOR THE STATE AND IN ORDER TO DETERMINE THE NATURE OF SUBSIDY GRANTED, THE PURPOSE OF THE SCHEME WAS DETERMINING FACTOR AND TIMING OF RELEASE OF THE AMO UNT UNDER THE SCHEME WAS IRRELEVANT AND EVEN THE SOURCE OF SUCH SUBSIDY WAS IRRELEVANT. THE LEARNED A.R. FOR THE ASSESSEE FURTHER CONTENDED THAT THE SCHEME OF THE GOVERNMENT OF GUJARAT WHICH WAS BEING FOLLOWED BY T HE ASSESSEE WAS FOR A PERIOD OF 12 YEARS AND THE INDUS TRIAL POLICY FORMULATED UNDER THE SCHEME HAD TO BE LOOKED INTO TO DETERMINE THE PURPOSE OF THE SCHEME. THE LEARNE D A.R. FOR THE ASSESSEE POINTED OUT THAT BOTH THE DECISION S IN SAHNEY STEEL & PRESS WORKS LTD. VS. CIT (SUPRA), PO NNI SUGARS & CHEMICALS LTD. VS. CIT (SUPRA) DID NOT DIF FER THAT IN ORDER TO DETERMINE THE NATURE OF SUBSIDY TH E PURPOSE FOR WHICH IT WAS GIVEN, WAS TO BE SEEN. BO TH THE DECISIONS OF THE HON'BLE APEX COURT, HOWEVER, DIFFE R ON THE ISSUE OF TIMING OF RELEASE OF THE SUBSIDY UNDER THE RESPECTIVE SCHEMES. THE LEARNED A.R. FOR THE ASSESS EE POINTED OUT THAT UNDER THE SCHEME, THE OBJECT OF TH E SCHEME WAS TO PROVIDE EMPLOYMENT TO THE LOCAL PERSO NS AND FURTHER 50% OF THE INCENTIVE WAS TO FLOW BACK B Y WAY OF INVESTMENT IN ESTABLISHING NEW UNIT IN THE STATE OF GUJARAT ITSELF, WHICH WAS IN ADDITION TO 2% OF THE AMOUNT TO BE DONATED TO GRAM PANCHAYAT. IT WAS FURTHER CL ARIFIED BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE WHOLE PURPOSE FOR PROVIDING INCENTIVE AFTER START OF PROD UCTION WAS THAT THE UNITS SHOULD REMAIN IN PRODUCTION, MAK E SALES AND EARN REVENUE FOR THE STATE AND IN THIS M ANNER THERE WAS A BAR ON UNSCRUPULOUS PERSONS IN CLAIMING BENEFIT OF THE SUBSIDY. THE LEARNED A.R. FOR THE A SSESSEE FURTHER PLACED RELIANCE ON THE RATIO LAID DOWN BY T HE FULL BENCH OF THE HON'BLE KERALA HIGH COURT IN CIT VS. R UBI RUBBER WORKS LTD. [178 ITR 181(KER)(SB)] AND POINTE D OUT THAT THE PURPOSE HAD TO BE LOOKED INTO IN ORDER TO DETERMINE THE NATURE AND CHARACTER OF THE GRANT. F URTHER RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN CIT VS. BALARAMPUR CHINI MIL LS [238 ITR 445 (CAL)] AND SHREE BALAJI ALLOYS VS. CIT [333 ITR 335 (J&K)], WHICH IN TURN HAD CONSIDERED THE RA TIO LAID DOWN BY THE HON'BLE APEX COURT IN NAPCO INDUST RIES LTD. VS. CIT [319 ITR 208 (SC)]. THE LEARNED A.R. FOR THE ASSESSEE FURTHER POINTED OUT THAT THE SPECIAL BENCH OF MUMBAI TRIBUNAL IN DCIT VS. RELIANCE INDUSTRIES LTD . [88 ITR 273 (SB)(MUM)] HAD CONSIDERED THE SCHEME OF MAHARASHTRA AND HELD THE INCENTIVES TO BE CAPITAL R ECEIPT. THE SCHEME OF THE GOVERNMENT OF HARYANA WAS CONSIDE RED 6 IN DCIT VS. MARUTI SUZUKI INDIA LTD. IN ITA NO.2188/DEL/2010 AND THE TRIBUNAL HAD HELD THE RECE IPT TO BE CAPITAL RECEIPT. FURTHER RELIANCE WAS PLACED ON NAPCO INDUSTRIES LTD. VS. CIT (SUPRA). 8. THE LEARNED A.R. FOR THE ASSESSEE CONCLUDED BY STATING THAT THE TRIBUNAL IN THE ORDERS RELATING TO THE EARLIER YEARS HAD MERELY FOLLOWED THE RATIO LAID DO WN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. ABHISHEK INDUSTRIES (SUPRA) AND HAD NOT CONSIDERED THE FACTUM OF THE SCHEME OF STATE OF GUJARAT. THE LEAR NED A.R. FOR THE ASSESSEE POINTED OUT THAT GROUND NO.3 RAISED WAS PURELY WITHOUT PREJUDICE TO THE GROUND NO.2 RAI SED BY THE ASSESSEE THAT THE SUBSIDY RECEIVED BY THE ASSES SEE AROSE IN THE COURSE OF BUSINESS AND THE SAME WAS TO BE HELD AS BUSINESS INCOME IN THE HANDS OF THE ASSESSE E. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ABH ISHEK INDUSTRIES VS. JCIT IN ITA NO.321/CHD/2009 RELATING TO ASSESSMENT YEAR 2004-05 ORDER DATED 27.9.2011. 9. THE LEARNED D.R. FOR THE REVENUE POINTED OUT THA T THE ISSUE RAISED VIDE GROUND NO.2 IN THE PRESENT AP PEAL IS SQUARELY COVERED BY THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. AB HISHEK INDUSTRIES LTD. (SUPRA). IT WAS FURTHER POINTED OU T THAT THE TREATMENT OF SUBSIDY BY THE ASSESSEE IN ITS BOO KS OF ACCOUNT WAS ALSO DETERMINATIVE AS THE ASSESSEE WAS TREATING IT AS REVENUE RECEIPT. IN RESPECT OF UTIL IZATION OF THE SCHEME IT WAS CLAIMED BY THE LEARNED D.R. FOR T HE REVENUE THAT THE SAME HAD TO BE OFFSET AGAINST THE OBJECTIVES OF THE SCHEME I.E. PAYMENT OF WAGES TO T HE EMPLOYEES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE IN THE PRESENT APPEAL IS AGAINST THE TREATMENT OF INCENTIVES GRANTED TO THE ASSESSEE UND ER THE PREMIUM/PRESTIGIOUS UNIT SCHEME 1995-2000 OF GUJARA T. ADMITTEDLY SIMILAR SALES TAX SUBSIDY WAS RECEIVED B Y THE ASSESSEE IN ASSESSMENT YEARS 2003-04 TO 2005-06 AND THE SAME WAS HELD AS REVENUE IN NATURE. THE TRIBUNAL I N ITA NOS.592 & 824/CHD/2007 RELATING TO ASSESSMENT YEARS 2003-04 AND 2004-05 VIDE ORDER DATED 31.1.2008, FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. ABHISHEK INDUSTRIES L TD. (SUPRA) HAD DECIDED THE ISSUE AGAINST THE ASSESSEE. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF THE TRIBUNAL AND THE MATTER IS SUB-JUDICE BEFORE THE HO N'BLE PUNJAB & HARYANA HIGH COURT. THE APPEAL OF THE ASSESSEE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT IN INCOME TAX APPEAL NOS.632 & 633 OF 2008 HA D BEEN ADMITTED VIDE ORDER DATED 15.12.2008. THE ASS ESSEE IN ASSESSMENT YEAR 2005-06 HAD MOVED A DECLARATION UNDER SECTION 158A(1) OF THE ACT IN FORM NO.8 POINT ING OUT THAT AS IDENTICAL QUESTION OF LAW WAS PENDING B EFORE THE HON'BLE HIGH COURT IN THE APPEAL RELATING TO ASSESSMENT YEARS 2003-04 & 2004-05 AND THE DECISION IN 7 THE APPEALS PENDING BEFORE THE HON'BLE HIGH COURT S HALL APPLY TO THE ISSUES RAISED IN ASSESSMENT YEAR 2005- 06. THE TRIBUNAL IN ITA NO.232/CHD/2011 RELATING TO ASSESSM ENT YEAR 2005-06 VIDE ORDER DATED 25.11.2011 HAD DIRECT ED THE ASSESSING OFFICER TO APPLY THE RATIO SETTLED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT RELATING TO ASSESSMENT YEARS 2003-04 & 2004-05 TO THE ISSUES RA ISED IN THE SAID APPEAL, ON THE RECEIPT OF THE SAID JUDG MENT. THE SAID DIRECTIONS WERE GIVEN BY THE TRIBUNAL AT T HE REQUEST OF THE ASSESSEE AND AFTER THE REPORT OF THE ASSESSING OFFICER THAT THE QUESTIONS OF LAW RAISED IN ASSESSMENT YEARS 2003-04 & 2004-05 BEFORE THE HON'B LE PUNJAB & HARYANA HIGH COURT WERE IDENTICAL TO THE I SSUE RAISED IN THE ASSESSMENT YEAR 2005-06. 11. THE CONTENTION OF THE LEARNED A.R. FOR THE ASSE SSEE NOW BEFORE US, HOWEVER, IS THAT THE ISSUE IS COVERE D IN FAVOUR OF THE ASSESSEE IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN PONNI SUGARS & CHEMICALS LTD. VS. CIT (SUPRA) WITH REGARD TO THE TAXABILITY OF INCENTIVES BESTOWED TO NEW/EXTENDED SUGAR FACTORY. IT WAS POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE HON'BLE APEX COURT IN PONNI SUGARS & CHEMICALS LTD. VS. CIT (SUPRA) FOLLOWING THE EARLIER DECISION OF THE HON'BLE SUPRE ME COURT IN SAHNEY STEEL & PRESS WORKS LTD. (SUPRA) HA D HELD THAT THE SUBSIDY RECEIVED BY THE ASSESSEE WAS IN THE NATURE OF CAPITAL RECEIPT, SINCE THE OBJECT BEHIND THE SAME WAS SETTING UP OF NEW UNIT/EXPANSION OF EXISTING BU SINESS. FURTHER RELIANCE WAS PLACED ON THE DECISION OF THE CALCUTTA HIGH COURT IN CIT VS. RASOI LTD. (SUPRA) POINTING OUT THAT THE TAXABILITY OF THE RECEIPTS GI VEN BY WAY OF SUBSIDY, ESSENTIALLY BOILS DOWN TO THE PURPO SE FOR WHICH THE SUBSIDY WAS GRANTED. THE CONTENTION OF T HE ASSESSEE WAS THAT THE PURPOSE OF GRANTING EXEMPTION FROM SALES TAX FOR A FIXED PERIOD OF TIME, IN THE FACTS OF THE PRESENT CASE, WAS CLEARLY TO PROVIDE INCENTIVES FOR ESTABLISHMENT OF NEW INDUSTRY IN THE UNDERDEVELOPED REGION OF THE STATE. AS THE INTENTION WAS NOT TO I NCREASE THE PROFITABILITY OF THE ELIGIBLE UNIT, THE SAID IN CENTIVE RECEIVED BY THE ASSESSEE WAS CAPITAL RECEIPT NOT LI ABLE TO TAX. FURTHER IT WAS POINTED OUT BY THE LEARNED A. R. FOR THE ASSESSEE THAT THE FACTS OF THE PRESENT CASE ARE SQUARELY COVERED BY THE RECENT DECISION OF THE HON' BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BIRLA VXL (SUPRA), WHICH WHILE ADJUDICATING THE ISSUE OF TAXA BILITY OF SUBSIDY GRANTED UNDER THE SCHEME HAD HELD THAT T HE SUBSIDY GRANTED FOR THE DEVELOPMENT OF INDUSTRIES I N UNDERDEVELOPED AREAS WAS PRINCIPALLY AIMED TO COVER THE CAPITAL OUTLAY OF THE ELIGIBLE UNIT AND WAS CAPITAL RECEIPT. FURTHER RELIANCE WAS PLACED ON THE RATIO LAID DOWN IN DCIT VS. MARUTI SUZUKI INDIA LTD. (SUPRA) AND SHREE BALAJI ALLOYS VS. CIT (SUPRA). THE LEARNED A.R. FO R THE ASSESSEE POINTED OUT THAT THE DECISION OF THE HON'B LE PUNJAB & HARYANA HIGH COURT IN CIT VS. ABHISH EK INDUSTRIES LTD. 8 (SUPRA) WAS NOT APPLICABLE TO THE FACTS OF THE PRE SENT CASE. IT WAS FURTHER POINTED OUT THAT THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE SUCCEEDING DECISION IN CIT VS. SHAM LAL BANSAL, INCOME TAX APPEAL NO.472 OF 20 10 (SUPRA) AND CIT VS. SIA RAM GARG (HUF) (SUPRA) HAD HELD THE SUBSIDY RECEIVED BY THE ASSESSEE THEREIN TO BE CAPITAL RECEIPT. 12. WE FIND THAT THE ISSUE RAISED BEFORE US IS SUB- JUDICE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT IN ASSESSEES OWN CASE IN ASSESSMENT YEARS 2003-04 & 2 004- 05. THE ISSUE IS ALSO PENDING IN ASSESSMENT YEAR 2 005-06. THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEAR S VIDE ORDER DATED 31.1.2008 HAD DECIDED THE ISSUE AGAINST THE ASSESSEE WHICH IS NOW SUBJECT MATTER OF APPEAL BEFO RE THE HON'BLE HIGH COURT. THE LEARNED A.R. FOR THE ASSE SSEE VEHEMENTLY STATED THAT THE FACTS OF THE CASE WERE S QUARELY COVERED BY THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN CIT VS. BIRLA VXL (SUPRA) WHEREIN IT IS HELD THA T THE SUBSIDY GRANTED UNDER THE SCHEME WAS FOR CAPITAL OU TLAY OF THE UNIT. IN THE WRITTEN SUBMISSIONS FILED, THE LEARNED A.R. FOR THE ASSESSEE HAS ALSO POINTED OUT THAT THE SCHEME BEFORE THE HON'BLE HIGH COURT WAS THE SALES TAX SCH EME PREDECEASING THE SCHEME UNDER CONSIDERATION, WHICH SCHEME IS NOT BEFORE US. THE LEARNED A.R. FOR THE ASSESSEE HAS FAILED TO POINT OUT THE CONTENTS OF TH E EARLIER SCHEME OF STATE OF GUJARAT AND WHETHER THE SCHEME U NDER CONSIDERATION FOR THE YEAR UNDER APPEAL IS SIMILAR TO THE EARLIER SCHEME OF STATE OF GUJARAT. IN THE ABSENCE OF THE SAME, WE FIND NO MERIT IN THE RELIANCE PLACED UPON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN CIT V S. BIRLA VXL (SUPRA) AND THE PLEA OF THE ASSESSEE THAT THE FACTS OF THE CASE ARE SQUARELY COVERED BY THE SAID DECISION. IT MAY ALSO BE BROUGHT ON RECORD THAT TH E ASSESSEE ITSELF IN THE PRECEDING YEAR I.E. ASSESSME NT YEAR 2005-06 HAD FILED A DECLARATION UNDER SECTION 158A( 1) OF THE ACT AND IT WAS POINTED OUT THAT THE ISSUE WAS I DENTICAL TO THE ISSUE RAISED IN ASSESSMENT YEARS 2003-04 AND 2004- 05, WHERE THE APPEAL OF THE ASSESSEE WAS PENDING BE FORE THE HON'BLE HIGH COURT. REQUEST WAS MADE BEFORE US TO APPLY THE DECISION OF THE HON'BLE HIGH COURT IN ASSESSMENT YEARS 2003-04 AND 2004-05 TO THE ISSUE R AISED IN ASSESSMENT YEAR 2005-06. IN VIEW OF THE ABOVE SAID FACTS AND CIRCUMSTANCES AND RESPECTFULLY FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL IN ASSESSEES OWN CAS E, WE CONFIRM THE ORDER OF THE CIT (APPEALS) IN HOLDING T HAT THE SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS REVEN UE IN NATURE. THE GROUND NOS.1 AND 2 RAISED BY THE ASSES SEE ARE THUS DISMISSED. 9 7. THE SAID ORDER OF THE TRIBUNAL WAS FOLLOWED IN A SSESSEE'S OWN CASE RELATING TO ASSESSMENT YEAR 2010-11 IN ITA NO. 911/CHD/2013 VIDE ORDER DATED 20.01.2014. 8. THE ISSUE RAISED BEFORE US IS IDENTICAL TO THE I SSUE BEFORE THE TRIBUNAL IN ASSESSEE'S OWN CASE AND FOLLOWING THE SAME PARITY OF REASONING, WE HOLD THAT THE SALES TAX SUBSIDY RECEI VED BY THE ASSESSEE IS ASSESSABLE IN THE HANDS OF THE ASSESSEE AS REVEN UE RECEIPT. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS THUS, DI SMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH MAY,2014. SD/- SD/- ( T.R.SOOD) (SUSHMA CHO WLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 TH MAY,2014 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR ITAT,CHD.