DCIT, CC-XXVII, Kolkata, Kolkata V. M/s Budge Budge Refineries Ltd., Kolkata

ITA 389/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9562 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 05-03-2014
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Assessee Lawyers: A K TIBREWAL
• Keywords: Capital asset; Capital receipt
• Section: 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A NOS. 388 TO 390/KOL/2014 ASSESSMENT YEARS: 2009-10 TO 2011-12 DEPUTY COMMISSIONER OF INCOME-TAX, VS. M/S. BUDGE BUDGE REFINERIES LTD. CENTRAL CIRCLE-XXVII, KOLKATA. (PAN: AABCB2880M) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 02.01.2017 DATE OF PRONOUNCEMENT: 18.01.2017 FOR THE APPELLANT: SHRI G. MALLIKARJUNA, CIT, DR FOR THE RESPONDENT: SHRI A. K. TIBREWAL, FCA ORDER PER BENCH : THE CAPTIONED THREE APPEALS FILED BY THE REVENUE PE RTAINING TO ASSESSMENT YEARS 2009-10, 2010-11 AND 2011-12, ARE DIRECTED AGAINST THE SEPARATE ORDERS PASSED BY THE LD. COMMISSIONER OF INCOME TAX (A), CENTRAL-II, KOLKATA IN APPEAL NOS. 225/CC- XXVII/CIT(A)C-II/11-12, 01/CC-XXVII/CIT(A)C-II/13-1 4 AND 77/CC-XXVII/CIT(A)C- II/13-14, DATED 16.12.2013, 10.12.2013 AND 10.12.20 13 RESPECTIVELY, WHICH IN TURN ARISE OUT OF ASSESSMENT ORDERS PASSED BY THE AO U/S. 143(3) O F THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), DATED 26.12.2011, 07.03. 2013 AND 03.08.2013 RESPECTIVELY. 2. AT THE OUTSET, WE FIND THAT ALL THE APPEALS OF R EVENUE ARE DELAYED BY TWO DAYS AND REVENUE HAS FILED CONDONATION PETITIONS PRAYING FOR CONDONATION OF DELAY. ON PERUSAL OF THE CONDONATION PETITION AND IN VIEW OF THE CONCESSION GIVEN BY THE LD. AR FOR THE ASSESSEE, WE CONDONE THE DELAY AND ADMIT THE APPEALS FOR ADJUDIC ATION. 3. THESE THREE APPEALS PERTAIN TO SAME ASSESSEE, D IFFERENT ASSESSMENT YEARS, COMMON ISSUES INVOLVED, THEREFORE, THEREFORE, ALL THE APPE ALS HAVE BEEN CLUBBED AND HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SA KE OF CONVENIENCE AND BREVITY. THE REVENUE APPEAL IN ITA NO. 388/KOL/2014, PERTAINING TO AY 2009-10 IS TAKEN AS THE LEAD CASE. 4. THE BRIEF FACTS QUA THE ASSESSEE ARE THAT THE A SSESSEE FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 30.09.2009 DECLARING TOTAL INCOME AT NI L. THE RETURN OF INCOME WAS PROCESSED 2 ITA NOS. 388-390/KOL/2014 BUDGE BUDGE REFINERIES LTD. AYS. 2009-10 TO 2011-12 U/S. 143(1) OF THE ACT ON 30.09.2010. LATER ON THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY U/S. 143(3) OF THE ACT AND THE AO HAS COMPLETED THE ASSESSMENT BY MAKING THE DISALLOWANCE ON ACCOUNT OF SALES TAX INCENTIVE SCHEME. THE ASSE SSEE GOT THE BENEFIT OF A SUM OF RS.6,19,47,252/- BEING 75% OF SALES TAX/VAT AS RECE IVABLE AS SALES TAX INCENTIVE UNDER THE SCHEME OF STATE OF WEST BENGAL. THE AO HAS TREATED THE SALES TAX INCENTIVE AS CAPITAL RECEIPT AND ADDED TO THE INCOME OF THE ASSESSEE. 5. AGGRIEVED FROM THE ORDER OF THE AO, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), WHO HAS DELETED THE ADDITION MADE BY AO, OBSERVING THE FOLLOWINGS: 5. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND PERUSED THE ASSESSMENT ORDER. I HAVE ALSO GONE THROUGH THE COPY OF INCENT IVE SCHEME AS WELL AS THE COPIES OF LETTERS ISSUED BY THE VARIOUS STATE AUTHORITIES. T HE JUDICIAL DECISIONS RELIED UPON BY THE AO AS WELL AS THE APPELLANT ARE ALSO GONE THROU GH. THE FACTS OF THE CASE HAVE ALREADY BEEN DISCUSSED AS ABOVE THAT THE APPELLANT COMPANY WAS ENTITLED TO RECEIVE SUBSIDY IN THE FORM OF INDUSTRIAL PROMOTION ASSISTA NCE UNDER THE WEST BENGAL INCENTIVE SCHEME, 2000 FROM THE GOVERNMENT OF WEST BENGAL AMOUNTING TO RS.6,19,47,252/-. THE APPELLANT HAS TREATED THE SA ID SUBSIDY AS CAPITAL IN NATURE ON THE GROUND THAT IT WAS GIVEN BY THE GOVT. TO ENCOUR AGE SETTING UP NEW INDUSTRIES OR EXPANSION OF THE EXISTING INDUSTRIES IN THE STATE O F W.B. WHEREAS THE AO HAS TREATED THE SAID INCENTIVE AS REVENUE IN NATURE AND INVOKED THE PROVISIONS OF SECTION 41(1) OF THE ACT FOR THE REASON THAT THE INCENTIVE WAS TO BE RECEIVABLE BY THE APPELLANT COMPANY BY WAY OF 75% OF SALES TAX/VAT COLLECTED BY THE COM PANY ON SALE OF ITS FINISHED PRODUCTS. THAT, THE APPELLANT COMPANY COLLECTED TH E SALES TAX AND THE 75% OF THE SAME WAS NOT PAID TO THE GOVERNMENT. FURTHER, THE DEDUCTION ON ACCOUNT OF PAYMENT OF SALES TAX WAS ALLOWED IN EARLIER YEARS AND, THER EFORE, 75% OF SUCH SALES TAX IS TAXABLE U/S. 41(1) OF THE ACT. HOWEVER, IN THE ASS ESSMENT ORDER, THE AO DID NOT DISCUSSED THE SUBMISSION MADE BY THE APPELLANT IN T HE COURSE OF ASSESSMENT PROCEEDINGS EXPLAINING AS TO WHY THE SUM OF RS.6,19 ,47,252/- IS NOT TAXABLE AS REVENUE RECEIPT. ON THE OTHER HAND, THE APPELLANT HAS CLAI MED THAT THE SUM OF RS.6,19,47,252/- WAS RECEIVABLE AS INDUSTRIAL PROMOTION INCENTIVE UN DER THE WEST BENGAL INCENTIVE SCHEME, 2000 AND THAT THERE IS NO APPLICATION OF TH E PROVISIONS OF SECTION 41(1) OF THE ACT BECAUSE THE APPELLANT HAD NOT RECEIVED ANY REFU ND OF SALES TAX FROM THE SALES TAX DEPARTMENT. FURTHER, ENTIRE AMOUNT OF SALES TAX WA S PAID TO THE GOVERNMENT AND NO PART OF THE SALES TAX WAS RETAINED BY THE APPELLANT AS ALLEGED BY THE AO. THE APPELLANT HAS ALSO NOT CLAIMED DEDUCTION ON ACCOUNT OF PAYMEN T OF SALES TAX AS APPARENT FROM THE BALANCE SHEET AND THE PROFIT AND LOSS ACCOUNT. ON PERUSAL OF WEST BENGAL INCENTIVE SCHEME, 2000, IT IS OBSERVED THAT IT STAR TS WITH THE WORDINGS: WHEREAS IN PURSUANCE OF A NATIONAL POLICY THE SALE S TAX RELATED INCENTIVES HAVE BEEN WITHDRAWN FROM THE 1 ST JANUARY, 2000. 3 ITA NOS. 388-390/KOL/2014 BUDGE BUDGE REFINERIES LTD. AYS. 2009-10 TO 2011-12 AND WHEREAS THE STATE GOVERNMENT HAVE CONSIDERED IT NECESSARY AND EXPEDIENT TO EXTEND NEW TYPES OF INCENTIVES FOR PRO MOTION OF INDUSTRIES IN THE STATE FROM THE SAME DATE. NOW, THEREFORE, THE GOVERNOR IS PLEASED HEREBY, IN SUPERSESSION OF THE WEST BENGAL INCENTIVE SCHEME, 1999 SANCTIONED UNDER COMM ERCE & INDUSTRIES DEPARTMENTS NOTIFICATION NO. 580-CI/H DATED 22.06. 1999 AND AMENDED FROM TIME TO TIME, TO APPROVE AND SANCTION A NEW INCENTI VE SCHEME FOR LARGE, MEDIUM AND SMALL SCALE INDUSTRIAL UNITS AS UNDER. AS PER THE NOTIFICATION THE SCHEME IS KNOWN AS TH E WEST BENGAL INCENTIVE SCHEME, 2000 AND SHALL COME INTO EFFECT ON AND FROM THE 1 ST DAY OF JANUARY, 2000 IN THE WHOLE OF WEST BENGAL AND SHALL REMAIN VALID FOR A PERIOD OF FIVE YEARS ENDING ON THE 31 ST DECEMBER, 2004. THE SECTION 4 OF THE SCHEME PROVIDE THE APPLICABIL ITY OF THE 2000-SCHEME AND IT SAYS THAT IT SHALL GENERALLY BE APPLICABLE TO ALL LARGE, MEDIUM, COTTAGE AND SMALL SCALE PROJECTS AND TO LARGE/MEDIUM SECTOR TOURISM UNITS T O BE SET UP AND ALSO TO EXPANSION PROJECTS OF EXISTING UNITS ON OR AFTER THE 1 ST JANUARY, 2000. THE UNITS MAY BE IN THE PRIVATE SECTOR, CO-OPERATIVE SECTOR, JOINT SECTOR A S ALSO COMPANIES/UNDERTAKINGS OWNED OR MANAGED BY THE STATE GOVERNMENT. SECTION 6 OF THE SCHEME PROVIDE THE ELIGIBILITY C RITERIA FOR INCENTIVES UNDER THE 2000- SCHEME AND SECTION 7 PROVIDES CLASSIFICATION OF D EVELOPED AREAS AND BACKWARD AREAS THEREAFTER. SECTION 8, 9, 10, 11, 12, 13, 14 AND 15 PROVIDE FO R VARIOUS TYPES OF INCENTIVES AND SUBSIDIES WHICH ARE STATE CAPITAL INVESTMENT SUBSI DY, INTEREST SUBSIDY, WAIVER OF ELECTRICITY DUTY, EMPLOYMENT GENERATION SUBSIDY REMISSION OF STAMP DUTY AND REGISTRATION FEE, SUBSIDY FOR CONVERSION FOR USE OF PIPED GAS, SUBSIDY FOR QUALITY IMPROVEMENT IN THE SMALL SCALE SECTOR AND ADDITIO NAL INCENTIVE FOR INFORMATION TECHNOLOGY, ELECTRONICS, AGRO AND FOOD PROCESSING I NDUSTRIES AND HALDIA PETROCHEMICALS LTD. FROM THE ABOVE, IT MAY BE OBSERVED THAT THE SCHEME -2000 WAS ANNOUNCED FOR PROMOTION OF INDUSTRIES IN THE STATE WITH VARIOUS T YPES OF INCENTIVES AND SUBSIDIES AS MENTIONED ABOVE. AS PER SCHEME, THE INCENTIVES WER E TO BE GIVEN FOR SETTING UP OF NEW UNITS OR EXPANSION OF THE EXISTING UNITS AND NOT TO FACILITATE THE TRADE OR BUSINESS OF THE INDUSTRIES. AS PER SECTION 18 OF THE SCHEME, UNDER THE MEGA PROJECTS, THE GOVERNMENT MAY CONSIDER GRANTING SPECIAL PACKAGE OF INCENTIVES UNDER THIS SCHEME TO A MEGA PROJECT. 5.1. THUS, THE MAIN AIM AND PURPOSE OF THE SCHEME FOR WHICH IT WAS SANCTIONED WAS PROMOTION OF INDUSTRIES IN THE STATE OF WEST BENGA L. SIMILAR SCHEMES WERE SANCTIONED BY THE STATE GOVERNMENT IN EARLIER YEARS ALSO TO PROMOTE SETTING UP OF INDUSTRIES IN THE STATE AND UNDER THOSE SCHEMES VAR IOUS INCENTIVES WERE GIVEN TO THE REGISTERED AND ELIGIBLE INDUSTRIES. HOWEVER, THE O BJECT OF ALL THE SCHEMES WAS TO PROVIDE INCENTIVES TO PROMOTE THE INDUSTRIES IN THE STATE OF WEST BENGAL. WITH THE 4 ITA NOS. 388-390/KOL/2014 BUDGE BUDGE REFINERIES LTD. AYS. 2009-10 TO 2011-12 SAME OBJECT IN SUPERSESSION OF THE WEST BENGAL INCE NTIVE SCHEME, 1999, THE NEW WEST BENGAL INCENTIVE SCHEME, 2000 WAS ANNOUNCED BY THE STATE GOVERNMENT W.E.F. 1 ST JANUARY, 2000. IT IS OBSERVED THAT IN THE CASE OF APPELLANT COMPANY, GOVT. OF WEST BENGAL, COMMERCE & INDUSTRIES DEPARTMENT VIDE LETTE R NO. 1219/JS/DC DATED 22.03.2004, APPROVED A MEGA PACKAGE FOR BUDGE BUDGE REFINERIES LTD. TO BE LOCATED AT BUDGE BUDGE, SOUTH 24 PARGANAS WITH AN INVESTMEN T OF RS.65 CRORE FOR SETTING UP AN EDIBLE OIL REFINERY PLANT AND CAPTIVE POWER GENE RATION UNIT. THE SAID PACKAGE WAS CONSISTING OF INDUSTRIAL PROMOTION ASSISTANCE (IPA) , STATE CAPITAL INVESTMENT SUBSIDY, WAIVER OF ELECTRICITY DUTY, EMPLOYMENT GENERAL SUBS IDY AND REMISSION OF STAMP DUTY & REGISTRATION CHARGES. AS PER THE APPROVAL LETTER , THE INDUSTRIAL PROMOTION ASSISTANCE WAS @ 75% OF THE SALES TAX PAID IN THE Y EAR PREVIOUS TO THE YEAR DURING WHICH IPA WOULD BE RELEASED SUBJECT TO MAXIMUM OF 1 00% OF THE FIXED CAPITAL INVESTMENT BY WAY OF ADJUSTMENT AGAINST SALES TAX L IABILITY OF THAT YEAR. THE SALES TAX PAID WILL NOT INCLUDE TAX PAID ON THE PURCHASE OF R AW MATERIALS. THE IPA WILL BE AVAILABLE FOR A PERIOD OF 15 YEARS OR TILL THE FINA NCIAL CAP IS REACHED, WHICHEVER ENDS EARLIER. AS PER THE APPROVAL LETTER, THIS PACKAGE WILL CONTINUE EVEN IF WEST BENGAL SALES TAX ACT, 1994 IS SUBSTITUTED BY ANY OTHER ACT . THE UNIT WILL APPLY TO THE COMMISSIONER, COMMERCIAL TAXES, W.B. IN THE PRESCRI BED FORM REQUESTING HIM TO CERTIFY THE TOTAL AMOUNT OF TAX PAID DURING THE YEA R ON SALES AND PURCHASE IN RESPECT OF WHICH APPLICATION HAS BEEN MADE. SUCH APPLICATION BE FILED AT THE END OF EACH YEAR. UPON RECEIPT OF APPLICATION, THE COMMISSIONER, COMM ERCIAL TAXES, W.B. WOULD VERIFY THE PAYMENTS AND OTHER PARTICULARS AS CONTAINED IN THE APPLICATION AND ISSUE A CERTIFICATE TO THE MANAGING DIRECTOR, WBIC LTD. CER TIFYING THE TAX PAID BY THE UNIT ON ITS SALES DURING THE YEAR IN QUESTION. THE MD, WBI C LTD. ON RECEIPT OF THE INTIMATION AS ABOVE WILL ISSUE CHEQUES FOR AN AMOUNT @ 75% OF THE TAX PAID BY THE UNIT OF ITS SALE IN THE PREVIOUS YEAR AS INDUSTRIAL PROMOTION ASSIST ANCE. FURTHER, THE APPELLANT UNIT WOULD BE ELIGIBLE TO ALL THE BENEFITS INCLUDING THE INDUSTRIAL PROMOTION ASSISTANCE ONLY AFTER THE TOTAL INVESTMENT CROSSES THE LIMIT OF RS. 25 CRORES AND ON STARTING COMMERCIAL PRODUCTION. THE WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION LIMITED ISSUED ELIGIBILITY CERTIFICATE NO. INC-2000/EC-425(B) DATE D 07/08.06.2006 TO THE APPELLANT COMPANY UNDER THE W.B. INCENTIVE SCHEME, 2000 SPECI FYING THE INCENTIVES FOR WHICH THE APPELLANT COMPANY WAS ENTITLED. THE ELIGIBILIT Y CERTIFICATE WAS FOR INCENTIVES FOR MEGA PROJECT UNDER W.B. INCENTIVE SCHEME, 2000. TH E REGISTRATION UNDER W.B. INCENTIVE SCHEME, 2000 WAS ISSUED TO THE APPELLANT COMPANY BY THE DIRECTORATE OF INDUSTRIES, GOVT. OF WEST BENGAL VIDE CERTIFICATE O F REGISTRATION DI/2000/581(B)/102(4)/1983 DATED 17.02.2005. THUS, AS PER THE SCHEME, THE INDUSTRIAL PROMOTION ASSISTANCE WAS PROVIDED AS INC ENTIVE FOR SETTING UP OF NEW UNIT OR EXPANSION OF EXISTING UNIT, THOUGH, THE MODE OF CALCULATION OF ASSISTANCE WAS SALES TAX PAID BY THE APPELLANT COMPANY. UNDER THE CIRC UMSTANCES, I AM OF THE OPINION THAT IT IS NOT CORRECT TO SAY THAT THE SUBSIDY/INCENTIVE WAS GIVEN TO THE APPELLANT FOR THE PURPOSE OF CARRYING ON BUSINESS OR TRADE BY WAY OF REFUND OF SALES TAX OR THAT THERE WAS CESSATION OF LIABILITY ON ACCOUNT OF PAYMENT OF SALES TAX ATTRACTING THE PROVISIONS OF SECTION 41(1) OF THE ACT. THOUGH, THE METHOD OF CALCULATION OF IPA IS PAYMENT OF SALES TAX BUT THE PURPOSE OF GIVING THE INCENTIVE I S SETTING UP/EXPANSION OF INDUSTRIES IN THE BACKWARD AREAS OF THE STATE OF WEST BENGAL. IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD., (SUPRA), IT IS HELD BY THE HONBLE SUPR EME COURT THAT IF PAYMENTS IN THE NATURE OF SUBSIDY FROM PUBLIC FUNDS ARE MADE TO THE ASSESSEE TO ASSIST HIM IN CARRYING ON ITS TRADE OR BUSINESS, THEY ARE TRADE RECEIPTS. THE CHARACTER OF THE SUBSIDY IN THE 5 ITA NOS. 388-390/KOL/2014 BUDGE BUDGE REFINERIES LTD. AYS. 2009-10 TO 2011-12 HANDS OF RECIPIENT WHETHER REVENUE OR CAPITAL WIL L HAVE TO BE DETERMINED, HAVING REGARD TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVE N. THE SOURCE OF THE FUND IS QUITE IMMATERIAL. HOWEVER, IF THE PURPOSE IS TO HELP THE ASSESSEE TO SET UP ITS BUSINESS OR COMPLETE A PROJECT, THE MONEYS MUST BE TREATED AS H AVING BEEN RECEIVED FOR CAPITAL PURPOSES. BUT, IF MONEYS ARE GIVEN TO THE ASSESSEE FOR ASSISTING HIM IN CARRYING OUT THE BUSINESS OPERATION AND THE MONEY IS GIVEN ONLY AFTE R AND CONDITIONAL UPON COMMENCEMENT OF PRODUCTION, SUCH SUBSIDIES MUST BE TREATED AS ASSISTANCE FOR THE PURPOSE OF THE TRADE. IN THE CASE OF APPELLANT, IT HAD RECEIVED SUBSIDY/INCENTIVE UNDER THE WEST BENGAL INCENTIVE SCHEME, 2000 IN THE FORM OF INDUSTRIAL PROMOTION ASSISTANCE. ON PERUSAL OF APPROVAL LETTER, IT IS A PPARENT THAT THE INCENTIVE WAS ALLOWED TO THE APPELLANT COMPANY FOR SETTING UP AN EDIBLE OIL REFINERY PLANT AND CAPTIVE POWER GENERATION UNIT. THE SOLE OBJECTIVE OF THE SCHEME FORMULATED BY THE STATE GOVERNMENT WAS TO ALLOW INCENTIVE TO THE ENTR EPRENEURS TO ESTABLISH THE NEW INDUSTRIES OR EXPAND THE EXISTING INDUSTRIES IN BAC KWARD AREAS FOR OVERALL ECONOMIC DEVELOPMENT OF THE STATE OF WEST BENGAL. ON GOING THROUGH THE WEST BENGAL INCENTIVE SCHEME, IT IS OBSERVED THAT THE SUBSIDY WAS NOT ALL OWED TO ASSIST THE APPELLANT COMPANY IN CARRYING ON ITS TRADE OR BUSINESS OR CAR RYING OUT THE BUSINESS OPERATION. THE UNITS WHICH WERE SET UP BY THE APPELLANT COMPAN Y, BOTH ARE LOCATED IN MOUZA- BUDGE BUDGE, P.O. BUDGE BUDGE, SOUTH 24 PARGANAS IN THE STATE OF WEST BENGAL. AS PER THE INCENTIVE SCHEME, 2000, THE APPELLANTS UNI TS FALL UNDER GROUP-B OF CLASSIFICATION OF AREAS. ACCORDINGLY, THE APPELLAN T COMPANY HAD RECEIVED INCENTIVE IN THE FORM OF INDUSTRIAL PROMOTION ASSISTANCE AND OTH ER INCENTIVES SPECIFIED FOR GROUP- B LOCATION. SINCE, THE INCENTIVE HAS NOT BEEN ALLO WED TO THE APPELLANT COMPANY FOR ITS BUSINESS OR TRADE, HENCE, EVEN AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. THE AMOUNT RECEIVABLE BY THE APPELLANT ON ACCOUNT OF INDUSTRIAL PROMOTION ASSISTANCE, WOULD B E CAPITAL IN NATURE. 5.2. IN THE CASE OF CIT VS. PONNI SUGARS & CHEMICAL S LTD. REPORTED IN 306 ITR 392 (SC), BY APPLYING THE DECISION IN THE CASE OF SAHNE Y STEEL & PRESS WORKS LTD., IT IS HELD BY THE HONBLE SUPREME COURT THAT THE CHARACTE R OF THE RECEIPT OF A SUBSIDY IN THE HANDS OF THE ASSESSEE UNDER THE SCHEME HAS TO BE DE TERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GRANTED. IN OTHER WORDS, ONE HAS TO APPLY THE PURPOSE TEST. THE POINT OF TIME AT WHICH THE SUBSI DY IS PAID IS NOT RELEVANT. THE SOURCE IS IMMATERIAL. IF THE OBJECT OF THE SUBSIDY IS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY THEN THE RECEIPT IS ON REV ENUE ACCOUNT. ON THE OTHER HAND, IF THE OBJECTS OF THE ASSISTANCE UNDER THE SUBSIDY SCH EME IS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND AN EXISTING UNIT THEN TH E RECEIPT OF THE SUBSIDY WOULD BE ON CAPITAL ACCOUNT. IN THE CASE OF APPELLANT COMPANY, THE INCENTIVE WA S RECEIVABLE FROM THE WEST BENGAL GOVERNMENT UNDER THE WEST BENGAL INCENTIVE SCHEME, 2000 IN THE FORM INDUSTRIAL PROMOTION ASSISTANCE, TO BE CALCULATED ON THE BASIS OF PAYMENT OF SALES TAX. HOWEVER, THE SOLE OBJECT OF THE AFORESAID INCENTIVE SCHEME W AS TO ENABLE THE APPELLANT TO SET UP A NEW EDIBLE OIL REFINERY PLANT AND CAPTIVE POWER G ENERATION UNIT. IN THE CASE OF APPELLANT, IT HAD INVESTED A SUBSTANTIAL AMOUNT IN FIXED CAPITAL ASSETS FOR THE PURPOSE OF SETTING UP A NEW UNIT. HENCE, AS PER THE PRINCI PLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICA LS LTD. (SUPRA), THE RECEIPTS ON 6 ITA NOS. 388-390/KOL/2014 BUDGE BUDGE REFINERIES LTD. AYS. 2009-10 TO 2011-12 ACCOUNT OF INDUSTRIAL PROMOTION ASSISTANCE RECEIVAB LE BY THE APPELLANT COMPANY IS ON CAPITAL ACCOUNT. 5.8. THE VIEW TAKEN BY THE APPELLANT THAT THE AMOUN T RECEIVED/RECEIVABLE FROM THE GOVT. OF WEST BENGAL IN THE FORM OF INDUSTRIAL PROM OTION ASSISTANCE FOR SETTING UP A NEW UNIT IS CAPITAL IN NATURE, ALSO FIND SUPPORT FR OM THE DECISION IN THE CASE OF DCIT VS. INOX LEISURE LTD., 351 ITR 314 (GUJ); CIT VS. R ELIANCE INDUSTRIES LTD., 339 ITR 632 (BOM); SHREE BALAJI ALLOYS VS. CIT, 333 ITR 335 (J&K) AND CIT VS. CHAPHALKAR BROS., 215 TAXMAN 145 (BOM)(MAG.). IN VIEW OF THE FACTS IN THE CASE OF APPELLANT COMP ANY AS WELL AS RESPECTFULLY FOLLOWING THE PRINCIPLES LAID DOWN IN VARIOUS JUDICIAL PRONOU NCEMENTS BY THE HONBLE SUPREME COURT, JURISDICTIONAL HIGH COURT AS WELL AS THE JUR ISDICTIONAL ITAT, AS DISCUSSED ABOVE, IT IS TO BE HELD THAT THE RECEIPT OF RS.6,19 ,47,252/- RECEIVABLE BY THE APPELLANT COMPANY ON ACCOUNT OF INDUSTRIAL PROMOTION ASSISTAN CE UNDER WEST BENGAL INCENTIVE SCHEME, 2000 IS CAPITAL IN NATURE. HENCE, THE SAID RECEIPT IS NOT INCLUDIBLE IN THE TAXABLE INCOME OF THE APPELLANT COMPANY. THERE IS NO APPLICATION OF PROVISIONS OF SECTION 41(1) AS HELD BY THE AO AS THERE WAS NO CES SATION OF LIABILITY ON ACCOUNT OF PAYMENT OF SALES TAX. THE AO IS DIRECTED TO DELETE THE ADDITION MADE BY HIM. THE GROUND NO. 1 AND 2 ARE ALLOWED. IN THE ASSESSMENT PROCEEDINGS FOR THE AY 2007-08 RS .3,72,95,124/- BEING 75% OF SALES TAX/VAT RECEIVABLE AS SALES TAX INCENTIVE UNDER THE SCHEME OF THE STATE GOVERNMENT WAS TREATED AS INCOME U/S. 41(1) AND ADDED TO THE I NCOME. ASSESSEE COMPANY PREFERRED APPEAL AGAINST THIS ADDITION BEFORE THE C IT(A)-C-II, KOL. THE CIT(A) VIDE HIS ORDER DATED 26.04.2010 DIRECTED THE AO TO DELET E THE ADDITION AS THIS WAS NOT A SUBJECT MATTER FOR THE FINANCIAL YEAR 2006-07 RELEV ANT TO ASSESSMENT YEAR 2007-08. ACCORDINGLY, RS.3,72,95,124/- WAS DELETED FROM THE ASSESSED INCOME FOR THE AY 2007- 08 VIDE ORDER U/S. 251 DATED 16.07.2010. THE AMOUN T OF RS.3,72,95,124/- WAS RECEIVED BY THE APPELLANT ON 31.03.2009 I.E. IN FIN ANCIAL YEAR 2008-09 RELEVANT TO ASSESSMENT YEAR 2009-10. SO, RS.3,72,95,124/- IS T REATED AS INCOME U/S. 41(1) OF THE I. T. ACT ON THE GROUND THAT REMISSION OF LIABILITY WH ICH WAS ALLOWED AS A DEDUCTION EARLIER IS TAXABLE AS INCOME U/S. 41(1) OF THE I. T . ACT. HENCE, RS.3,72,95,124/- IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY A S UNDISCLOSED INCOME. 7. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT HAS SUBMITTED AS UNDER: THIS GROUND OF APPEAL RELATE TO ADDITION OF RS.3 ,72,95,124 MADE BY THE LD. ASSESSING OFFICER ON THE GROUND THAT THIS AMOUNT WA S PREVIOUSLY CONSIDERED AS INCOME CHARGEABLE TO TAX U/S. 41(1) OF THE ACT IN THE ASSE SSMENT YEAR 2007-08 BUT THE SAME WAS DELETED BY LD. CIT(A) ON THE GROUND THAT THE SA ME WAS A PROVISION MADE BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS ON THE BASIS OF CLAIMS MADE BY IT BEFORE WBIDC. HOWEVER, THE SUM OF RS.4,69,78,053/- WAS ACTUALLY P AID BY WBIDC VIDE THEIR CHEQUE NO. 252741 DATED 17.03.2009 DRAWN IN FAVOUR OF COM MERCIAL TAX OFFICER, WEST BENGAL ACCOUNT BUDGE BUDGE REFINERY LTD.. THE PHO TO COPY OF THE SAID CHEQUE AND 7 ITA NOS. 388-390/KOL/2014 BUDGE BUDGE REFINERIES LTD. AYS. 2009-10 TO 2011-12 THE RECEIPT OF THE SAME ISSUED BY THE APPELLANT COM PANY IS ENCLOSED IN THE PAPER BOOK AT PAGES 90 AND 91. ON PERUSAL OF THE AFORESAID RECEIPT AND THE CHEQUE IT WOULD BE FOUND THAT THE SUM OF RS.4,69,78,053/- WAS PAID BY WBIDC ON ACCOUNT OF IN DUSTRIAL PROMOTION ASSISTANCE UNDER THE WEST BENGAL INCENTIVE SCHEME, 2000. UNDE R THE SCHEME THE AMOUNT OF INCENTIVE WAS TO BE PAID TO COMMERCIAL TAX OFFICER ON ACCOUNT OF CST/VAT LIABILITY OF THE APPELLANT. HOWEVER, THE NATURE OF THE INCENTIVE WAS INDUSTRIAL PROMOTION ASSISTANCE WHICH IS A CAPITAL RECEIPT AS STATED EA RLIER WHILE MAKING SUBMISSIONS IN RESPECT OF GROUND NOS. 1 AND 2 ABOVE. THE APPELLAN T COMPANY REFERS TO AND RELIES ON VARIOUS DECISIONS AS STATED HEREIN ABOVE. IN ANY CASE, THE SAID AMOUNT CANNOT BE CONSIDERED A S WAIVER OR CESSATION OF SALES TAX LIABILITY AS ALLEGED BY THE LD. ASSESSING OFFICER I NASMUCH AS THE CST/VAT FOR THE FINANCIAL YEAR 2006-07 RELEVANT TO ASSESSMENT YEAR 2007-08 (TO WHICH THE INCENTIVES WAS RECEIVED) WAS DULY PAID BY THE APPELLANT IN THO SE YEARS. THUS THE LD. ASSESSING OFFICER WAS NOT JUSTIFIED IN ADDING THE SUM OF RS.3 ,72,95,124/-. THE SAID AMOUNT CANNOT BE ADDED TO THE INCOME OF THE APPELLANT COMP ANY FOR ANY REASONS WHATSOEVER SINCE THE SAME IS A CAPITAL RECEIPT AS STATED HEREI NABOVE. 8. I HAVE CONSIDERED THE SUBMISSION OF THE APPELLA NT AND PERUSED THE ASSESSMENT ORDER. THE ISSUE RAISED IN GROUND NO. 3 IS SAME AS IN GROUND NO.1 AND 2. THE ONLY DIFFERENCE IS THAT IN GROUND NO. 1 AND 2 THE AMOUNT ON ACCOUNT OF INDUSTRIAL PROMOTION ASSISTANCE WAS RECEIVABLE WHEREAS IN GROUND NO. 3 T HE AMOUNT WAS RECEIVED BY THE APPELLANT IN THE YEAR UNDER CONSIDERATION. BUT, TH E FACT REMAINS THAT BOTH THE SUMS RECEIVABLE AND RECEIVED WERE ON ACCOUNT OF INDUSTRI AL PROMOTION ASSISTANCE UNDER THE WEST BENGAL INCENTIVE SCHEME, 2000 GIVEN TO THE APP ELLANT COMPANY FOR SETTING UP AN EDIBLE OIL REFINERY PLANT AND CAPTIVE POWER GENERAT ION UNIT AT BUDGE BUDGE. THUS, THE INCENTIVE RECEIVED BY THE APPELLANT WAS CAPITAL IN NATURE AND THERE WAS NO APPLICATION OF PROVISION OF SECTION 41(1) OF THE AC T AS DISCUSSED ABOVE WHILE ADJUDICATING GROUND NO. 1 AND 2. FOR THE REASONS D ISCUSSED ABOVE IN GROUND NO. 1 AND 2, IT IS HELD THAT THE SUM OF RS.3,72,95,124/- RECEIVED AS INDUSTRIAL PROMOTION ASSISTANCE WAS A CAPITAL RECEIPT NOT LIABLE TO TAX. THEREFORE, THE AO IS DIRECTED TO DELETE THE ADDITION MADE BY HIM. THE GROUND NO. 3 IS ALLOWED. 6. NOT BEING SATISFIED WITH THE ORDER OF THE LD. C IT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUNDS OF AP PEAL: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT (A) HAS ERRED IN DIRECTING TO DELETE THE ADDITION OF RS 6,19,47,252/ - RECEIVABLE BY THE APPELLANT COMPANY ON ACCOUNT OF INDUSTRIAL PROMOTION ASSISTANCE UNDER WE ST BENGAL INCENTIVE SCHEME, 2000 BY HOLDING IT TO BE OF CAPITAL IN NATURE AND HENCE NOT INC1UDIBLE IN THE TAXABLE INCOME OF THE ASSESSEE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) HAS ERRED IN DIRECTING TO DELETE THE ADDITION OF RS 6,19,47,252/ - RECEIVABLE BY THE APPELLANT COMPANY ON THE GROUND THAT THERE WAS NO CESSATION OF LIABILITY , WITHOUT APPRECIATING THE FACT THAT THE 8 ITA NOS. 388-390/KOL/2014 BUDGE BUDGE REFINERIES LTD. AYS. 2009-10 TO 2011-12 ASSESSEE WAS MAINTAINING ITS ACCOUNTS ON MERCANTILE BASIS AND HAD ACCOUNTED FOR THE TRANSACTIONS IN THE CURRENT YEAR. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (A) HAS ERRED IN DIRECTING TO DELETE THE ADDITION OF RS 3,72,95,124/ -ON ACCOUNT OF INCENTIVE RECEIVED OF RS.3,72,95,124/ -[ @75% OF SALES TAX/VAT FOR THE F. Y. 2008-09 AS INDUSTRIAL PROMOTION ASSISTANCE UNDER W. B. INCENTIVE SCHEME 2000] 6.1. THE LD. AR FOR THE ASSESSEE HAS SUBMITTED BEF ORE US THAT THE ASSESSEE COMPANY WAS ENTITLED TO RECEIVE SUBSIDY IN THE FORM OF INDUSTRI AL PROMOTION ASSISTANCE UNDER THE WEST BENGAL INCENTIVE SCHEME, 2000 FROM THE GOVT. OF WES T BENGAL AMOUNTING TO RS.6,19,47,252/-. THE ASSESSEE COMPANY HAS TREATED THE SAID SUBSIDY AS CAPITAL IN NATURE ON THE GROUND THAT IT WAS GIVEN BY THE GOVERNMENT TO S ET UP A NEW UNIT OR TO EXPAND AN EXISTING UNIT IN THE STATE OF WEST BENGAL. BUT THE AO HAS T REATED THE SAID INCENTIVE AS REVENUE IN NATURE AND INVOKED THE PROVISIONS OF SECTION 41(1) OF THE ACT FOR THE REASON THAT THE INCENTIVE WAS TO BE RECEIVABLE BY THE ASSESSEE COMP ANY BY WAY OF 75% OF SALES TAX COLLECTED BY THE COMPANY ON SALE OF ITS FINISHED PR ODUCTS. THE ASSESSEE COMPANY COLLECTED THE SALES TAX AND THE 75% OF THE SAME WAS NOT PAID TO THE GOVERNMENT AS PER THE SCHEME OF THE GOVERNMENT. IN ADDITION TO THIS, THE DEDUCTION ON ACCOUNT OF PAYMENT OF SALES TAX WAS ALLOWED IN EARLIER YEARS AND THEREFORE, 75% OF SUCH SALES TAX WAS TAXABLE U/S. 41(1) OF THE ACT AS PER THE ASSESSMENT ORDER. IN THE ASSESSMENT ORDER, THE AO DID NOT DISCUSS THE SUBMISSION MADE BY THE ASSESSEE COMPANY IN THE COUR SE OF ASSESSMENT PROCEEDINGS EXPLAINING THE REASON AS TO WHY THE SUM OF RS. 6, 1 9,47,252/- IS NOT TAXABLE AS REVENUE RECEIPT. THE ASSESSEE COMPANY HAS CLEARLY SUBMITTE D BEFORE THE AO THAT THE SUM OF RS.6,19,47,252/- WAS RECEIVABLE AS INDUSTRIAL PROMO TION INCENTIVE UNDER THE WEST BENGAL INCENTIVE SCHEME, 2000 AND THAT THERE IS NO APPLICA TION OF THE PROVISIONS OF SECTION 41(1) OF THE ACT, BECAUSE THE ASSESSEE COMPANY HAD NOT RECEI VED ANY REFUND OF THE SALES TAX FROM THE SALES TAX DEPARTMENT. THE ASSESSEE COMPANY HAS REL IED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN CIT VS. PONNY SUGARS & CHEMICALS L TD. 306 ITR 392 (SC). THE LD. AR FOR THE ASSESSEE IN THIS WAY HAS STRONGLY DEFENDED THE ORDER PASSED BY THE LD. CIT(A). 9 ITA NOS. 388-390/KOL/2014 BUDGE BUDGE REFINERIES LTD. AYS. 2009-10 TO 2011-12 6.2. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE AO, WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 6.3. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE SUBMISSI ONS OF THE ASSESSEE, AS THE PROPOSITION CANVASSED BY THE LD. AR FOR THE ASSESSEE ARE SUPPOR TED BY THE JUDGMENT OF HONBLE SUPREME COURT AND THE FACTS NARRATED ABOVE. THE LD. AR FOR THE ASSESSEE HAS POINTED OUT BEFORE US THAT THE ASSESSEE COMPANY GOT THE SUBSIDY FROM THE WEST BENGAL GOVERNMENT IN THE FORM OF INDUSTRIAL PROMOTION ASSISTANCE UNDER THE WEST BENG AL INCENTIVE SCHEME-2000. THE SAID SCHEME CLEARLY SAYS THAT IT IS FOR THE COMPANY TO E STABLISH ITS UNIT IN THE BACKWARD AREA TO PROMOTE THE EMPLOYMENT AND OTHER FACILITIES IN THE BACKWARD AREAS AND THE SAID INCENTIVE WAS TOWARDS CAPITAL RECEIPT IN NATURE. THE LD. AR FOR THE ASSESSEE ALSO POINTED OUT THAT THE SAID SCHEME IS NOT FOR THE ASSESSEE COMPANY TO REIM BURSE THE DAY TO DAY OPERATIONAL EXPENSES, THEREFORE, IT CANNOT BE IN THE NATURE OF REVENUE. CONSIDERING THE FACTUAL POSITION AND THE PRECEDENT CITED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND BEFORE US, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS PASSED A REASONED ORDE R AND IT DOES NOT REQUIRE ANY MODIFICATION. THEREFORE, WE CONFIRM THE ORDER PASS ED BY THE LD. CIT(A). 6.4 IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. 7. IN REST TWO APPEALS SAME ISSUES ARE INVOLVED, EX CEPT TO A SMALL COVERED ISSUE, WHICH RELATES TO SECTION 35D OF THE ACT. THE ASSESSEE CLA IMED PRELIMINARY EXPENSES OF RS.21,74,874/- IN THE RETURN OF INCOME AND THAT WAS ALLOWED IN THE ASSESSMENT U/S 143(3) OF THE ACT. THE SAID CLAIM OF PRELIMINARY EXPENSES HAD BEEN ALLOWED BY THE ASSESSING OFFICER IN PREVIOUS YEARS. HOWEVER, THE DEDUCTION CLAIMED I N THE YEAR UNDER CONSIDERATION HAS BEEN DISALLOWED BY THE ASSESSING OFFICER STATING THAT TH E ASSESSEE HAS NOT SUBSTANTIATED ITS CLAIM. WE ARE OF THE VIEW THAT THERE IS NO REASON TO DISAL LOW THE CLAIM U/S 35D IN THE YEAR UNDER APPEAL WHEN THE SIMILAR CLAIM WAS ALLOWED IN EARLIE R YEARS. THEREFORE, THE LD.CIT (A) HAS RIGHTLY DELETED THE ADDITION. ON THIS, SQUARELY COV ERED ISSUE, WE CONFIRM THE ORDER PASSED BY THE LD CIT(A). 10 ITA NOS. 388-390/KOL/2014 BUDGE BUDGE REFINERIES LTD. AYS. 2009-10 TO 2011-12 7.1 IN THE RESULT, ALL THE THREE APPEALS FILED BY T HE REVENUE ( IN ITA NO.388, 389 & 390/KOL/2014), ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.01.2017 SD/- SD/- (A. T. VARKEY) (DR. A. L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH JANUARY, 2017 JD. SR. P.S COPY OF THE ORDER FORWARDED TO: 1. APPELLANT DCIT, CENTRAL CIRCLE-XXVII, KOLKATA. 2. RESPONDENT M/S. BUDGE BUDGE REFINERIES LTD., 23B, A. M. GHOSH ROAD, BUDGE BUDGE, KOLKATA-700 137. 3. CIT(A), KOLKATA 4. CIT, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .