M/s Bhushan Ltd., Chandigarh V. DCIT, Chandigarh

ITA 370/CHANDI/2006

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90199 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 year(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 17-05-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Capital asset; Business income; Capital receipt; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 744/CHD/2006 ASSESSMENT YEAR: 2003-04 THE DCIT, VS M/S BHUSHAN LIMITED, CIRCLE 2(1), # 3, INDUSTRIAL AREA, CHANDIGARH. PHASE 1, CHANDIGARH PAN: AAACB9760D & ITA NO. 370/CHD/2006 ASSESSMENT YEAR : 2004-05 M/S BHUSHAN LTD., VS THE DCIT, 3, INDUSTRIAL AREA, CIRCLE 2(1), PHASE I, CHANDIGARH. CHANDIGARH. PAN: AAACB9760D & ITA NO. 977/CHD/2008 ASSESSMENT YEAR : 2005-06 M/S BHUSHAN POWER & VS THE ACIT, STEEL LTD.,3, INDUSTRIAL AREA, CIRCLE 2(1), PHASE I, CHANDIGARH. CHANDIGARH. PAN: AAACB9760D & ITA NO. 1082/CHD/2008 ASSESSMENT YEAR : 2006-07 M/S BHUSHAN POWER & VS THE JCIT, STEEL LTD.,3, INDUSTRIAL AREA, RANGE-II, PHASE I, CHANDIGARH. CHANDIGARH. PAN: AAACB9760D & ITA NO. 1428/CHD/2010 ASSESSMENT YEAR : 2007-08 M/S BHUSHAN POWER & VS THE ADDL. CIT, STEEL LTD.,3, INDUSTRIAL AREA, RANGE 2, PHASE I, CHANDIGARH. CHANDIGARH. PAN: AAACB9760D (APPELLANT) (RESPONDENT) 2 DEPARTMENT BY : SMT. JYOTI KUMARI ASSESSEE BY : SHRI ASHWANI KUMAR DATE OF HEARING : 03.06.2015 DATE OF PRONOUNCEMENT : 16.06.2015 O R D E R PER BENCH THIS ORDER SHALL DISPOSE OF ALL THE ABOVE APPEALS O F TWO DIFFERENT ASSESSEES ON AN IDENTICAL QUESTION WHETH ER SALES TAX SUBSIDY IN QUESTION IS REVENUE RECEIPT OR CAPITAL R ECEIPT ? 2. EARLIER THE TRIBUNAL DECIDED THE DEPARTMENTAL AP PEAL AS WELL AS APPEALS OF THE ASSESSEE VIDE SEPARATE ORDER S AND THE TRIBUNAL HELD THAT SALES TAX SUBSIDY RECEIVED BY TH E ASSESSEE AS REVENUE RECEIPT. THE ORDER OF THE LD. CIT(APPEALS) FOR ASSESSMENT YEAR 2003-04 AND 2004-05 IN THIS REGARD WAS SET ASIDE AND ORDER OF THE ASSESSING OFFICER WAS RESTOR ED. 3. IN OTHER CASES OF ASSESSEE'S APPEALS, THE TRIBUN AL TOOK THE SAME VIEW THAT SALES TAX SUBSIDY RECEIVED BY THE AS SESSEE IS REVENUE IN NATURE AND DISMISSED THE APPEALS OF THE ASSESSEE. 4. THE ASSESSEES PREFERRED APPEALS BEFORE HON'BLE P UNJAB & HARYANA HIGH COURT IN ALL THE MATTERS AND HON'BLE H IGH COURT DECIDED THE APPEALS VIDE ORDER DATED 18.12.2014 IN THE LIGHT OF ORDER IN THE INCOME TAX APPEAL NO. 146 OF 2014 DATE D 18.12.2014 DECIDED IN THE CASE OF M/S VARDHMAN ACRY LICS LTD. VS CIT, LUDHIANA & OTHERS. THE ORDER OF THE HON'BL E HIGH COURT ALONGWITH DECISION IN THE CASE OF M/S VARDHMAN ACRY LICS LTD. (SUPRA) WERE FORWARDED TO THE TRIBUNAL TO ADJUDICAT E THE NATURE 3 AND PURPOSE OF THE SALES TAX SUBSIDY AND THE MATTER S WERE REMANDED TO THE TRIBUNAL ACCORDINGLY. THE OFFICE F IXED ALL THE ABOVE APPEALS AS PER DIRECTIONS OF THE HON'BLE PUNJ AB & HARYANA HIGH COURT. 5. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES, PERUSED THE MATERIAL ON RECORD IN THE LIGHT OF THE DIRECTIONS OF THE HON'BLE PUNJAB & HARYANA HIGH COURT. 6. IT MAY BE NOTED HERE THAT WHILE PASSING THE ORDE RS IN THE APPEALS OF THE PRESENT ASSESSEES, HON'BLE HIGH COUR T TOOK THE SAME VIEW AS WAS TAKEN IN THE CASE OF M/S VARDHMAN ACRYLICS LTD. VS CIT OF EVEN DATED 18.12.2014 IN IT APPEAL N O. 146 OF 2014. COPY OF THE JUDGEMENT IN THAT CASE IS ALSO F ORWARDED IN WHICH THE ISSUE BEFORE THE HON'BLE HIGH COURT WAS, WHETHER THE SUBSIDIES IN THE FORM OF EXEMPTION FROM SALES TAX R ECEIVED BY THE ASSESSEE CONSTITUTED CAPITAL RECEIPTS, NOT LIABLE T O TAX UNDER THE PROVISIONS OF ACT ? IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THOUGH IN 286 ITR 1 (P&H) [CIT VS ABHISHEK IND USTRIES LTD.] SALES TAX SUBSIDY HAS BEEN HELD TO BE REVENUE RECEIPT BUT HON'BLE SUPREME COURT HAS, WHILE CONSIDERING THE NA TURE OF SALES TAX SUBSIDY HELD IN 306 ITR 392 (CIT VS PONNI SUGARS & CHEMICALS LTD.) HELD THAT IT IS THE NATURE AND PURP OSE OF A SUBSIDY THAT WOULD DETERMINE WHETHER IT IS A CAPITA L OR REVENUE RECEIPT THEREBY CLARIFYING THAT SALES TAX SUBSIDY SHALL BE A REVENUE RECEIPT DEPENDING UPON ITS NATURE AND PURPO SE. THE COUNSEL FOR ASSESSEE ALSO SUBMITTED BEFORE HON'BLE HIGH COURT THAT IN OTHER CASE, THE DIVISION BENCH OF THE HIGH COURT AFTER CONSIDERING THE JUDGEMENT IN CIT VS PONNI SUGARS & CHEMICALS 4 LTD. (SUPRA) REMITTED THE MATTER TO THE TRIBUNAL TO RECORD A OPINION, WHETHER SALES TAX SUBSIDY AVAILED BY THE A SSESSEE IS A REVENUE OR CAPITAL RECEIPT, AFTER CONSIDERING ITS N ATURE AND PURPOSE. THE HON'BLE PUNJAB & HARYANA HIGH COURT CO NSIDERING THE SUBMISSIONS OF BOTH THE PARTIES IN THE LIGHT OF THE ABOVE DECISIONS, SET ASIDE THE ORDERS PASSED BY THE ITAT CHANDIGARH BENCH AND MATTER WAS RESTORED TO THE TRIBUNAL FOR R E- DETERMINING THE QUESTION, WHETHER SALES TAX SUBSID Y IS A REVENUE OR A CAPITAL RECEIPT BY REFERENCE TO THE NA TURE AND PURPOSE OF THE SUBSIDY ?. WHILE ALLOWING THE APPE AL AND RESTORING THE APPEALS TO THE TRIBUNAL, IT WAS DIREC TED TO THE TRIBUNAL TO ADJUDICATE THE NATURE AND PURPOSE OF TH E SALES TAX SUBSIDY AND THEREAFTER RECORD AN OPINION WHETHER IT IS A CAPITAL OR REVENUE EXPENDITURE AFTER TAKING INTO CONSIDERAT ION THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD (SUPRA). 7. LD. REPRESENTATIVES OF BOTH THE PARTIES, THEREFO RE SUBMITTED THAT THE ISSUE OF SALES TAX SUBSIDY WHETHER REVENUE OR CAPITAL RECEIPT, IS TO BE ADJUDICATED UPON WITH REFERENCE T O THE NATURE AND PURPOSE OF THE SALES TAX SUBSIDY. THE ASSESSEE WAS, THEREFORE, DIRECTED TO FILE THE COPY OF THE RELEVAN T SCHEME FOR GRANT OF SUBSIDY/INCENTIVE FROM SALES TAX. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT UNIT OF THE ASSESSEES I S SITUATED IN STATE OF WEST BENGAL AND THEREFORE, FILED COPY OF T HE WEST BENGAL INCENTIVE SCHEME, 1999 AND SUBMITTED THAT THIS SCHE ME IS APPLICABLE IN THE CASE OF THE ASSESSEE, COPY OF THE SAME IS ALSO SUPPLIED TO THE LD. DR. IT IS, THEREFORE, ADMITTED FACTS THAT THE WEST BENGAL INCENTIVE SCHEME, 1999 IS APPLICABLE IN THE CASE OF 5 ASSESSEE WHICH SHALL HAVE TO BE CONSIDERED WHILE CO NSIDERING THE ISSUE OF SALES TAX SUBSIDY UNDER CONSIDERATION IN C ONTROVERSY. IT IS ALSO ADMITTED FACTS THAT SAME SCHEME IS APPLI CABLE IN ALL THE REMAINING APPEALS. BOTH THE PARTIES MAINLY ARG UED IN ITA 744 OF 2006 AND STATED THAT THE ISSUE IS SAME IN TH E REMAINING APPEALS AND ORDER IN THAT CASE MAY BE FOLLOWED IN O THER CASES IN ASSESSMENT YEAR IN APPEALS. 8. IN THE BACKGROUND OF THESE FACTS, NOW WE PROCEED TO DECIDE THE ISSUE WHETHER SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS A CAPITAL OR REVENUE RECEIPT IN THE HANDS OF THE AS SESSEE AND THE ISSUE SHALL HAVE TO BE CONSIDERED IN THE LIGHT OF T HE DIRECTIONS GIVEN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT AF TER TAKING INTO CONSIDERATION THE JUDGEMENT OF THE HON'BLE SUP REME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD. (SUPRA ). 9. THE LD. COUNSEL FOR THE ASSESSEE WHILE REFERRING TO THE WEST BENGAL INCENTIVE SCHEME, 1999 SUBMITTED THAT THE SC HEME IS DIRECTLY LINKED TO THE SETTING UP OF INDUSTRY IN WE ST BENGAL, THEREFORE, INCENTIVE IS DIRECTLY LINKED TO THE CAPI TAL. THEREFORE, SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS CAPIT AL IN NATURE. HE HAS REFERRED TO VARIOUS PROVISIONS OF THE SCHEME WHICH WE WOULD TAKE UP LATER ON IN THIS ORDER AND AS HIGHLIG HTED, THE SUBSIDY IS TO BE CALCULATED WITH REFERENCE TO FIXED CAPITAL ASSET AND THE UNIT SHOULD BE APPROVED PROJECT WITHIN A PA RTICULAR AREA AND SUBSIDY IS GRANTED FOR GROWTH OF THE INDUSTRY A ND NOT TO SUPPLEMENT THE PROFIT. HE HAS REFERRED TO CERTIFIC ATE OF REGISTRATION UNDER WEST BENGAL INCENTIVE SCHEME, 19 99 ISSUED BY DIRECTORATE OF INDUSTRIES, WEST BENGAL DATED 31 .12.1999 IN 6 THE NAME OF THE ASSESSEE FOR ESTABLISHING THE UNIT IN DISTRICT HOOGHLY AND THE NATURE OF THE PROJECT WAS NEW. T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE SAME CERTIFI CATE, IT IS CLARIFIED THAT UNIT IS ELIGIBLE TO GET REMISSION OF SALES TAX ON SALE OF FINISHED GOODS AND EXEMPTION OF SALES TAX O N PURCHASE OF RAW MATERIAL FOR THE PERIOD OF 12 YEARS IN THE SCAL E OF 100% OF THE FIXED CAPITAL INVESTMENT WITHOUT ANY CAP. HE H AS ALSO REFERRED TO THE LETTER DATED 31.12.1998 ISSUED BY G OVERNMENT OF WEST BENGAL, COMMERCE & INDUSTRIES DEPARTMENT, WHO HAVE EXAMINED THE CASE OF THE ASSESSEE THROUGH HIGH POWE RED COMMITTEE ON INDUSTRIAL DEVELOPMENT AND IT WAS CONS IDERED AND DECIDED TO GIVE SALES TAX INCENTIVE TO ASSESSEE IN THE SCALE OF 100% OF FIXED CAPITAL INVESTMENT FOR 12 YEARS IN SA LE OF FINISHED GOODS AND ON PURCHASE OF RAW MATERIAL WITHOUT ANY C AP. HE HAS ALSO REFERRED TO THE LETTER DATED 31.12.1999 ISSUED BY WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION LTD., WHO HAVE ISSUED ELIGIBILITY CERTIFICATE UNDER WEST BENGAL IN CENTIVE SCHEME, 1999 DIRECTING THAT ASSESSEE WOULD BE ELIGI BLE FOR INCENTIVE I.E. REMISSION OF SALES TAX ON SALE OF FI NISHED GOODS AND EXEMPTION OF SALES TAX ON PURCHASE OF RAW MATER IAL FOR A PERIOD OF 12 YEARS IN THE SCALE OF 100% OF THE FIXE D CAPITAL INVESTMENT WITHOUT ANY RELAXATION UNDER THE SCHEME. THE COPY OF THE ELIGIBILITY CERTIFICATE UNDER THE WEST BENGA L INCENTIVE SCHEME, 1999 IS ALSO PLACED ON RECORD TO SHOW THAT THE SALES TAX SUBSIDY/INCENTIVE SHALL NOT BE GRANTED IF THE INDUS TRY/UNIT IS FOUND TO HAVE FAILED TO TAKE EFFECTIVE STEPS FOR ES TABLISHMENT OF THE AFORESAID PROJECT WITHIN THE PRESCRIBED PERIOD. 7 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT PROJECT WAS SET UP WITHIN THE TIME PERIOD AND ASSESSEES STARTED COMMERCIAL PRODUCTION ON 13.05.2000. THE LD. COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE ABOVE SCHEME IS FOR SETTING UP A ND PROMOTION OF THE INDUSTRY AND NEGATIVE LIST IS MAINTAINED THA T SOME OTHER INDUSTRY SHALL NOT GET BENEFIT IN THE SAME SCHEME. RUNNING AND SETTING UP OF INDUSTRY IS NECESSARY SO THAT FAKE IN DUSTRY DO NOT TAKE UNDUE BENEFIT AND ELIGIBLE INDUSTRY IS ENTITLE D FOR SUBSIDY WHICH WILL REDUCE COST OF THE ASSET BY REPAYING THE LOANS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CAS E OF THE ASSESSEE THUS, SQUARELY FALL WITHIN THE PARAMETERS OF JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS PONN I SUGARS & CHEMICALS LTD. (SUPRA) IN WHICH IT WAS HELD AS UNDE R : THE CHARACTER OF THE RECEIPT OF A SUBSIDY IN THE HA NDS OF THE ASSESSES, UNDER A SCHEME HAS TO BE DETERMINED WITH RE SPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GRANTED. IN OTH ER WORDS, ONE HAS TO APPLY THE PURPOSE TEST. THE POINT OF TIME AT WHICH THE SUBSIDY IS PAID IS NOT RELEVANT. THE SOURCE IS IMMATER IAL IF THE OBJECT OF THE SUBSIDY IS TO ENABLE THE ASSESSES TO R UN THE BUSINESS MORE PROFITABLY THEN THE RECEIPT IS ON REV ENUE ACCOUNT. ON THE OTHER HAND, IF THE OBJECT OF THE ASSISTANCE UNDER THE SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND AN EXISTING UNIT THEN THE RECEIPT OF THE SU BSIDY WOULD BE ON CAPITAL ACCOUNT. THE ASSESSEE WAS A CO-OPERATIVE SOCIETY RUNNING A S UGAR MILL. DURING THE RELEVANT YEAR IN QUESTION, ON ACCOUNT OF ECONOMIC FACTORS, IT WAS NOT ECONOMICALLY VIABLE TO RUN NEW SUGAR FACTORIES AND, DUE TO HIGH FINANCIAL COSTS, FINANCI AL INSTITUTIONS DID NOT COME FORWARD TO ADVANCE LOANS TO THE ENTREP RENEURS OF NEW SUGAR FACTORIES. THE TEMPO OF ESTABLISHING NEW SUGAR FACTORIES RECEIVED A SERIOUS SETBACK. A COMMITTEE A PPOINTED BY THE GOVERNMENT RECOMMENDED THAT FIVE POSSIBLE IN CENTIVES FOR MAKING A SUGAR PLANT ECONOMICALLY VIABLE COULD BE PROVIDED FOR, VIZ., CAPITAL SUBSIDY, LARGER PERCENT AGE OF FREE SALE OF SUGAR, HIGHER LEVY SUGAR PRICE, ALLOWING RE BATE ON EXCISE DUTY AND REMISSION OF PURCHASE TAX. FOLLOWIN G THAT REPORT, SCHEMES WERE FORMULATED GIVING THE FOLLOWIN G BENEFITS (I) INCENTIVE SUBSIDY AVAILABLE ONLY IN NEW UNITS A ND TO SUBSTANTIALLY EXPANDED UNITS ; (II) MINIMUM INVESTM ENT FOR NEW UNITS AND EXPANSION OF EXISTING UNITS ; (III) I NCREASE IN 8 FREE SUGAR SALE QUOTA. THE BENEFIT OF THE SCHEMES H AD TO BE UTILISED ONLY FOR REPAYMENT OF LOANS. THE DEPARTMEN T AND THE HIGH COURT HAD HELD THAT THE RECEIPTS FROM THE GOVE RNMENT UNDER THE INCENTIVE SCHEMES WERE IN THE NATURE OF R EVENUE. ON APPEAL TO THE SUPREME COURT : HELD ACCORDINGLY, REVERSING THE DECISION OF THE HIG H COURT, ON THIS POINT, THAT THE MAIN ELIGIBILITY CONDITION IN THE SCHEMES WAS THAT THE INCENTIVE HAD TO BE UTILIZED FOR REPAY MENT OF LOANS TAKEN BY THE ASSESSEE TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF AN EXISTING UNIT. THE SUBS IDY RECEIVED BY THE ASSESSEE WAS NOT IN THE COURSE OF A TRADE BUT WAS OF A CAPITAL NATURE. 11. HE HAS ALSO RELIED UPON DECISION OF HON'BLE PUN JAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SIYA RAM G ARG, HUF 237 CTR 321 IN WHICH IT WAS HELD AS UNDER : SUBSIDY RECEIVED BY THE ASSESSEE FOR SETTING UP AG RO BASED INDUSTRIAL UNIT IN A BACKWARD AREA WHICH WAS DETERMINED WITH REFERENCE TO CAPITAL INVESTMENT, IS A CAPITAL RECEIPT. 12. HE HAS ALSO RELIED UPON DECISION OF HON'BLE CAL CUTTA HIGH COURT IN THE CASE OF CIT VS RASOI LTD. 375 ITR 438 IN WHICH IT WAS HELD AS UNDER : IF THE OBJECT OF A SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND, IF THE OBJECT OF THE ASSISTANCE UNDER THE SU BSIDY SCHEME IS TO ENABLE THE ASSESSEE TO SET-UP A NEW UNIT OR TO E XPAND THE EXISTING UNIT, THE RECEIPT OF THE SUBSIDY IS ON CAPITA L ACCOUNT. IT IS THE QUALITY OF THE PAYMENT THAT IS DECISIVE OF THE CHARA CTER OF THE PAYMENT AND NOT THE METHOD OF THE PAYMENT OR ITS MEASURE. HELD, DISMISSING THE APPEAL , THAT THE OBJECT OF TH E SUBSIDY WAS THE EXPANSION OF BUSINESS CAPACITIES, MODERNIZATION, AN D IMPROVING MARKETING CAPABILITIES AND THUS, THOSE WERE FOR ASSI STANCE ON CAPITAL ACCOUNT. MERELY BECAUSE THE AMOUNT OF SUBSI DY WAS EQUIVALENT TO 90 PER CENT, OF THE SALES TAX PAID BY TH E BENEFICIARY THAT DID NOT IMPLY THAT IT WAS IN THE FORM OF REFUND OF SALES TAX PAID. THE SUBSIDY WAS A CAPITAL RECEIPT. 13. HE HAS RELIED UPON DECISION OF THE HON'BLE SUPR EME COURT IN THE CASE OF MEPCO INDUSTRIES LTD. VS CIT 319 ITR 208, ON THE PROPOSITION THAT, THE NATURE OF THE SUBSIDIES IN EACH OF THE THREE 9 CASES IS SEPARATE AND DISTINCT. THERE IS NO STRAIGH T JACKET OF PRINCIPLE OF DISTINGUISHING A CAPITAL RECEIPT FROM REVENUE RECEIPT. IT DEPENDS UPON CIRCUMSTANCES OF EACH CASE. 14. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED UP ON ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF SAFARI BIKES L TD. V JCIT ITA NO. 253/2013 DATED 29.05.2014 IN WHICH ON IDENT ICAL ISSUE, THE TRIBUNAL IN PARA 13 TO 15 OF THE ORDER HELD AS UNDER : 13. WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS CAR EFULLY AND FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSE L FOR THE ASSESSES. COPY OF INDUSTRIAL SCHEME HAS BEEN FILED AT PAGE 841 TO 862 OF THE PAPER BOOK, IT HAS BEEN STATED IN THE POLICY THAT GOVERNMENT OF PUNJAB HAS FORMULATED NEW INDUST RIAL POLICY 1996 WHICH OFFERS FRESH INCENTIVE FOR THE DE VELOPMENT OF INDUSTRY IN THE STATE OF PUNJAB. OBJECTS OF THE POLICY ARE AS UNDER: 1. ATTRACTING FRESH INVESTMENT TO FURTHER BOOST THE GROWTH OF INDUSTRY IN THE STATE. 2. AVOIDING MULTIPLICITY OF INCENTIVES SO THAT THEY ARE EASY TO INTERPRET AND ADMINISTER. 3. OFF-SETTING THE LOCATIONAL DISADVANTAGES OF THE STA TE 4. CREATING MORE JOB OPPORTUNITIES FOR THE YOUTH IN TH E BORDER DISTRICT THROUGH INCREASED INVESTMENT IN INDUSTRIAL SECTOR.' FROM PAGE 854 ONWARDS A COPY OF THE SCHEME IS ENCLO SED WHICH LAYS DOWN ELIGIBILITY CRITERIA OF THE SUBSIDY AND OTHER PROCEDURAL MATTERS. PARA 6 OF THE SCHEME STARTS AS INCENTIVES TO SMALL SCALE INDUSTRY UNITS' AND THEN PARA 6.1 ST ARTS 'INVESTMENT INCENTIVES (CAPITAL SUBSIDY). THIS ITSE LF SHOWS THAT SUBSIDY WAS FOR TERMED IN THE NATURE OF CAPITA L NATURE. IN THE ELIGIBILITY CRITERIA IT HAS BEEN PROVIDED TO INCLUDE THE VALUE OF LAND, BUILDING, PLANT & MACHINERY AND OTHE R ITEMS AND VARIOUS CONDITIONS NAVE BEEN LAID DOWN UNDER TH E HEAD ''QUANTUM OF ENTITLEMENT' IT IS MENTIONED THAT IN T HE A CATEGORY AREA 30% OF FIXED CAPITAL INVESTMENT SUBJE CT TO RS. 50 LAKHS AND IN CASE B CATEGORY AREA 20% OF THE FIX ED CAPITAL INVESTMENT SUBJECT TO 30% WAS ELIGIBLE. IN PARA 13 WHICH DEALS WITH INCENTIVES TO EXPORT ORIENTED UNIT IT IS PROVIDED INTER-ALIA AS UNDER: INCENTIVES TO EXPORT ORIENTED UNIT I) ELIGIBILITY EXPORT ORIENTED UNITS AS DEFINED UNDER RULE 2.22 SH ALL BE ENTITLED TO THE INCENTIVES MENTIONED BELOW: II) INCENTIVES 10 A) INVESTMENT INCENTIVE @ 30% OF FIXED CAPITAL I NVESTMENT SUBJECT TO MAXIMUM OF RS. 50 LAKHS IN CASE OF EXPOR T ORIENTED UNITS IN SMALL SCALE SECTOR, WHICH WOULD B E SANCTIONED AS PRESCRIBED UNDER RULE 6.1. HOWEVER, I N CASE OF EXPORT ORIENTED UNITS IN LARGE & MEDIUM SEC TOR THE QUANTUM OF INVESTMENT INCENTIVE SHALL BE AS PER RULE 6.1(B).' FURTHER THE ASSESSEE IS ADMITTEDLY A REGISTERED SMA LL SCALE INDUSTRY AND WAS REGISTERED AS EXPORT ORIENTE D UNIT ON 8.6.1999 WHICH BECOMES CLEAR FROM THE CERTIFICATE OF REGISTRATION PLACED AT PAGE 871 OF P APER BOOK. PAGE 878 GIVES LIST OF MACHINERY INSTALLED BY THE ASSESSEE. THUS IT BECOMES CLEAR THAT SUBSIDY WAS PROVIDED TO THE EXPORT ORIENTED UNIT UNDER WHICH CATEGORY THE ASSESSEE BECAME ELIGIBLE AND SUBSIDY W AS FOR INSTALLATION OF PLANT & MACHINERY WHICH HAS BEE N INSTALLED BY THE ASSESSEE, 14 THOUGH RECENTLY WE HA VE HELD IN CASE OF VARDHMAN ACRYLICS LTD (SUPRA) WHERE THE ASSESSEE HAS RECEIVED SALES TAX SUBSIDY FROM THE GOVERNMENT OF GUJARAT THAT SAME IS IN THE NATURE OF REVENUE SUBSIDY BUT THAT DECISION IS DISTINGUISHABL E BECAUSE FIRSTLY NATURE OF THE SUBSIDY DEFINED AS CA PITAL SUBSIDY WHICH WAS GRANTED AGAINST THE INSTALLATION OF PLANT & MACHINERY. IN CASE OF VARDHMAN ACRYLICS LTD (SUPRA) THE NATURE OF SUBSIDY WAS SALES FAX SUBSIDY WHICH IS PAYABLE FROM YEAR LO YEAR BY WAY O F EXEMPTION FROM SALES TAX WHEREAS IN THE CASE BEFORE US, IT IS ONE TIME INCENTIVE FOR SETTING UP OF THE INDU STRY. THE SUBSIDY HAS BEEN RECEIVED AS PER INDUSTRIAL POLICY OF THE GOVERNMENT OF PUNJAB 1996. NO CONDITI ONS WERE IMPOSED BY THE GOVERNMENT OF PUNJAB FOR GRANT OF SUBSIDY EXCEPT FOR INSTALLATION OF PLANT & MACHI NERY WHEREAS IN THE SCHEME GIVEN BY GUJARAT GOVERNMENT VARIOUS CONDITIONS WERE ALSO IMPOSED, THE DECISION IN CASE OF VARDHMAN ACRYLICS LTD (SUPRA) WAS ALSO TAKE N BECAUSE IN THE EARLIER YEARS ON SIMILAR ISSUE, THE ISSUE WAS DECIDED AGAINST THE ASSESSEE WHEREAS IN THE PRESENT CASE, IT IS FIRST TIME THAT THE ISSUE OF SU BSIDY HAS BEEN RAISED. 15. AS FAR AS DECISION RELIED ON BY THE LD. CIT(A ) IS CONCERNED, WE ARE OF THE OPINION THAT THE DECISI ONS RELIED ON IN CASE OF SAHNEY STEEL AND PRESS WORKS L TD VS. GIT (SUPRA) IS DISTINGUISHABLE BY THE OBSERVATION OF HON'BLE SUPREME COURT IN CASE OF CIT VS. PONNI SUGA RS AND CHEMICALS LTD, (SUPRA). IT WAS CLEARLY HELD IN THAT CASE THAT MOST IMPORTANT THING FOR DETERMINATION OF THE NATURE OF SUBSIDY IS THE OBJECT OF THE SUBSIDY. IT WAS FURTHER OBSERVED THAT POINT OF TIME OF RECEIPT IS N OT RELEVANT. AS WE HAVE SEEN ABOVE THE OBJECT OF THE SUBSIDY IN THE PRESENT CASE IS TO ENCOURAGE THE SET TING UP OF NEW-INDUSTRY IN THE STATE OF PUNJAB, FURTHER THE HON'BLE PUNJAB AND HARYANA HIGH COURT IN CASE OF CI T VS. SIVA RAM GARG (HUF) WHERE THE SUBSIDY WAS 11 RECEIVED FOR SETTING UP OF AGRO INDUSTRY IN THE BAC KWARD AREA WAS HELD TO BE OF CAPITAL NATURE AFTER CONSIDE RING VARIOUS DECISIONS INCLUDING THE DECISION OF ABHISHE K INDUSTRIES (SUPRA) AND SAHNEY STEEL AND PRESS WORKS LTD VS. CIT (SUPRA) OF HON'BLE SUPREME COURT. ONLY DISTINGUISHING FEATURE FROM THIS DECISION IS THAT I N THIS CASE SUBSIDY WAS PROVIDED FOR SETTING UP OF INDUSTR Y IN THE BACKWARD AREA BUT IN OUR OPINION, THAT IS NOT IMPORTANT BECAUSE IF THE GOVERNMENT OF PUNJAB DECID ED TO ENCOURAGE THE INDUSTRY AND PARTICULARLY SMALL SC ALE INDUSTRY IN THE WHOLE STATS THEN NATURE OF SUCH SUB SIDY WOULD NOT CHANGE. IN CASE BEFORE US, THE SUBSIDY WA S GIVEN IN THE CATEGORY OF SMALL SCALE INDUSTRY AND U NDER FURTHER SUB HEAD EXPORT ORIENTED UNITS. THE SUBSIDY IS DIRECTLY RELATED TO PLANT & MACHINERY. THEREFORE IN OUR OPINION, IN THIS BACKGROUND THE SUBSIDY IS CLEARLY OF CAPITAL NATURE AND ACCORDINGLY WE SET ASIDE THE ORD ER OF THE LD. CIT(A) AND HOLD THAT SUBSIDY RECEIVED BY TH E ASSESSEE FROM GOVERNMENT OF PUNJAB IS IN NATURE OF CAPITAL RECEIPT. 15. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED UPON ORDER OF ITAT CALCUTTA BENCH IN THE CASE OF JCIT VS M/S KEVE NTER AGRO LTD. IN ITA NO. 1663/2011, 1664/2011 AND 1665/2011 DATED 30.06.2014 IN WHICH THE TRIBUNAL CONSIDERED THE SAM E SALES TAX SUBSIDY GIVEN UNDER WEST BENGAL INCENTIVE SCHEME, 1 993 AND 1999 AND DECIDED THE ISSUE AGAINST THE REVENUE. TH E FINDINGS OF THE TRIBUNAL IN PARA 26 READS AS UNDER : 26. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE CTT( A) HAS CONSIDERED THE LEGAL ASPECT AS TO WHETHER THE SALES TAX REMISSION WAS A REVENUE OR CAPITAL RECEIPT IN THE HANDS OF TH E ASSESSEE. HE FOUND THAT THE SALES TAX REMISSION GIVEN UNDER WEST B ENGAL INCENTIVE SCHEME 1993 AND 1999 WAS NOT FOR ASSISTING THE ASSE SSEE IN CARRYING OUT ITS BUSINESS OPERATION BUT INCURRED TH E PROMOTION OF INDUSTRIES IN THE STATE OF WEST BENGAL AND CONSEQUE NTLY, FOLLOWING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F SAHANEY STEEL & PRESS WORKS LTD. VS. CIT 228 1TR 253 HOLDING THE S ALES TAX REMISSION AS CAPITAL RECEIPT. LD. COUNSEL ALSO DREW O UR ATTENTION TO THE FACT THAT THE SALES TAX REMISSION UNDER WEST BEN GAL INCENTIVE SCHEME, 1993/1999 WAS REVENUE OR CAPITAL HAS ALREAD Y BEEN EXAMINED AND DECIDED BY IT AT, KOLKATA BENCH IN THE FOLLOWING APPEALS: 12 'I. IN THE CASE OF ITO, WARD-I(3) KOL VS. M/S. DURO PLA ST INDIA PVT. LTD. IN IT A NO. 1983, 1984, 1985/KOL/2008 DATED 16.01.2009FOR ASSTT. YEARS 1999-2000 TO 2001-02. 2. LN THE CASE OF DCIT, CIR-12, KOL VS. M/S. TEESTA A GRO INDUSTRIES LTD. IN ITA NO. 1237/KOL/2010, ITA NO. 1053/KOL/2010 & ITA NO. 17S3/KOV2010 DATED 07.01.2011 FOR ASSTT. YEARS 2003-04, 2006-07 & 2007-08 RESPECTIVELY.' WE FIND THAT THE WEST BENGAL INCENTIVE SCHEME 1993 AND 1999 CATEGORICALLY ENCOURAGED THE PROMOTION OF INDUSTRIES IN THE STATE OF WEST BENGAL AND IN SUCH CIRCUMSTANCES THE ISSUE IS C LEARLY COVERED BY THE DECISION OF HON'BLE SUPREME COURT IN THE CAS E OF SAHANEY STEEL & PRESS WORKS LTD., SUPRA. THE ISSUE IS ALSO CO VERED BY THE TRIBUNAL'S DECISION AS NOTED ABOVE. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) AND THIS ISSUE OF REVENUE'S APPEALS FO R BOTH THE YEARS IS DISMISSED. 16. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SU BMITTED THAT THE SALES TAX SUBSIDY RECEIVED BY BOTH THE ASSESSEE S ARE CAPITAL RECEIPT IN NATURE AND DEPARTMENTAL APPEALS MAY BE D ISMISSED AND APPEALS OF THE ASSESSEE MAY BE ALLOWED. 17. ON THE OTHER HAND, LD. DR SUBMITTED THAT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD. (SUPRA), THE ISSUE WA S OF REPAYMENT OF THE LOAN, THEREFORE UNDER THOSE FACTS, IT WAS HELD THAT SUBSIDY/INCENTIVE WAS CAPITAL RECEIPT IN NATUR E. THE LD. DR FURTHER SUBMITTED THAT THE SALES TAX SUBSIDY IN THE CASE OF ASSESSEE IS NOT RELATED TO SETTING UP OF THE INDUST RIES AND THE SCHEME PROVIDES FOR NEGATIVE LIST REGARDING SOME UN ITS WHICH MAY NOT BE ELIGIBLE FOR THE EXEMPTION BUT CASE OF A SSESSEE WOULD NOT FALL IN THE NEGATIVE LIST. THE LD. DR SUBMITTE D THAT THE SUBSIDY WAS GRANTED TO SUPPLEMENT PROFIT OF ASSESSE E AND BY REFERRING TO PARA 10 OF THE SCHEME SUBMITTED THAT D IFFERENT SCHEMES/BENEFITS HAVE BEEN ALLOWED TO DIFFERENT IND USTRIES, THEREFORE, IT IS CLEARLY REVENUE RECEIPT IN NATURE. EXEMPTION ON SALES TAX WAS FOR REDUCING THE COST OF PURCHASE TO INCREASE THE 13 PROFIT OF ASSESSEE AND SUBSIDY IS LINKED TO THE PRO FIT. THE ELIGIBILITY CRITERIA IS AVAILABLE WHEN FINANCE IS A VAILABLE AND IT HAS NO CONNECTION WITH THE CAPITAL INVESTMENT. THE LD. DR SUBMITTED THAT NOW AS PER FINANCE ACT, 2015 AMENDME NT IN SECTION 2(24), ALL SUBSIDIES RECEIVED BY THE INDUST RIES ARE TAXABLE, THOUGH IT IS AFFECTED W.E.F. ASSESSMENT YE AR 2016-17. THE LD. DR REFERRED TO THE LETTERS OF WEST BENGAL I NDUSTRIAL DEVELOPMENT CORPORATION LTD. REFERRED TO BY LD. COU NSEL FOR THE ASSESSEE AND SUBMITTED THAT CONCESSION/EXEMPTION IS GIVEN FROM START OF THE PRODUCTION. THEREFORE, IT IS DIRECTLY RELATED TO AUGMENTATION OF PROFIT EARNED BY ASSESSEE AND PRODU CTION IS NECESSARY WHICH SHOULD BE CONSIDERED AS REVENUE IN NATURE. 18. THE LD. DR RELIED UPON DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD . VS CIT 228 ITR 253 AS WAS CONSIDERED IN THE CASE OF PONNI SUGA RS & CHEMICALS LTD. (SUPRA). THE LD. DR ALSO RELIED UPON DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS RAJ A RAM MAIZE PRODUCTS 251 ITR 427 IN WHICH IT WAS HELD THAT, POWER SUBSIDY- SUBSIDY WENT TOWARDS REDUCTION OF THE SUBSIDY BILL, IT WAS REVENUE NATURE LIABLE TO TAX. 19. THE LD. DR ALSO RELIED UPON DECISION OF THE SUP REME COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU P. LTD. VS CIT 87 ITR 542 IN WHICH IT WAS HELD THAT, SALES TAX COLLECTED FROM BUYERS NOT PAID TO STATE OR OWNERS OF GOODS NOR REFUNDED T O PURCHASERS IS BUSINESS RECEIPT. THE LD. DR ALSO RELIED UPON DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF WARDEX PHARMACEUTICALS P. LTD. V CIT 307 ITR 387 IN WHICH IT WAS HELD 14 THAT WHEN SUBSIDY WAS GIVEN TO ASSIST BUSINESS IS REVEN UE RECEIPT. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. IT IS ADMITTED FACT S THAT THE CASE OF BOTH THE ASSESSEES FALL WITHIN THE SCHEME KNOWN AS WEST BENGAL INCENTIVE SCHEME, 1999, COPY OF THE SAME IS PLACED ON RECORD. IT PROVIDES THAT INCENTIVE SCHEME IS APPRO VED BY THE GOVERNMENT OF WEST BENGAL FOR LARGE/MEDIUM AND SMAL L SCALE INDUSTRIES. THE VARIOUS SALIENT FEATURES OF THIS I NCENTIVE SCHEME PROVIDE THAT WHEREAS, THE GOVERNOR IS OF OPINION T HAT IT IS NECESSARY AND EXPEDIENT TO EXTENT INCENTIVE FOR PRO MOTION OF INDUSTRIES IN THIS STATE, THEREFORE, GOVERNOR IS P LEASED HEREBY, IN SUPERCESSION OF 1993 SCHEME, SANCTIONED PRESENT INCENTIVE SCHEME. THE TITLE OF THE SCHEME IS CALLED THE WES T BENGAL INCENTIVE SCHEME, 1999 FOR INDUSTRIAL PROJECTS OF LARGE, MEDIUM AND SMALL SCALE UNITS TO BE SET UP IN THE STATE. 21. THE DEFINITION OF SMALL SCALE UNIT WOULD MEAN A UNIT HAVING INVESTMENT UPTO THE LIMIT AS PRESCRIBED BY T HE GOVERNMENT OF INDIA FROM TIME TO TIME. THE DEFINITI ON OF NEW UNITS MEANS AN INDUSTRIAL UNIT IN THE LARGE/MEDIUM /SMALL SCALE SECTOR HAVING INVESTMENT IN FIXED CAPITAL ASSET WHI CH IS ESTABLISHED AND COMMISSIONED BY THE ENTREPRENEUR FOR THE MANUFACTURE OF GOODS IN WEST BENGAL FOR FIRST TIME ON OR AFTER 01.04.1999 AND IS REGISTERED WITH THE DIRECTORATE O F INDUSTRIES/DIRECTORATE OF COTTAGE & SMALL SCALE IND USTRIES, AS THE CASE MAY BE. THE DEFINITION OF ELIGIBLE UNIT MEANS A UNIT IN THE LARGE/MEDIUM/SMALL SCALE SECTOR HAVING REGIS TRATION 15 CERTIFICATE ISSUED BY THE DIRECTORATE OF INDUSTRIES AND ELIGIBLE CERTIFICATE BY W.B.I.D.C. OR REGISTRATION CERTIFICA TE ISSUED BY THE DISTRICT INDUSTRIES CENTRE, AS THE CASE MAY BE. TH E EXPLANATION-I TO THE DEFINITION OF THE SCHEME AL SO PROVIDES THAT SUCH PROJECTS SHOULD BE COVERED BY APPROPRIATE APPROVAL UNDER THE INDUSTRIES ACT, 1951 OR A SECRETARIAT FOR INDUSTRIAL APPROVAL REFERENCE NUMBER OR APPROVAL BY ANY DIREC TORATE UNDER THE COTTAGE & SMALL SCALE INDUSTRIES DEPARTME NT, WEST BENGAL. THE DEFINITION OF FIXED CAPITAL INVESTMEN T MEANS INVESTMENT MADE IN THE LAND, BUILDING, PLANT & MACH INERY AND EQUIPMENT INSTALLED FOR THE POLLUTION CONTROL MEASU RES OF THE APPROVED PROJECT UNDER THE SCHEME. THE EXPLANATION ALSO PROVIDES HOW THE FIXED CAPITAL INVESTMENT SHALL BE CALCULATED. THE APPLICABILITY OF 1999 SCHEME SHALL BE APPLICABL E TO ALL LARGE, MEDIUM COTTAGE AND SMALL SCALE PROJECT UNITS TO BE SET UP AND ALSO EXPANSION PROJECT OF THE EXISTING UNITS ON OR AFTER 01.01.1999. THE ELIGIBILITY CRITERIA FOR INCENTIVE UNDER THE 1999 SCHEME PROVIDES THAT INDUSTRIAL PROJECT TO WHICH TH E SCHEME APPLIES, SHALL BE ELIGIBLE FOR SECURING ELIGIBILITY CERTIFICATE PROVIDED ; A) THE PROJECT IS COVERED BY A DETAILED FEASIBILITY REPORT/PROJECT REPORT PREPARED FOR THE PURPOSE; B) THE PROJECT HAS BEEN APPROVED AND SANCTIONED BY THE CENTRAL FINANCIAL INSTITUTION OR COMMERCIAL BANKS O R STATE FINANCIAL INSTITUTIONS, AS THE CASE MAY BE. IN THE CASE OF PROJECTS WITH ARRANGEMENT OF FINANCE FROM OWN RESOU RCES, ISSUE OF ELIGIBILITY CERTIFICATE SHALL BE CONSIDERE D PROVIDED THE WBIDC IS SATISFIED ABOUT THE ARRANGEMENT OF SUC H FINANCE. 16 22. IT FURTHER PROVIDES THAT ANY INDUSTRIAL UNIT IN THE SMALL SCALE SECTOR SHALL BE ELIGIBLE FOR INCENTIVES UNDER THIS SCHEME SUBJECT TO THE FULFILLMENT OF THE CONDITION THAT UN IT IS REGISTERED WITH THE DISTRICT INDUSTRIES CENTRE. HOWEVER, IN R ESPECT OF SUBSIDY OR INVESTMENT IN PLANT AND MACHINERY THE UN DERTAKING CONCERNED MAY BE PROVISIONALLY OR TEMPORARILY REGIS TERED ON OR AFTER 01.04.1998 AND VALID REGISTRATION TO THAT EFF ECT MAY BE ACCEPTED AND THE AMOUNT OF SUBSIDY SHALL BE JUDGED ON THE QUANTUM OF INVESTMENT IN THE PLANT AND MACHINERY AS SANCTIONED AND DISBURSED BY THE FINANCIAL AGENCY CO NCERNED. THE SCHEME FURTHER PROVIDES CLASSIFICATION OF DEVEL OPED AREAS AND BACKWARD AREAS. THE INCENTIVE WOULD BE AVAILAB LE UNDER THE SCHEME FOR APPROVED PROJECTS ACCORDING TO THEIR LOC ATION WHICH ARE CLASSIFIED IN GROUP A B AND C. IT IS PRO VIDED THAT NO SUBSIDY SHALL BE GRANTED TO GROUP A (DEVELOPED AR EA). THE SCHEME FURTHER PROVIDES THE SALES TAX DEFERMENT/REM ISSION ON SALE OF FINISHED GOODS. A NEW UNIT FOR ITS APPROVE D PROJECT SHALL BE ELIGIBLE FOR DEFERRED PAYMENT OF SALES TAX DUE F OR PAYMENT BY IT OR ALTERNATIVELY FOR REMISSION OF SALES TAX DUE TO PAYMENT BY IT FOR THE PERIOD AND SUBJECT TO CEILING AS IS REFERRE D DEPENDING UPON LOCATION OF THE UNIT AND IN CASE OF THE ASSESS EE, IT IS REMISSION OF SALES TAX DUE FOR PAYMENT BY THE UNIT , PERCENTAGE CEILING IN TERMS OF GROSS VALUE OF FIXED CAPITAL AS SET OF THE APPROVED PROJECT. GROUP A WOULD NOT GET ANY BEN EFIT. IT IS ALSO PROVIDED THAT A NEW UNIT FOR ITS APPROVED PROJ ECT OR AN EXISTING UNIT FOR ITS APPROVED EXPANSION PROJECT SH ALL BE ENTITLED TO EXEMPTION OF SALES TAX PAYABLE ON RAW MATERIAL P URCHASED BY 17 IT FOR ITS COMMERCIAL PRODUCTION FOR THE PERIOD MEN TIONED IN THE LIST. 23. CONSIDERING THE ABOVE SALIENT FEATURES OF THE W EST BENGAL INCENTIVE SCHEME,1999 IT IS CLEAR THAT THE SCHEME W AS MEANT FOR INDUSTRIAL PROJECT TO BE SET UP IN THE STATE OF WES T BENGAL. THE NEW UNIT SHALL BE CONSIDERED ON THE BASIS OF INVEST MENT IN FIXED CAPITAL ASSET MEANT FOR MANUFACTURE OF GOODS IN WES T BENGAL FOR THE FIRST TIME AND IS REGISTERED WITH THE DIRECTORA TE OF INDUSTRIES OR SMALL SCALE. THE ELIGIBLE UNIT SHALL HAVE TO GE T CERTIFICATE FROM THE DIRECTORATE OF INDUSTRIES AND ELIGIBILITY CERTIFICATE BY WBIDC. THE UNIT SHOULD HAVE MADE FIXED CAPITAL INV ESTMENT IN LAND, BUILDING, PLANT AND MACHINERY AND EQUIPMENT A ND FORMULA IS GIVEN HOW TO CALCULATE THE FIXED CAPITAL INVESTM ENT. THE CLASSIFICATION OF DEVELOPED AREA AND BACKWARD AREA IS GIVEN IN GROUP A B AND C. GROUP A WOULD NOT GET INC ENTIVE BENEFITS BEING DEVELOPED AREA. SUBSIDY RECEIVED BY ASSESSEE FOR AREA-B UNIT MAY BE BACKWARD AREA. THEREFORE, SUBSIDY WOUL D LINK TO CAPITAL ONLY. AS PER CERTIFICATE OF REGISTRATION UNDER WEST BENGA L INCENTIVE SCHEME, 1999 ISSUED BY DIRECTORATE OF IND USTRIES, GOVT. OF WEST BENGAL IN THE CASE OF THE ASSESSEE, T HE UNIT OF THE ASSESSEE IS LOCATED IN DISTRICT HOOGHLY WHICH FALLS IN GROUP B AND IS A NEW UNIT. THIS CERTIFICATE HAS TERMS AND CONDITIONS. NO. 9 IS RELEVANT WHICH READS, THE UNIT IS ELIGIBLE TO GET REMISSION OF SALES TAX ON SALE OF FINISHED GOODS AN D EXEMPTION OF SALES TAX ON PURCHASE OF RAW MATERIAL FOR A PERIOD OF 12 YEARS IN THE SCALE OF 100% ON THE FIXED CAPITAL INVESTMENT W ITHOUT ANY CAP. THUS, THE ASSESSEE WOULD BE ELIGIBLE FOR SALES TAX DEFERMENT/REMISSION ON SALE OF FINISHED GOODS ETC. AS PER THE 18 SCHEME. THE ASSESSEE ALSO FILED LETTER FROM COMMERC E & INDUSTRIES DEPARTMENT DATED 31.12.1998 WHO HAVE CON SIDERED THE CASE OF ASSESSEE THROUGH HIGH POWERED COMMITTEE AND ASSESSEE HAS BEEN GRANTED SALES TAX INCENTIVES IN T HE SCALE OF 100% OF FIXED CAPITAL INVESTMENT FOR 12 YEARS ON SA LE OF FINISHED GOODS AND ON PURCHASE OF RAW MATERIAL WITHOUT ANY C AP. THE WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION LTD. ALSO ISSUED AN ELIGIBILITY CERTIFICATE IN FAVOUR OF THE ASSESSEE UNDER THE INCENTIVE SCHEME THAT ASSESSEE WOULD GET REMISS ION OF SALES TAX ON SALE OF FINISHED GOODS AND EXEMPTION OF SALE S TAX ON PURCHASE OF RAW MATERIAL FOR A PERIOD OF 12 YEARS I N THE SCALE OF 100% OF THE FIXED CAPITAL INVESTMENT. THE COPY OF ELIGIBILITY CERTIFICATE UNDER THE SCHEME IS ALSO FILED WHICH AL SO PROVIDES THAT IN CASE THE INDUSTRIAL UNIT OF THE ASSESSEE HA S FAILED TO TAKE EFFECTIVE STEPS FOR ESTABLISHMENT OF THE AFORESAID PROJECT WITHIN THE SPECIFIED PERIOD, THE VALIDITY OF CERTIFICATE W OULD NOT BE EXTENDED. THE CRUX OF THE ABOVE WEST BENGAL INCENT IVE SCHEME, 1999 THUS, PROVIDES THAT THE SCHEME IS DIRECTLY REL ATED TO THE SETTING UP OF THE INDUSTRIAL UNITS/PROJECTS IN THE STATE OF WEST BENGAL, THE INDUSTRY SHOULD BE REGISTERED WITH THE DIRECTORATE OF INDUSTRIES WHICH IS IN THE CASE OF THE ASSESSEE AND THE REQUIRED CERTIFICATE HAS BEEN OBTAINED. THE ELIGIBILITY CER TIFICATE SHALL HAVE TO BE ISSUED IN FAVOUR OF INDUSTRY/UNIT AND TH E INVESTMENT SHALL BE CALCULATED WITH REFERENCE TO FIXED CAPITAL INVESTMENT AND THE INCENTIVE/SUBSIDY SHALL HAVE TO BE GRANTED OUT OF THE SALES TAX. THUS, THE ASSESSEE HAS FULFILLED ALL TH E REQUIREMENTS UNDER THE WEST BENGAL INCENTIVE SCHEME, 1999 AND ON LY ON FULFILLING THE CONDITIONS OF THE SCHEME, THE DIRECT ORATE OF 19 INDUSTRIES ISSUED CERTIFICATE OF REGISTRATION AND T HE WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION LTD. ISSUED AN E LIGIBILITY CERTIFICATE UNDER THE SCHEME IN FAVOUR OF THE ASSES SEE. 24. THE HON'BLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD. (SUPRA) CONSIDERING ITS EARLIER DECI SION IN THE CASE OF SAHNEY STEELS & PRESS WORKS LTD.(SUPRA) DIR ECTED THAT THE TEST IS THAT THE CHARACTER OF THE RECEIPT IN TH E HANDS OF ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE P URPOSE FOR WHICH SUBSIDY IS GIVEN. IN OTHER WORDS, IN SUCH CA SES, ONE HAS TO APPLY THE PURPOSE TEST. THE POINT OF TIME AT WH ICH SUBSIDY IS PAID, IS NOT RELEVANT. THE SOURCE IS IMMATERIAL. THE FORM OF SUBSIDY IS IMMATERIAL. 25. CONSIDERING THE FACTS OF THE CASE AND THE WEST BENGAL INCENTIVE SCHEME, 1999 IN THE LIGHT OF THE JUDGEMEN T 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 FO R 12 YEARS UPTO 100% OF GROSS FIXED CAPITAL INVESTMENT/ASSET O F THE APPROVED PROJECT. THE INCENTIVE SCHEME WAS AVAILAB LE FOR LOCATION OF THE UNIT. NO INCENTIVE IS AVAILABLE TO UNITS LOCATED IN GROUP A. THE UNIT OF ASSESSEE IS LOCATED IN GROU P B (HOOGHLY). THE SUBSIDY WOULD HELP THE GROWTH OF INDUSTRY AND NOT TO SUPPLEMENT PROFIT. SUBSIDY IS DETERMINED WITH REFE RENCE TO THE FIXED CAPITAL INVESTMENT/ASSET AND NOT PROFIT. NO WORKING CAPITAL IS CONSIDERED IN THE SCHEME. THE LD. DR SA YS THAT THE SUBSIDY IS GIVEN FOR 12 YEARS AFTER PRODUCTION AND AS SUCH IT IS 20 REVENUE IN NATURE. THE ARGUMENTS OF LD. DR CANNOT BE ACCEPTED IN VIEW OF THE ABOVE FACTS BECAUSE THE SCHEME IS MA DE TO ENCOURAGE THE PROMOTION OF INDUSTRIES/SETTING UP IN THE STATE OF WEST BENGAL. THE INCENTIVES ARE PROVIDED TO APPROV ED PROJECTS ONLY. THE PURPOSE OF GIVING SUBSIDY IS THUS, TO PR OMOTE AND SET UP INDUSTRIES IN STATE OF WEST BENGAL. THE ELIGIBI LITY CERTIFICATE WAS ISSUED BEFORE COMMENCEMENT OF PRODUCTION, THERE FORE SUBSIDY BASED ON FIXED CAPITAL INVESTMENT. THE TIME OF 12 YEARS AFTER COMMENCEMENT OF THE PRODUCTION IS NOT RELEVAN T. THE SOURCE OF SUBSIDY OUT OF SALES TAX IS IMMATERIAL. THE FORM OF SUBSIDY IS ALSO NOT RELEVANT. THE OBJECT/PURPOSE O F ASSISTANCE UNDER THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO SET UP NEW UNIT IN STATE OF WEST BENGAL. THEREFORE, THE R ECEIPT OF THE SALES TAX SUBSIDY IN THE HANDS OF ASSESSEE WAS CAPI TAL 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 T HE 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 KOLKATT A BENCH IN THE CASE OF KEVENTER AGRO LTD. (SUPRA) AND THE TRIB UNAL ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE WEST BENGAL INCENTIVE SCHEME, 1999 CATEGORICALLY ENCOURA GE 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 T HE CASE OF PONNI SUGARS & CHEMICALS LTD. (SUPRA) AND CONSIDERI NG THE 21 ABOVE DISCUSSION, WE ARE OF THE VIEW THAT SALES TAX SUBSIDY RECEIVED BY THE ASSESSEE IS CAPITAL RECEIPT IN NATU RE AND ARE NOT SUBJECTED TO TAX. THE ADDITIONS MADE BY THE ASSESS ING OFFICER ON ACCOUNT OF RECEIPT OF SALES TAX SUBSIDY ARE ACCO RDINGLY DELETED IN ALL THE ASSESSMENT YEARS IN APPEALS. TH E ISSUE REMANDED TO THE TRIBUNAL IS THUS, DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN ALL THE APPEALS UNDER REFERENCE. 27. IN THE RESULT, DEPARTMENTAL APPEAL STANDS DISMI SSED AND THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JUNE,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 16 TH JUNE,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH