Chandu Laxman Chavan, Pune V. CIT(A) -1, Pune

ITA 371/PUN/2012

• Counselvise Citation: 37124514 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 23-02-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUNITA RAI
• Keywords: Capital asset; Business income; Capital receipt; Capital expenditure
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K.PANDA, ACCOUNTANT MEMBER. ITA.NO.371/PN/2012 (ASSTT. YEAR : 2005-06) CHANDU LAXMAN CHAVAN, FLAT NO.18 & 20, C-WING, AMBIENCE EMP. BEHIND EMPRESS GARDEN, GHORPADI, PUNE 411001. .. APPELLANT PAN: AAMPC1361N VS. ITO, WARD-1(3), PUNE. .. RESPONDENT ASSESSEE BY : SHRI C.H.NANIWADEKAR DEPARTMENT BY : SMT.SUNITA RAI DATE OF HEARING : 01.05.2013 DATE OF PRONOUNCEMENT : 28.05.2013 ORDER PER SHAILENDRA KUMAR YADAV, JM : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) ON THE FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED ON FACTS AND IN LAW IN UPHOLDING THE A.O.S ACTION OF TREATING THE AMOUNT OF RS.46,66,665 RECEIVED ON SALE OF SALES TA X EXEMPTION ENTITLEMENT, WHICH ENTITLEMENT WAS ON ACC OUNT OF AN INCENTIVE GRANTED BY GOVERNMENT OF MAHARASHTRA F OR SETTING UP A WIND-MILL POWER GENERATION UNIT, AS CH ARGEABLE TO TAX U/S.28(IV) OF THE ACT, AS AGAINST THE ASSESS EES CLAIM OF EXEMPT FROM TAX BEING A CAPITAL RECEIPT. THE LEARN ED CIT(A) OUGHT TO HAVE HELD THE SAID SUM OF RS.46,66,665 AS CAPITAL RECEIPT. HE FAILED TO APPRECIATE THE PURPOSE TEST FOR WHICH THE SAID ENTITLEMENT WAS RECEIVED, AS EXPLAINED BY THE HON'BLE SUPREME COURT IN 306 ITR 392. THE DECISIONS RELIED UPON BY HIM ARE EITHER DISTINGUISHABLE OR IRRELEVANT. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OU GHT TO HAVE HELD THAT THE ENTITLEMENT OF SALES TAX EXEMPTI ON IS A 2 VALUABLE RIGHT AND HENCE A CAPITAL ASSET AND INCO ME FROM SALE THEREOF IF TAXABLE CAN ONLY BE TAXED ONLY UNDER THE HEAD CAPITAL GAINS AND NOT UNDER THE HEAD BUSINESS IN COME. HE FURTHER OUGHT TO HAVE HELD THAT THE COST OF ACQUISI TION FOR THE SAID RIGHT IS UNASCERTAINABLE AND HENCE EVEN THE CH ARGE UNDER THE HEAD CAPITAL GAINS FAILS. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED ON FACTS AND IN LAW IN NOT HOLDING THAT THE RECEIPT OF RS.46,66,665 ON ACCOUNT OF SALE OF SALES TAX EXEMPTION ENTITLEME NT ARE DIRECTLY RELATED TO AND DERIVED FROM WING MILL AND HENCE ARE ENTITLED TO DEDUCTION U/S.80-IA OF THE ACT. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED ON FACTS AND IN LAW IN NOT ALLOWING DEDUCTION U/S.80-I A(4) BY MERELY RELYING ON THE GOETZE INDIAS CASE [284 ITR 323 (SC)] AND ON THE GROUND THAT THE AUDIT REPORT IN FORM 10C CB WAS NOT FURNISHED. THE REASONS ASSIGNED FOR DISALLOWAN CES ARE UNTENABLE. 2. THE FIRST ISSUE IS WITH REGARD TO TREATING SALE PROCEEDS OF SALES TAX INCENTIVES ENTITLEMENT TO THIRD PARTIES AS INCO ME. IN THIS REGARD IT WAS POINTED OUT THAT THIS ISSUE IS COVERED AGAIN ST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL, WHEREIN ISSUE HAS BEEN D ECIDED AGAINST THE ASSESSEE IN ASSESSEES OWN CASE FOR A.Y. 2006-0 7, BY OBSERVING AS UNDER: 5. AT THE TIME OF HEARING IT WAS A COMMON POINT BE TWEEN PARTIES WITH THAT AN IDENTICAL ISSUE HAS BEEN A SUB JECT MATTER OF CONSIDERATION BY OUR COORDINATE BENCH IN THE CAS E OF RASIKLAL M. DHARIWAL (HUF), PUNE VS. DY. CIT, CIRCL E 2, PUNE IN ITA NOS. 575/PN/07 & 150/PN/2008, DATED 31-03-20 11 WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE AGAINST THE ASSESSEE. TO FACILITATE APPRECIATION OF THE REASON ING ADOPTED BY TRIBUNAL TO ADJUDICATE THE ISSUE, THE RELEVANT P ORTION OF THE ORDER OF THE TRIBUNAL DATED 31-03-2011(SUPRA) IS EX TRACTED BELOW : 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS. IN TERMS OF THE POLICY ON WIND POWER GENERATION FORMULATED BY THE GOVERNMENT OF MAHARASHTRA, VIDE RESOLUTIONS DATED 12.3.1998 (SUPRA), AND 1.10.1999 (SUPRA), THE ASSESSEE AVAILED OF SALES-TAX BENEFIT OF A SUM OF RS 63,74,291/-. THE ASSESSEE CLAIMED THAT SUCH AMOUNT IS A CAPITAL RECEIPT NOT SUBJECTED TO ITA NO 575/PN/07,150/PN/08 TAXATION. ON THE CONTRARY, AS P ER THE REVENUE SUCH AMOUNT IS A REVENUE RECEIPT CHARGE ABLE TO TAX. 9. BEFORE WE TOUCH UPON THE DIFFERING STANDS OF TH E ASSESSEE AND REVENUE ON THE ISSUE, IT WOULD BE 3 APPROPRIATE TO CULL OUT THE FACTS HAVING A BEARING ON THE ISSUE. THE APPELLANT IS AN HUF WHICH IS, INTER ALIA , ENGAGED IN A RANGE OF BUSINESS ACTIVITIES VIZ. MANU FACTURE AND SALE OF MANICKCHAND ZARDA, PAN MASALA, CONSTRUCTION ACTIVITIES, MANUFACTURING OF TILES ETC . INCLUDING GENERATION AND SALE OF POWER. IN THE COUR SE OF ITS ACTIVITIES, THE ASSESSEE COMPANY SET UP WIND MI LLS IN THE STATE OF MAHARASHTRA FOR GENERATION OF WIND POW ER. THE GOVERNMENT OF MAHARASHTRA IN TERMS OF ITS POLIC Y ON WIND POWER GENERATION GRANTED VARIOUS BENEFITS, INCLUDING SALES-TAX BENEFIT. IN TERMS OF THE PROCED URE FOR AVAILING SALES-TAX BENEFITS ON NONCONVENTIONAL ENER GY GENERATING PROJECTS, SUCH AS WIND MILLS, ASSESSEE W AS ALSO ENTITLED TO THE FACILITY OF TRANSFERRING THE S ALES-TAX BENEFIT TO THE THIRD PARTY. THE ASSESSEE AFTER OBTA INING THE REQUISITE PERMISSION FROM THE STATE GOVERNMENT TRANSFERRED THE SALES-TAX BENEFIT ENTITLEMENTS TO A THIRD PARTY AND THE CONSIDERATION THEREOF AMOUNTING TO RS 63,74,291/- WAS CLAIMED AS A CAPITAL RECEIPT. AT TH IS STAGE, IT WOULD BE APPROPRIATE TO BRIEFLY TOUCH UPO N THE RESOLUTION OF THE STATE GOVERNMENT DATED 12.3.1998 (SUPRA), THE RELEVANT PORTION OF WHICH IS REPRODUCE D AS UNDER: PREAMBLE THE STATE GOVERNMENT HAS A POLICY TO PROMOTE GENERATION OF ENERGY THROUGH NONCONVENTIONAL SOURCES TO SUPPLEMENT THE EVER INCREASING DEMAND OF ELECTRICITY IN THE STATE. IT WAS FOUND AFTER A S URVEY THAT THERE IS AN IMMENSE POTENTIAL FOR GENERATION O F WIND POWER IN THE STATE. SURVEYS CONDUCTED BY MEDA IN ASSOCIATION WITH MNES, NEW DELHI AND IITM, BANGALORE INDICATE THAT THE POTENTIAL IS ABOU T 300 TO 400 MW.EIGHT DIFFERENT SITES HAVE BEEN SELECTED FOR THIS PURPOSE AND FURTHER SURVEY IS BEI NG CARRIED OUT. THE STATE GOVERNMENT HAD ENUNCIATED ITS POLICY ON GENERATION THROUGH NON CONVENTIONAL SOURCES IN JANUARY, 1996. THIS POLICY HOWEVER COULD NOT ATTRACT THE PROMOTERS. DURING THE INTERVENING PERIOD, THE GOVERNMENT OF INDIA HAD ISSUED CERTAIN GUIDELINES REGARDING WIND ENERGY GENERATION. THESE GUIDELINES FROM GOVERNMENT OF INDIA, WIND POWER GENERATION POLICIES OF OTHER STATE GOVERNMENTS AND THE PROBLEMS BEING FACED BY PROMOTERS OF WIND ENERGY GENERATION WERE UNDER ACTIVE CONSIDERATION OF THE STATE GOVERNMENT. RESOLUTION : IN PARTIAL MODIFICATION OF ITS EXISTING POLICY TO PROMOTE WIND ENERGY GENERATION, THE STATE 4 GOVERNMENT HAS TAKEN FOLLOWING DECISIONS TO PROMOTE WIND ENERGY GENERATION IN THE STATE:- (1) TARIFF: MAHARASHTRA STATE ELECTRICITY BOARD SHALL PURCHASE ENERGY GENERATED FROM WIND POWER PLANTS AT A RATE OF 225 PAISE PER UNIT. THE FINANCIAL YEAR 1994-95 WILL BE TAKEN AS BASE YEAR FOR THIS RATE WHICH WILL BE INCREASED AT A RATE OF 5% PER ANNUM. THIS 5% ESCALATION WILL BE AVAILABLE TO THE DEVELOPERS FOR THE FIRST 10 YEARS OF THE PROJECT LIFE. THE LIABILITY O F THE PROJECT REDUCES AFTER REPAYMENT OF DEBT. DUE TO THI S, FOR THE NEXT 3 YEARS THERE WILL BE NO ESCALATION AN D THE RATE WILL BE KEPT CONSTANT. THEREAFTER, FOR THE BALANCE LIFE OF THE PROJECT (7 YEARS), AN ESCALATIO N OF 5% PER ANNUM WILL BE AVAILABLE TO THE DEVELOPERS. (2) BANKING IN LINE WITH THE CENTRAL GOVERNMENT POLICY, WIND POWER DEVELOPERS WOULD BE GIVEN PERMISSION TO BANK THE ENERGY GENERATED FROM WIND POWER PLANTS WITH MSEB. BANKING CAN BE DONE ANY TIME OF THE DAY AND NIGHT. THE ENERGY BALANCE AT THE END OF ONE YEAR SHALL NOT BE TAKEN INTO ACCOUNT NEXT YEAR. THE BALANCE OF ENERGY ACCOUNT WILL BE SETTLED BETWEEN THE MSEB AND PROMOTERS AT THE END OF THE YEAR AS PER THE TARIFF APPLICABLE DURING THAT YEAR. (3) TRANSMISSION LOSSES: MSEB SHALL BEAR THE TRANSMISSION LOSSES FOR WIND ENERGY TRANSMISSION FOR THE FIRST THREE YEARS. THEREAFTER, TRANSMISSION LOSSES WILL BE LEVIABLE AT THE RATE OF 1%.(4) THIRD PARTY SALE:PROMOTERS WILL BE PERMITTED TO SELL EXPORTABLE POWER TO ANY TWO (INDUSTRIAL OR COMMERCIAL) CONSUMERS PER MW. WHEELING CHARGES FOR THIS WILL BE LEVIABLE AT THE R ATE OF 2%. (5) EVACUATION ARRANGEMENT: MSEB SHALL INITIALLY BEAR THE EXPENDITURE FOR ERECTION OF HIGH TENSION SUB-STATION AND TRANSMISSION INFRASTRUCTURE. MEDA SHALL RECOVER 50% OF THIS EXPENDITURE FROM WIND POWER PROJECT PROMOTERS AND WILL GIVE IT TO MSEB. DEVELOPERS SHAL L BEAR THE COST OF TRANSMISSION LINES FROM THE SUB- STATION TO THE PROJECT AND ALL OTHER RELATED EQUIPMENT. 5 (6) APPROACH ROADS: MEDA SHALL BEAR THE COST OF CONSTRUCTION OF ROADS T O THE PROJECT SITES. MEDA WOULD BE ENTITLED TO GOVERNMENT GRANTS FOR THIS EXPENDITURE. (7) CAPITAL SUBSIDY : WIND POWER PROJECTS WILL BE GRANTED STATUS OF SMALL SCALE INDUSTRIES. MEDA SHALL GIVE A SUBSIDY UPTO 30% OR THE FIXED CAPITAL INVESTMENT (LIMITED TO RS 20 LAKHS) TO THE PROMOTERS SUBJECT TO A CONDITION THAT WIND POWER PLANT HAS SUCCESSFULLY OPERATED WITH A MINIMUM 12% PLANT LOAD FACTOR FOR AT LEAST ONE YEAR. (8) ENTRY TAX/OCTROI REFUND: ENTRY TAX/OCTROI AS PAID Y PROMOTERS WHILE MAKING CAPITAL EXPENDITURE WILL BE REIMBURSED BY MEDA. (9) SALES TAX BENEFITS : INVESTMENTS IN PLANT AND MACHINERY, NEW BUILDING, LAND DEVELOPMENT, TECHNICAL DEVELOPMENT AND DESIGN IN A WIND POWER PROJECT WOULD BE CONSIDERED AS QUALIFYING INVESTMENT. PROMOTER SHALL BE ENTITLE D TO SALES-TAX BENEFITS UPTO THE AMOUNT OF QUALIFYING INVESTMENT. THIS BENEFIT WOULD BE GIVEN IN 6 EQUAL INSTALMENTS OVER A PERIOD OF 6 YEARS (1/6 OF THE QUALIFYING INVESTMENT AMOUNT EVERY YEAR) ONLY UNDER THE CONDITION THAT THE PLANT HAS SUCCESSFULLY OPERATED EVERY YEAR WITH A MINIMUM OF 12% PLANT LOAD FACTOR. THIS BENEFIT MAY ALSO BE AVAILABLE TO ANY OTHER COMPANY ASSOCIATED WITH THE PROMOTERS. DETAILED INSTRUCTIONS ABOUT THE MODUS OPERANDI ABOUT SALES TAX BENEFITS WILL BE SEPARATELY ISSUED BY THE FINANCE DEPARTMENT. BY ORDER AND IN THE NAME OF THE GOVERNOR OF MAHARASHTRA. SD/-(L.V.NILESH) DEPUTY SECRETARY TO GOVERNMENT 10. A PERUSAL OF THE PREAMBLE TO SUCH RESOLUTION REVEALS THAT THE STATE GOVERNMENT HAS A POLICY TO PROMOTE GENERATION OF ENERGY THROUGH NON CONVENTION AL SOURCES TO SUPPLEMENT THE EVER INCREASING DEMAND OF ELECTRICITY. IN THE STATE OF MAHARASHTRA. IT WAS FO UND THAT THERE IS IMMENSE POTENTIAL FOR GENERATION OF WIND P OWER IN THE STATE AND DIFFERENT SITES WERE SELECTED BY T HE GOVERNMENT FOR THIS PURPOSE. IT APPEARS THAT THE ST ATE GOVERNMENT HAD ENUNCIATED ITS POLICY OF GENERATION THROUGH NON CONVENTIONAL SOURCES IN JANUARY 1996, WHICH WAS NOT FOUND ATTRACTIVE BY THE PROMOTERS. IN TERMS OF THE SAID RESOLUTION THE GOVERNMENT MODIFIE D ITS 6 EXISTING POLICY TO PROMOTE WIND ENERGY GENERATION B Y ANNOUNCING CERTAIN CONCESSIONS AS INCENTIVES ENUMERATED THEREIN. SUCH INCENTIVES RELATED TO TARI FF STRUCTURING, BANKING OF POWER GENERATED BY WIND MIL LS WITH MSEB, BEARING OF TRANSMISSION LOSSES BY MSEB, PERMITTING PROMOTERS TO SELL POWER TO THIRD PARTIES , BEARING INITIAL EXPENDITURE FOR ERECTION OF HIGH TE NSION AND SUB-STATION AND TRANSMISSION INFRASTRUCTURE, BE ARING THE COST OF CONSTRUCTION OF ROADS TO PROJECT SITES, REIMBURSEMENT OF ENTRY TAX/OCTROI TO THE PROMOTERS, CAPITAL SUBSIDY UPTO 30% OF THE FIXED CAPITAL INVES TMENT (LIMITED TO RS 20 LAKHS), AND SALES-TAX BENEFITS. S INCE THE PRIMARY DISPUTE BEFORE US IS IN RELATION TO THE SAL ES-TAX BENEFITS AVAILABLE UNDER THE SCHEME, IT WOULD BE IN THE FITNESS OF THINGS THAT WE MAY LOOK AT IT IN SLIGHT DETAIL. THE SCHEME INTENDED THAT INVESTMENTS IN PLANT AND MACHINERY, NEW BUILDING, LAND DEVELOPMENT, TECHNICA L DEVELOPMENT AND DESIGN IN A WIND POWER PROJECT WOUL D CONSTITUTE QUALIFYING INVESTMENT AND A PROMOTER SHA LL BE ENTITLED TO SALES-TAX BENEFITS UPTO THE AMOUNT OF S UCH QUALIFYING INVESTMENT. SUCH SALES-TAX BENEFIT WAS T O BE GIVEN IN SIX EQUAL INSTALMENTS OVER A PERIOD OF SIX YEARS, I.E. 1/6TH OF THE QUALIFYING INVESTMENT AMOUNT EVER Y YEAR ON THE CONDITION THAT THE PLANT SUCCESSFULLY OPERAT ES EVERY YEAR WITH A MINIMUM OF 12% PLANT LOAD FACTOR. IN TERMS OF SUCH BROAD FRAMEWORK OF THE SALES-TAX BENE FIT, THE STATE GOVERNMENT ISSUED SEPARATE DETAILED INSTRUCTIONS ABOUT THE MODUS OPERANDI TO AVAIL SUCH BENEFITS, BY WAY OF GOVERNMENT RESOLUTION DATED 1.10.1999 (SUPRA)S. THE RELEVANT PORTION OF THE SAI D RESOLUTION DATED 1.10.1999 IS AS UNDER: PREAMBLE: WITH A VIEW TO ENCOURAGE INSTALLATION OF WIND ENERG Y GENERATOR UNITS, STATE GOVERNMENT HAS PUBLISHED A P OLICY VIDE ABOVE MENTIONED GOVERNMENT RESOLUTION. ACCORDING TO THE SAID POLICY SALES TAX BENEFIT IS A VAILABLE, EQUIVALENT TO THE QUALIFYING INVESTMENT ON WIND ENE RGY GENERATION PROJECTS. TO AVAIL THE SALES TAX BENEFIT A PROCEDURE HAS BEEN LAID DOWN BY THE FINANCE DEPARTMENT VIDE NOTIFICATION NO . STA 1098/CR-45/TAXATION 2, DATED 24.8.1998 AND NOTIFICATION NO VKN-1298/CR-33/TAXATION-1 DATED 24.8.1998. HOWEVER, EVEN AFTER RELEASE OF THE SAID NOTIFICATIONS THE INDUSTRIALISTS HAVE EXPRESSED CER TAIN DIFFICULTIES WHICH HAVE BEEN BROUGHT TO THE NOTICE OF THE GOVERNMENT. TAKING INTO CONSIDERATION THE REQUESTS OF THE WIND POWER PROMOTERS AS WELL AS THEIR DIFFICULT IES, THE PROPOSAL FOR MODIFIED DETAILED PROCEDURE FOR AVAILI NG SALES TAX BENEFIT WAS UNDER CONSIDERATION OF THE GOVERNME NT. 7 GOVERNMENT RESOLUTION: CONSIDERING THE DIFFICULTIES OF THE INDUSTRIALISTS AND WITH A VIEW TO MAKE AVAILABLE SALES TAX BENEFIT, GOVERNM ENT HAS DECIDED TO SIMPLIFY THE PROCEDURE AS FOLLOWS: 1. THE SALES TAX BENEFIT WILL BE AVAILABLE ON ELECT RICITY GENERATING UNITS IN RELATION TO ACHIEVEMENT OF PLAN T LOAD FACTOR AS FOLLOWS: S.NO. PLANT LOAD FACTOR SALES TAX BENEFIT EQUIVALEN T OF 1//6TH OF QUALIFYING INVESTMENT WITHOUT BANK GUARAN TEE WITH BANK GUARANTEE 1 12% 60% 50% 2 13% 70% 60% 3 14% 80% 70% 4 15% 90% 80% 5 16% 100% 90% 6 17% 100% 100% THE SALES TAX BENEFIT CAN BE AVAILED BY ALL PROJECT S WHICH ARE COMMISSIONED AS WELL AS CONNECTED TO THE TRANSMISSION LINES FROM TWO MONTHS AFTER THE DATE O F PUBLICATION OF THE GOVERNMENT RESOLUTION. SALES TAX BENEFIT WILL BE AVAILABLE FOR CONTINUOUS 6 YEARS AF TER OBTAINING THE ENTITLEMENT CERTIFICATE FROM THE SA LES TAX DEPARTMENT. 2. WHILE DETERMINING THE PLANT LOAD FACTOR, THE AVAILABILITY OF THE TRANSMISSION LINES DURING THE M ONTHS FROM MAY TO SEPTEMBER OF THAT FINANCIAL YEAR AVERAG E AVAILABILITY OF TRANSMISSION LINES SHALL BE TAKEN I NTO CONSIDERATION AND THIS PERCENTAGE WILL BE INCREASED PROPORTIONATELY TO 100%, AND THEN THE PLANT LOAD FA CTOR WILL BE DETERMINED. FOR EXAMPLE, IF TRANSMISSION LI NES AVAILABILITY IS 85%, THEN THAT YEARS AVERAGE PLANT LOAD FACTOR WILL BE INCREASED PROPORTIONATELY TO CORRESP OND TO 100% AVAILABILITY OF TRANSMISSION LINES AND THE SAL ES TAX BENEFIT WILL BE INCREASED PROPORTIONATELY. THE AVAI LABILITY OF THE TRANSMISSION LINES DURING THE MONTHS FROM MA Y TO SEPTEMBER OF THAT FINANCIAL YEAR WILL BE DECIDED BY MAHARASHTRA ENERGY DEVELOPMENT AGENCY (MEDA), PUNE. 3. SALES TAX BENEFIT WILL BE AVAILABLE FOR THE PROM OTERS FROM THE DATE OF OBTAINING OR ENTITLEMENT CERTIFIC ATE, FOR A PERIOD OF CONTINUOUS 6 YEARS. AND FOR EVERY YEAR, SUCH BENEFIT WILL BE LIMITED TO 1/6TH OF THE QUALIFYING INVESTMENT. HOWEVER, IN ANY ONE YEAR, PLANT LOAD FA CTOR OF 12% IS NOT ACHIEVED THEN THAT YEARS SALES TAX B ENEFIT WILL GET CANCELLED AND THAT UNIT WILL HAVE TO LOSE SALES TAX BENEFIT FOR THAT YEAR FOREVER. 8 ANY TWO YEARS SALES TAX BENEFIT WILL NOT BE ALLOWE D TO DEDUCT TOGETHER TO CLAIM IN ONE YEAR. TO AVAIL THE SALES TAX BENEFITS THE PERIOD WILL BE COUNTED FOR CONTINU OUS 6(SIX) YEARS. THE FINANCIAL YEAR PERIOD WILL BE FRO M 1ST APRIL TO 31ST MARCH. 4. THE FACILITY OF TRANSFERRING THE SALES TAX BENEF IT TO THE THIRD PARTY THE PROMOTERS OF THE PROJECT, IF SELL E LECTRICITY TO THE THIRD PARTY, FOR SUCH THIRD PARTY, TRANSFERR ING OF SALES TAX BENEFIT WILL BE PERMITTED. THE PROMOTERS OF THE PROJECT CAN CHOOSE THE THIRD PARTY FOR THIS FACILIT Y AND IT WILL BE APPLICABLE FOR THAT YEAR ONLY. HOWEVER, NO PERMISSION WILL BE GIVEN DURING THAT PERIOD TO CHAN GE THE NAME OF THE THIRD PARTY. THIRD PARTY UNITS CAN AVAI L THE BENEFIT UPTO THE AMOUNT MENTIONED IN PARAGRAPH 1. F OR THIS, ELIGIBILITY CERTIFICATE WILL BE GIVEN BY DI RECTOR, MAHARASHTRA ENERGY DEVELOPMENT AGENCY. PROMOTERS OF THE PROJECT WILL BE ALLOWED TO CHOOSE, A THE MOST T WO NAMES OF THE THIRD PARTY UNITS TO GET THE SALES TAX BENEFIT. THE ENTITLEMENT CERTIFICATE FOR UNITS OF THIRD PA RTY WILL E CERTIFIED BY COMMISSIONER OF SALES TAX. AMOUNT OF S ALES TAX BENEFIT IS RELATED TO THE WIND ENERGY GENERATIO N AND THEY ARE NOT RELATED TO THE AMOUNT OF ELECTRICITY S OLD TO THE THIRD PARTY. AFTER OBTAINING THE ENTITLEMENT CERTIFICATE FOR SALES TAX BENEFIT THE PROMOTERS OF THE PROJECT CAN TRANSFER TO THE THIRD PARTY TO WHOM THE Y HAVE SOLD THE ELECTRICITY. AMOUNT OF SALES TAX BENEFIT I S RELATED TO THE QUALIFYING INVESTMENT AND PLANT LOAD FACTOR. THE ELECTRICITY SOLD TO THE UNIT/UNITS OF THIRD PARTY C AN AVAIL SALES TAX BENEFIT LIMITED ONLY TO THE QUALIFYING IN VESTMENT AND PLANT LOAD FACTOR. THE ELECTRICITY SOLD TO THE UNIT/UNITS OF THIRD PARTY CAN AVAIL SALES TAX BENEF IT LIMITED ONLY TO THE QUALIFYING INVESTMENT AS MENTIO NED IN PARAGRAPH 1. 5. AFTER SATISFYING THE CONDITION OF AVERAGE PLANT LOAD FACTOR, SALES TAX BENEFIT CAN BE AVAILED BY THE ELI GIBLE WIND ENERGY GENERATION UNIT IN THE IMMEDIATE FOLLOW ING YEAR. HOWEVER, IF SOME PROMOTERS DESIRE TO AVAIL TH IS BENEFIT IN THE CURRENT FINANCIAL YEAR IMMEDIATELY O N COMMISSIONING OF WIND ENERGY PROJECT, THEY CAN AVAI L THE BENEFIT ON THE FOLLOWING CONDITIONS: A) BANK GUARANTEE EQUIVALENT TO QUALIFYING INVESTMENT WILL HAVE TO BE GIVEN EVERY YEAR FOR AVAILING SALES TAX BENEFIT OF FOLLOWING FINANCIAL Y EAR. B) IF THE CONDITION OF PLANT LOAD FACTOR IS NOT FUL FILLED, THE BANK GUARANTEE AMOUNT WILL BE FORFEITED AT THE END OF THE YEAR. THE FORFEITED AMOUNT OF BANK GUARANTEE WILL BE TRANSFERRED TO SALES TAX DEPARTMENT BY MAHARASHTRA ENERGY DEVELOPMENT AGENCY. 9 6. FACILITY TO BULK LICENSEES IF THE BULK LICENSEE HAS INSTALLED WIND ENERGY GENERATION UNIT, PERMISSION W ILL BE GRANTED TO AVAIL BY ADJUSTMENT IN THE TAX ON SALE O F ELECTRICITY, SALES TAX BENEFIT DETERMINED ON QUALIF YING INVESTMENT IN THE PROJECT. FOR THAT PURPOSE ENTITL EMENT CERTIFICATE WILL BE GIVEN BY ENERGY DEPARTMENT OF GOVERNMENT OF MAHARASHTRA AND ELIGIBILITY CERTIFIC ATE WILL BE ISSUED BY MAHARASHTRA ENERGY DEVELOPMENT AGENCY. 7. IF THE PROMOTERS DO NOT ABIDE BY TERMS AND CONDI TIONS OF MAHARASHTRA ENERGY DEVELOPMENT AGENCY AND SALES TAX DEPARTMENT, THEN THE DIRECTOR OF MAHARASHTRA ENERGY DEVELOPMENT AGENCY AND COMMISSIONER OF SALES TAX RESERVE THE RIGHT TO CANCEL THE ENTITLEMENT CERTIFICATE AND THE ELIGIBILITY CERTIFICATE. 8. SALES TAX BENEFIT CAN BE AVAILED ON THE FINISHED PRODUCT AS WELL AS ON THE RAW MATERIALS USED AND IT S PROCEDURE SHALL BE AS PER PACKAGE SCHEME OF INCENTI VE (PSI), 1993 AND AMENDMENT THEREON FROM TIME TO TIME . 9. THE PROMOTER WILL NOT BE ELIGIBLE FOR SALES TAX BENEFIT FOR USE OF SECOND HAND MACHINERY AND ON OLD WIND ELECTRIC GENERATOR. IF SUCH CASES ARE NOTICED, THEN THE DIRECTOR, MAHARASHTRA ENERGY DEVELOPMENT AGENCY HAS RIGHT TO CANCEL ENTITLEMENT CERTIFICATE AND ELIGIBLE CERTIFICATE . 10. THE SITES APPROVED BY MINISTRY OF NON-CONVENTIO NAL ENERGY SOURCES, GOVERNMENT OF INDIA, NEW DELHI WILL BE ELIGIBLE FOR SALES TAX BENEFIT. THE NO OBJECTION C ERTIFICATE WILL BE ISSUED BY MAHARASHTRA ENERGY DEVELOPMENT AGENCY ONLY AFTER SUBMISSION OF UNDERTAKING FROM TH E CONCERNED MANUFACTURER AND PROMOTER THAT THE MACHINERY USED FOR WIND GENERATION PROJECT IS NEW. 11. THERE IS NO RESTRICTION FOR EXPANSION OF PROJEC TS. HOWEVER, CAPACITY OF THE WIND ENERGY GENERATOR SHOU LD BE MINIMUM 200 KW. 12. PROCEDURE FOR AVAILING THE SALES TAX BENEFIT WI LL BE APPLICABLE TO ALL PROJECTS SUCH AS THE WIND ENERGY GENERATOR UNITS/WIND SPV DIESEL HYBRID, SELF STARTING GENERATOR (HYBRID STAND ALONE SYSTEM) AND AS PER MAHARASHTRA GOVERNMENTS DECLARED POLICY PUBLIS HED IN THIS CONNECTION. BY THE ORDER AND ON BEHALF OF 10 GOVERNOR OF MAHARASHTRA SD/- (P.D. KARKHANIS) SECTION OFFICER (ENERGY). 11. AS IS EVIDENT, THE SAID RESOLUTION DEALS WITH T HE MANNER IN WHICH THE INTENDED SALES-TAX BENEFITS CAN BE AVAILED OF BY THE PROMOTERS. IT IS CLEAR THAT THE S ALES-TAX BENEFITS CAN BE AVAILED BY ALL PROJECTS WHICH ARE COMMISSIONED AS WELL AS CONNECTED TO THE TRANSMISSI ON LINES FROM TWO MONTHS AFTER THE DATE OF PUBLICATION OF THE SAID RESOLUTION. IT IS ALSO PROVIDED THAT THE SALES -TAX BENEFIT IS AVAILABLE ON ELECTRICITY GENERATING UNIT S IN RELATION TO ACHIEVEMENT OF PLANT LOAD FACTOR. THE PROCEDURAL REQUIREMENT ALSO ENTAILS THAT THE SALES TAX BENEFIT WILL BE AVAILABLE FOR THE PROMOTERS FROM TH E DATE OF OBTAINING OF ENTITLEMENT CERTIFICATE FOR A PER IOD OF CONTINUOUS SIX YEARS, AND FOR EVERY YEAR SUCH BENEF IT WILL BE LIMITED TO 1/6TH OF THE QUALIFYING INVESTMENT. I T IS ALSO PROVIDED THAT IN ANY ONE YEAR, IF PLANT LOAD FACTOR OF 12% IS NOT ACHIEVED, THEN THAT YEARS SALES-TAX BENEFIT WILL GET CANCELLED AND THAT SUCH UNIT WOULD LOOSE SALES-TAX BENEFIT OF THAT YEAR FOR EVER. ANOTHER PERTINENT PR OCEDURE OUTLINED IN THE RESOLUTION PERMITTED THE FACILITY O F TRANSFERRING THE SALES-TAX BENEFIT TO THIRD PARTIES . IN TERMS OF SUCH FACILITY, THE PROMOTERS OF THE PROJEC T WERE PERMITTED TO TRANSFER SALES-TAX BENEFIT TO THIRD PA RTY, IF IT SOLD ELECTRICITY TO SUCH THIRD PARTY. SUCH TRANSFER WAS SUBJECT TO ISSUANCE OF THE ENTITLEMENT CERTIFICATE TO BE ISSUED BY THE COMMISSIONER OF SALES-TAX. THE SAID RESOLUTION ALSO PROVIDED THAT THE SALES-TAX BENEFIT CAN BE AVAILED ON THE FINISHED PRODUCT AS WELL AS ON THE R AW MATERIALS USED. IT IS FURTHER NOTIFIED BY THE STATE GOVERNMENT THAT THE PROMOTER WILL NOT BE ELIGIBLE F OR SALES-TAX BENEFIT FOR USE OF SECOND HAND MACHINERY AND ON OLD WIND ELECTRIC GENERATOR. THE POLICY FURTHER PROVIDED THAT THERE WAS NO RESTRICTION FOR EXPANSIO N OF PROJECT. HOWEVER, THE MINIMUM CAPACITY OF WIND MILL GENERATION WAS STATED TO BE 200 KW. IN TERMS OF THE AFORESAID SCHEME, THE ASSESSEE OBTAINED THE ENTITL EMENT CERTIFICATE AND TRANSFERRED THE SALES-TAX BENEFIT TO A THIRD PARTY. THE ASSESSEE AVAILED THE SALES-TAX BEN EFIT FOR ITS WIND POWER PROJECT INSTALLED AT VILLAGE KUSHI (VANKUSAWADE) TAL. SATARA, DIST. SATARA AND SUCH BE NEFIT AMOUNTING TO RS 63,74,291/- PERTAINING TO THE YEAR UNDER CONSIDERATION HAS BEEN CLAIMED AS A CAPITAL RECEIPT. FACTUALLY SPEAKING, ON THE ASPECT OF THE A SSESSEE HAVING RECEIVED THE SAID AMOUNT IN TERMS OF THE SCH EME OF THE STATE GOVERNMENT AS SALES-TAX BENEFIT UNDER THE AFORESAID GOVERNMENT RESOLUTIONS, IS NOT IN DISPUTE . 11 12. IN ORDER TO EXAMINE THE TAXABILITY OF SUCH AMOU NT, IT WOULD BE APPROPRIATE TO REFER TO THE PROPOSITIONS B ASED ON THE CASE LAWS REFERRED TO US. IN THE CASE OF SAH NEY STEELS (SUPRA), THE QUESTION BEFORE THE HONBLE SUP REME COURT WAS WHETHER THE SUBSIDY RECEIVED BY THE ASSES SEE THEREIN FROM ANDHRA PRADESH GOVERNMENT WAS TAXABLE AS A REVENUE RECEIPT OR NOT. THE ANDHRA PRADESH GOVERNMENT HAD NOTIFIED CERTAIN FACILITIES AND INCE NTIVES FOR ALL THE NEW INDUSTRIAL UNDERTAKINGS COMMENCING PRODUCTION ON OR AFTER 1.9.1969 WITH INVESTMENT CAP ITAL (EXCLUDING WORKING CAPITAL) NOT EXCEEDING RS 5 CROR ES. THE INCENTIVES WERE TO BE ALLOWED FOR A PERIOD OF F IVE YEARS FROM THE DATE OF COMMENCEMENT OF PRODUCTION A ND SUCH CONCESSION WAS ALSO AVAILABLE FOR SUBSEQUENT EXPANSION OF 50% AND ABOVE OF THE EXISTING CAPACITI ES, PROVIDED SUCH EXPANSION WAS LOCATED IN A CITY OR TO WN OR PANCHAYAT AREA OTHER THAN THAT IN WHICH THE EXISTIN G UNIT WAS LOCATED. THE HONBLE SUPREME COURT NOTICED THAT THE SALIENT FEATURE OF THE SCHEME FORMULATED BY THE AND HRA PRADESH GOVERNMENT WAS THAT THE INCENTIVES WERE NOT AVAILABLE UNLESS AND UNTIL PRODUCTION HAD COMMENCED AND THAT THE SAME WAS LIMITED TO A PERIOD OF 5 YEAR S FROM THE DATE OF COMMENCEMENT OF PRODUCTION. THE HONBLE SUPREME COURT NOTED THAT ALL THE INCENTIVES ARE PRODUCTION INCENTIVES IN THE SENSE THAT THE COMPANY WOULD BE ENTITLED TO THESE INCENTIVES ONLY AFTER IT GOES INTO PRODUCTION AND THAT THE SCHEME WAS NOT TO MAKE ANY PAYMENT DIRECTLY OR INDIRECTLY FOR THE SETTING UP OF INDUSTRIES. ON FACTUAL ANALYSIS OF THE SCHEME, IT W AS INFERRED THAT THE SUBSIDIES WERE OPERATIONAL SUBSID IES, INASMUCH AS THEY WERE GIVEN TO ENCOURAGE SETTING U P OF INDUSTRIES IN THE STATE OF ANDHRA PRADESH BY MAKING THE BUSINESS OF PRODUCTION AND SALE OF GOODS IN THE STA TE MORE PROFITABLE. THE HONBLE SUPREME COURT OBSERVE D THAT THE CHARACTER OF SUBSIDY WHETHER REVENUE OR CA PITAL WILL HAVE TO BE DETERMINED, HAVING REGARD TO THE PU RPOSE FOR WHICH THE SUBSIDY IS GIVEN. THE FOLLOWING OBSER VATIONS ARE RELEVANT: IF ANY SUBSIDY IS GIVEN, THE CHARACTER OF THE SUBS IDY IN THE HANDS OF THE RECIPIENT WHETHER REVENUE OR CAPITAL WILL HAVE TO BE DETERMINED BY HAVING REGARD ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HUF),PUNE TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. IF IT IS GIVEN Y WAY OF ASSISTANC E TO THE ASSESSEE IN CARRYING ON OF HIS TRADE OR BUSINES S, IT HAS TO E TREATED AS TRADING RECEIPT. THE SOURCE OF THE FUND IS QUITE IMMATERIAL. FOR EXAMPLE, IF THE SCHEME WAS THAT THE ASSESSEE WILL BE GIVEN REFUND OF SALES TAX ON PURCHASE OF MACHINERY AS WELL AS ON RAW MATERIALS TO ENABLE THE 12 ASSESSEE TO ACQUIRE NEW PLANT AND MACHINERY FOR FURTHER EXPANSION OF ITS MANUFACTURING CAPACITY IN A BACKWARD AREA, THE ENTIRE SUBSIDY MUST BE HELD TO BE A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. IT WILL NOT BE OPEN TO THE REVENUE TO CONTEND THAT THE REFUND OF SALES TAX PAID ON RAW MATERIALS OR FINISH ED PRODUCTS MUST BE TREATED AS REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE. IN BOTH THE CASES, THE GOVERNMENT IS PAYING OUT OF PUBLIC FUNDS TO THE ASSESSEE FOR A DEFINITE PURPOSE. IF THE PURPOSE IS TO HELP THE ASSESSEE TO SET UP ITS BUSINESS OR COMPLET E A PROJECT AS IN SEAHAM HARBOUR DOCK CO.S CASE (1931) 16 TC 333 (HL), THE MONIES MUST BE TREATED AS HAVING BEEN RECEIVED FOR A CAPITAL PURPOSE. BUT IF MONIES ARE GIVEN TO THE ASSESSEE FOR ASSISTING HIM IN CARRYING OUT THE BUSINESS OPERATION AND THE MONEY IS GIVEN ONLY AFTER AND CONDITIONAL UPON COMMENCEMENT OF PRODUCTION, SUCH SUBSIDIES MUST BE TREATED AS ASSISTANT FOR THE PURPOSE OF THE TRADE.. IN THE CASE BEFORE US, THE SUBSIDIES HAVE NOT BEEN GRANTED FOR PRODUCTION OR FOR BRINGING INTO EXISTEN CE ANY NEW ASSET. THE SUBSIDIES WERE GRANTED YEAR AFTER YEAR ONLY AFTER SETTING UP OF THE NEW INDUSTR Y AND COMMENCEMENT OF PRODUCTION. SUCH A SUBSIDY COULD ONLY BE TREATED AS ASSISTANCE GIVEN FOR THE PURPOSE OF CARRYING ON OF THE BUSINESS OF THE ASSESSEE. APPLYING THE TEST OF VISCOUNT SIMON IN TH E CASE OF OSTIME (1946) 14 ITR (SUPPL) 45 (HL), IT MUST BE HELD THAT THESE SUBSIDIES ARE OF REVENUE CHARACTER AND WILL HAVE TO BE TAXED ACCORDINGLY. 13. ANOTHER DECISION WHICH HAS BEEN REFERRED TO IS THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F PONNI SUGARS & CHEMICALS LTD. (SUPRA). IN THIS CASE ALSO, THE ISSUE RELATED TO THE CHARACTER OF SUBSIDY RECEI VED BY SUGAR FACTORIES . THE HONBLE SUPREME COURT REITERA TED THE PARAMETERS APPLIED IN THE EARLIER JUDGMENT OF S AHNEY STEEL (SUPRA). AS PER THE HONBLE SUPREME COURT, TH E CHARACTER OF THE RECEIPT OF A SUBSIDY IN THE HANDS OF THE RECIPIENT HAS TO BE DETERMINED WITH REGARD TO THE P URPOSE FOR WHICH THE SUBSIDY HAS BEEN GRANTED. THE FOLLOWI NG DISCUSSION IS IMPORTANT TO NOTICE: ON THE FACTS OF THAT CASE, IT WAS HELD THAT THE SUBSIDY GIVEN WAS TO MEET RECURRING EXPENSES. IT WA S NOT FOR ACQUIRING THE CAPITAL ASSET. IT WAS NOT TO MEET PART OF THE COST. IT WAS NOT GRANTED FOR PRODUCTION OF OR B RINGING INTO EXISTENCE ANY NEW ASSET. THE SUBSIDIES IN THAT CASE WERE GRANTED YEAR AFTER YEAR ONLY 6 AFTER SETTING U P OF THE 13 NEW INDUSTRY AND ONLY AFTER COMMENCEMENT OF PRODUCTION AND, THEREFORE, SUCH A SUBSIDY COULD ONL Y BE TREATED AS ASSISTANCE GIVEN FOR THE PURPOSE OF CARR YING ON THE BUSINESS OF THE ASSESSEE. CONSEQUENTLY THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE ON THE FACTS OF THAT CASE STOOD REJECTED AND IT WAS HELD THAT TH E SUBSIDY RECEIVED BY SAHNEY STEEL COULD NOT BE REGAR DED AS ANYTHING BUT A REVENUE RECEIPT. ACCORDINGLY, THE MATTER WAS DECIDED AGAINST THE ASSESSEE. THE IMPORT ANCE OF THE JUDGMENT OF THIS COURT IN SAHNEY STEEL CASE LIES IN THE FACT THAT IT HAS DISCUSSED AND ANALYSED THE ENT IRE CASE LAW AND IT HAS LAID DOWN THE BASIC TEST TO BE APPLIED IN JUDGING THE CHARACTER OF A SUBSIDY. THAT TEST IS THAT THE CHARACTER OF THE RECEIPT IN THE HANDS OF THE AS SESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FO R WHICH THE SUBSIDY IS GIVEN. IN OTHER WORDS, IN SUCH CASES, ONE HAS TO APPLY THE PURPOSE TEST. THE POINT OF TIM E AT WHICH THE SUBSIDY IS PAID IS NOT RELEVANT. THE SOUR CE IS IMMATERIAL. THE FORM OF SUBSIDY IS IMMATERIAL. THE MAIN ELIGIBILITY CONDITION IN THE SCHEME WITH WHICH WE A RE CONCERNED IN THIS CASE IS THAT THE INCENTIVE MUST B E UTILIZED FOR REPAYMENT OF LOANS TAKEN BY THE ASSESS EE TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF EX ISTING UNITS. ON THIS ASPECT THERE IS NO DISPUTE. IF THE O BJECT OF THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO RU N THE BUSINESS MORE PROFITABLY THEN THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND, IF THE OBJECT O F THE ASSISTANCE UNDER THE SUBSIDY SCHEME WAS TO ENABLE T HE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXIS TING UNIT THEN THE RECEIPT OF THE SUBSIDY WAS ON CAPITAL ACCOUNT. THEREFORE, IT IS THE OBJECT FOR WHICH THE SUBSIDY/ASSISTANCE IS GIVEN WHICH DETERMINES THE NA TURE OF THE INCENTIVE SUBSIDY. THE FORM OR THE MECHANISM THROUGH WHICH THE SUBSIDY IS GIVEN ARE IRRELEVANT ONE MORE ASPECT NEEDS TO BE MENTIONED. IN SAHNEY ST EEL AND PRESS WORKS LTD. THIS COURT FOUND THAT THE ASSE SSEE WAS FREE TO USE THE MONEY IN ITS BUSINESS ENTIRELY AS IT LIKED. IT WAS NOT OBLIGED TO SPEND THE MONEY FOR A PARTICULAR PURPOSE. IN THE CASE OF SEAHAM HARBOUR D OCK CO. THE ASSESSEE WAS OBLIGED TO SPEND THE MONEY FOR EXTENSION OF ITS DOCKS. THIS ASPECT IS VERY IMPORTA NT. IN THE PRESENT CASE ALSO, RECEIPT OF THE SUBSIDY WAS C APITAL IN NATURE AS THE ASSESSEE WAS OBLIGED TO UTILIZE TH E SUBSIDY ONLY FOR REPAYMENT OF TERM LOANS UNDERTAKEN BY THE ASSESSEE FOR SETTING UP NEW UNITS/EXPANSION OF EXISTING BUSINESS. APPLYING THE ABOVE TESTS TO THE FACTS OF THE PRESEN T CASE AND KEEPING IN MIND THE OBJECT BEHIND THE PAYMENT O F THE INCENTIVE SUBSIDY, WE ARE SATISFIED THAT SUCH P AYMENT 14 RECEIVED BY THE ASSESSEE UNDER THE SCHEME WAS NOT I N THE COURSE OF A TRADE BUT WAS OF CAPITAL NATURE. 14. ANOTHER DECISION RELIED UPON BY THE APPELLANT I S IN THE CASE OF RELIANCE INDUSTRIES LTD. (SUPRA). IN TH IS CASE, THE FACTS WERE THAT THE PATALGANGA UNIT OF THE ASSE SSEE WAS LOCATED IN A NOTIFIED BACKWARD AREA. THE SALES- TAX LIABILITY OF THE ASSESSEE WAS EXEMPTED BY THE STATE GOVERNMENT AND UNDER THE SCHEME OF INCENTIVES, ASSESSEE WAS NOT REQUIRED TO PAY ANY SALES-TAX TO T HE GOVERNMENT. THE CONTENTION OF THE ASSESSEE WAS THAT NON-PAYMENT OF SALES-TAX BE CONSIDERED AS A SUBSIDY BY THE GOVERNMENT, WHICH IS OF CAPITAL IN NATURE. THE SPECIAL BENCH OF THE TRIBUNAL FOUND THAT THE INCENT IVES WERE PROVIDED FOR FOLLOWING FOUR OBJECTS, NAMELY, DEVELOPMENT OF BACKWARD REGIONS OF THE STATE OF MAHARASHTRA; DISPERSAL OF INDUSTRIES; PROMOTION OF INDUSTRIES FOR EMPLOYMENT ORIENTED UNITS; AND, PROV IDING LOCAL EMPLOYMENT TO SC/ST. THE TRIBUNAL OBSERVED TH AT IN ORDER TO DECIDE THE CHARACTER OF RECEIPT THE PUR POSE OF GRANTING SUBSIDY WAS RELEVANT, WHILE THE MODE OF PAYMENT AND THE APPLICATION OF MONEY FOR CAPITAL OR REVENUE PURPOSES WAS IRRELEVANT. THEREFORE, AS PER THE SPECIAL BENCH THE DECISIVE FACTOR WAS THE OBJECTS W ITH WHICH THE INCENTIVE WAS GIVEN AND, THEREFORE, SUCH SUBSIDY WAS HELD TO BE A CAPITAL RECEIPT. THE SAID DECISION HAS ALSO BEEN FURTHER APPROVED BY THE HON BLE HIGH COURT VIDE ORDER DATED 15.4.2009 (SUPRA). THE HONBLE HIGH COURT APPLIED THE PURPOSE TEST AND FOU ND THAT THE OBJECT OF THE SUBSIDY BEING TO SET UP UNIT S IN BACKWARD AREAS FOR GENERATION OF EMPLOYMENT, COULD CONSTRUE THE SUBSIDY AS A CAPITAL RECEIPT. 6. IN TERMS OF AFORESAID DECISION, WE, THEREFORE, H OLD THAT THE LOWER AUTHORITIES HAVE RIGHTLY CONSIDERED THE I MPUGNED RECEIPTS AS OF REVENUE NATURE CHARGEABLE TO TAX. T HEREFORE, FOLLOWING THE AFORESAID PRECEDENT THE GROUNDS OF AP PEAL NO. 1 AND 2 ARE HEREBY DISMISSED. 3. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF THE ASSESSEE. IN VIEW OF ABOVE, WE HOLD THAT LOWER AUTHORITIES HAVE RIGHTLY CONSIDERED THE IMPUGNED RECEIPTS AS OF REVE NUE NATURE CHARGEABLE TO TAX. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 4. THE SECOND ISSUE IS WITH REGARD TO DEDUCTION U/S .80-IA IN RESPECT OF SALES TAX RECEIPTS. THE CIT(A) HAS DECI DED THIS ISSUE FOLLOWING THE DECISION OF HIS PREDECESSOR IN A.Y. 2 006-07. WE FIND 15 THAT THE TRIBUNAL IN A.Y. 2006-07 HAS DEALT AND DEC IDED THE ISSUE IN PARAS 7 TO 9 WHEREIN FOLLOWING THE PRECEDENT DIS CUSSED THEREIN, HELD THAT ASSESSEE WAS NOT ELIGIBLE FOR CLAIMING DE DUCTION U/S.80-IA OF THE ACT WITH REGARD TO THE INCOME OF RS.53,78,96 6/- ON ACCOUNT OF SALE OF SALES TAX ENTITLEMENT, BY OBSERVING AS U NDER: 7. IN SO FAR AS GROUND OF APPEAL NO. 3 IS CONCERNE D, THE SAME IS A FALL OUT OF THE ACTION OF THE INCOME-TAX AUTHORITIES IN TREATING THE RECEIPT OF RS. 53,78,966/- ON SALE OF SALES TAX EXEMPTION ENTITLEMENT AS BUSINESS INCOME. THE CONT ENTION OF THE ASSESSEE IS THAT THE SAID BUSINESS INCOME BE TR EATED TO HAVE BEEN DERIVED FROM THE ELIGIBLE BUSINESS SO AS TO QUALIFY FOR DEDUCTION U/S.80-IA OF THE ACT. ON THIS ASPECT THE CIT(A) HAS DENIED CLAIM ON THE GROUND THAT THE AFORESAID R ECEIPT CANNOT BE CONSIDERED AS DERIVED FROM THE BUSINESS OF POWER GENERATION AND IN COMING TO SUCH CONCLUSION RELIANC E WAS PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CASE OF LIBERTY INDIA VS. COMMISSIONER OF I NCOME TAX REPORTED IN 317 ITR 218 (SC). 8. IN THIS BACKGROUND THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED BEFORE US THAT SIMILAR ISSUE WAS A SUBJEC T MATTER OF CONSIDERATION BY THE MUMBAI BENCH OF THE TRIBUNAL I N THE CASE OF SRI UMESH M. JOSHI, MUMBAI VS. THE ITO, 6(3 )(2), MUMBAI IN ITA NO. 4287/MUM/2010, DATED 23-12-2011 WHEREIN THE ISSUE HAS BEEN DECIDED AGAINST THE ASSE SSEE. THE LEARNED REPRESENTATIVE HOWEVER HAS SOUGHT TO DEFEND THE CLAIM OF THE ASSESSEE BUT FAIRLY SUBMITTED THAT IN VIEW O F THE AVAILABLE PRECEDENT, THE LEGAL POSITION PRESENTLY IS AGAINST THE CLAIM OF THE ASSESSEE. IN THIS BACKGROUND, WE HERE BY REPRODUCE THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IN THE CASE OF SRI UMESH M. JOSHI, MUMBAI VS. THE ITO, 6(3)(2), MUMBAI (SUPRA) IN ORDER TO APPRECIATE THE REASONING PREVAILING WITH THE TRIBUNAL TO HOLD THE ISSUE AGAINST THE ASS ESSEE : 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE CA SE OF LIBERTY INDIA (SUPRA), THE HONBLE SUPREME COURT HE LD THAT SECTIONS 80IA AND 80IB ARE A CODE BY THEMSELVE S AND THEY PROVIDE FOR ALLOWING OF DEDUCTION IN RESPE CT OF PROFITS AND GAINS DERIVED FROM THE ELIGIBLE BUSINES S. IT WAS HELD THAT THE CONNOTATION OF THE WORDS DERIVED FROM IS NARROWER AS COMPARED TO THAT OF THE WORDS ATTRIBUTABLE TO AND BY USING THE EXPRESSION DERI VED FROM THE PARLIAMENT INTENDED TO COVER THE SOURCES NOT BEYOND THE FIRST DEGREE. IT WAS HELD THAT DEPB/DUT Y DRAW BACK ARE INCENTIVES WHICH FLOW FROM THE RELEVA NT SCHEMES FRAMED BY THE CENTRAL GOVERNMENT AND THEY A RE NOT PROFITS DERIVED FROM ELIGIBLE BUSINESS BUT BELO NG TO 16 THE CATEGORY OF ANCILLARY PROFITS OF SUCH UNDERTAKI NG. IT WAS HELD THAT THE INCENTIVE RECEIVED AS PER THE SCH EME OF THE CENTRAL GOVERNMENT, THEREFORE, HAD NO FIRST DEG REE CONNECTION WITH THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE AND THE IMMEDIATE SOURCE OF THE SAME BEING THE RELEVANT SCHEME OF THE CENTRAL GOVERNMENT, IT COULD NOT BE CONSIDERED AS PROFIT ELIGIBLE FOR DEDUCTION U/S. 80IA/80IB. 7. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED ON THE DECISION OF MUMBAI SPECIAL BENCH OF I TAT IN THE CASE OF MIRC ELECTRONICS LTD., (SUPRA) IN SU PPORT OF THE ASSESSEES CASE. IT IS , HOWEVER, OBSERVED THA T THE SAID DECISION WAS RENDERED BY THE TRIBUNAL ON 22 ND AUGUST, 2008 BEFORE THE JUDGMENT IN THE CASE OF LIB ERTY INDIA (SUPRA) CAME TO BE DELIVERED BY THE HONBLE SUPREME COURT ON 31 ST AUGUST, 2009. THE BENEFIT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F LIBERTY INDIA, THEREFORE, WAS NOT AVAILABLE TO THE SPECIAL BENCH OF ITAT WHILE DECIDING THE CASE OF MIRC ELECTRONICS LTD., (SUPRA). THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO RELIED ON THE DECISION OF COORDIN ATE BENCH OF THE TRIBUNAL IN THE CASE OF THE TOTAL PACK AGING SERVICES (SUPRA). HE HAS CONTENDED THAT THE TRIBUN AL IN THE SAID DECISION HAS RELIED ON THE DECISIONS OF HO NBLE GUWAHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD.,332 ITR 91 WHEREIN THE DECISION OF HONBLE SUP REME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) WAS CONS IDERED BY THE HONBLE GUWAHATI HIGH COURT. WE HAVE CAREFU LLY PERUSED THE DECISION OF HONBLE GUWAHATI HIGH COURT IN THE CASE OF MEGHALAYA STEELS LTD., (SUPRA). IN THE SAID CASE, THE FOLLOWING TWO SUBSTANTIAL QUESTIONS OF LA W HAD ARISEN FOR THE CONSIDERATION OF THE HONBLE GUWAHAT I HIGH COURT : (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME-TAX APPELLATE TRIBUNAL WAS JUSTIFIED AND CORRECT IN LAW IN HOLDING THAT THE ASSESSEE IS ENTITLED TO A DEDUCTION UNDER SECTION 8 0- IB OF THE INCOME-TAX ACT, 1961 ON THE TRANSPORT SUBSIDY AND INTEREST SUBSIDY RECEIVED BY IT? (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME-TAX APPELLATE TRIBUNAL WAS JUSTIFIED AND CORRECT IN LAW IN HOLDING THAT THE ASSESSEE IS ENTITLED TO A DEDUCTION UNDER SECTION 8 0- IB OF THE INCOME-TAX ACT, 1961 ON THE CENTRAL EXCIS E DUTY REFUND RECEIVED BY IT? QUESTION NO. 2 WAS ANSWERED BY THE HONBLE GUWAHATI HIGH COURT IN FAVOUR OF THE ASSESSEE WHEREIN THE IS SUE INVOLVED WAS WHETHER CENTRAL EXCISE REFUND RECEIVED BY THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S. 80IB O F THE 17 INCOME-TAX OR NOT. THE SAID ISSUE WAS ALTOGETHER DIFFERENT FROM THE ISSUE INVOLVED IN THE PRESENT CA SE RELATING TO SALES-TAX BENEFIT OR INCENTIVE RECEIVED BY THE ASSESSEE. IN THE CASE OF THE TOTAL PACKAGING SERVI CES (SUPRA), THE ISSUE INVOLVED WAS RECOVERY OF EXCISE DUTY PAID BY THE ASSESSEE IN THE EARLIER YEARS ON THE PURCHASES AGAINST THE EXCISE DUTY PAYABLE ON SALES MADE DURING THE SUBSEQUENT YEARS AND THE SAME BEING SIMI LAR TO THE ONE INVOLVED IN QUESTION NO. 2 BEFORE THE HO NBLE GUWAHATI HIGH COURT IN THE CASE OF MEGHALAYA STEEL LTD., (SUPRA), THE COORDINATE BENCH OF THE TRIBUNAL FOLLO WED THE SAID DECISION OF HONBLE GUWAHATI HIGH COURT AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN TH E PRESENT CASE, THE ISSUE INVOLVED RELATING TO SALES- TAX BENEFIT OR INCENTIVE UNDER THE RELEVANT SCHEME OF T HE GOVERNMENT ON THE OTHER HAND, IS SIMILAR TO THE ONE INVOLVED IN QUESTION NO. 1 RAISED BEFORE THE HONBL E GUWAHATI HIGH COURT IN THE CASE OF MEGHALAYA STEEL LTD. (SUPRA) RELATING TO ELIGIBILITY OF TRANSPORT SUBSID Y AND INTEREST SUBSIDY FOR DEDUCTION U/S. 80IB WHICH HAS BEEN DECIDED BY THE HONBLE GUWAHATI HIGH COURT AGAINST THE ASSESSEE RELYING INTER ALIA, ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA). THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F MEGHALAYA STEEL LTD., THUS IS ALSO AGAINST THE ASSE SSEE IN SO FAR AS THE ISSUE INVOLVED IN THE PRESENT CASE IS CONCERNED AND RESPECTFULLY FOLLOWING THE SAME AS WE LL AS THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F LIBERTY INDIA (SUPRA), WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(APPEALS) CONFIRMING THE ACTION OF T HE AO IN DISALLOWING THE ASSESSEES CLAIM FOR DEDUCTION U /S. 80IA(4) IN RESPECT OF SALES-TAX BENEFIT, THE IMMEDI ATE SOURCE OF WHICH IS THE RELEVANT SCHEME OF STATE GOV T. AND NOT THE ELIGIBLE BUSINESS OF THE INDUSTRIAL UNDERTA KING OF THE ASSESSEE. GROUND NO. 1 OF THE ASSESSEES APPEA L IS ACCORDINGLY DISMISSED. 9. FOLLOWING THE AFORESAID PRECEDENT, WHICH HAS BEE N RENDERED UNDER SIMILAR FACTS AND CIRCUMSTANCES, WE THEREFORE, UPHOLD THAT THE ASSESSEE WAS NOT ELIGIBLE FOR THE C LAIM OF DEDUCTION U/S. 80-IA OF THE ACT WITH REGARD TO THE INCOME OF RS. 53,78,966/- ON ACCOUNT OF THE SALE OF SALES TAX ENTITLEMENT. THUS, ON THIS GROUND THE ASSESSEE FAI LS. 5. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE. FACTS BEING SAME, SO FOLLOWING SAME REASONING, WE HOLD THAT ASS ESSEE IS NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S.80-IA WITH REGA RD TO INCOME OF RS.46,66,665/- ON ACCOUNT OF SALE OF SALES TAX ENTI TLEMENT. WE UPHOLD THE SAME. 18 6. THE LD. AUTHORISED REPRESENTATIVE DID NOT PRESS THE GROUND RELATING TO ALLOWABILITY OF DEDUCTION U/S.80-IA(4), SO THE SAME IS DISMISSED AS NOT PRESSED. 7. AS A RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF MAY, 2013. SD/- SD/- ( R.K.PANDA ) ( SHAILENDRA KUMAR YAD AV ) ACCOUNTANT MEMBER JUDICIAL MEMBER GSPS PUNE, DATED THE 28 TH MAY, 2013 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE ITO, WARD-1(3), PUNE. 3. THE CIT(A)-I, PUNE. 4. THE CIT-I, PUNE. 5. THE DR B BENCH, PUNE. 6. GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE.