ACIT CIR 23(2), MUMBAI V. MIHIR PACKAGING, MUMBAI

ITA 5629/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8926 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 28-08-2012
• Assessment Year: 2002-2003
• Appeal Filed On: 04-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATBIR SINGH
• Assessee Lawyers: DEVAN M PATIL
• Keywords: Capital asset; Depreciation; Competent authority; Capital receipt
• Section: 143(3); 263; 10

Judgement Text

+ , , , , - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI . . , , !' !' !' !' , ,, , # # # # $ $ $ $ BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 5629/MUM./2011 ( #& ' (' / ASSESSMENT YEAR : 200203 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE23(2), PRATYAKSHA KAR BHAVAN BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI 400 051 .. )* / APPELLANT & V/S M/S. MIHIR PACKAGING D201, SAIDHAM CHS LTD. P.K. ROAD, NEAR ST. MARRYS CONVENT MULUND (W), MUMBAI 400 080 .... +,)* / RESPONDENT ) . / PERMANENT ACCOUNT NUMBER AABFM4080B #& '. / 0 / ASSESSEE BY : MR. DEVAN M. PATIL 1 / 0 / REVENUE BY : MR. SATBIR SINGH & / / DATE OF HEARING 28.08.2012 ! 23( / / DATE OF ORDER 21.09.2012 ! ! ! ! / ORDER !' !' !' !' , ,, , # # # # 4 4 4 4 / PER AMIT SHUKLA, J.M. THE PRESENT APPEAL PREFERRED BY REVENUE, IS DIRECTE D AGAINST THE IMPUGNED ORDER DATED 30 TH MAY 2011, PASSED BY THE LEARNED COMMISSIONER (APPEALS)XXXIII, MUMBAI, FOR THE QUANTUM OF ASSESS MENT UNDER SECTION 143(3) R/W SECTION 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT), FOR M/S. MIHIR PACKAGING 2 ASSESSMENT YEAR 200203. THE GROUNDS RAISED BY THE REVENUE, READ AS FOLLOWS: 1. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS WE [L AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE AM OUNT OF ` 20 LAKHS RECEIVED BYT EH ASSESSEE FROM THE GOVT. OF MAHARASH TRA AS SPECIAL INCENTIVE WAS NOT A REVENUE RECEIPT LIABLE FOR TAXA TION BUT A CAPITAL RECEIPT NOT LIABLE TO BE TAXED. 2. WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, HAVING CO ME TO THE CONCLUSION THAT THE RECEIPT OF ` 20 LAKHS BY THE ASSESSEE FROM THE GOVT. OF MAHARASHTRA IS A CAPITAL RECEIPT NOT LIABL E TO BE TAXED, THE LEARNED CIT(A) OUGHT TO HAVE EXAMINED THE ISSUE AS TO WHETHER THIS AMOUNT SHOULD HAVE BEEN REDUCED FROM THE COST OF AS SETS IN TERMS OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT FOR THE PURPOSE OF CALCULATING THE DEPRECIATION UNDER THE ACT. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE IS A REGISTERED PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFAC TURING DPEB / HDPE FABRICS THROUGH SMALL SCALE INDUSTRY UNDERTAKING (S SI UNIT) SITUATED AT VILLAGE MET, TALWADA DISTRICT, THANE. THE SAID FACT ORY WAS ESTABLISHED IN JUNE 2000. THE AREA IN WHICH THE FACTORY IS LOCATED, HAS BEEN NOTIFIED BY THE GOVERNMENT OF MAHARASHTRA AS BACKWARD ZONE AND CLAS SIFIED UNDER D+ LOCALITY I.E., REMOTE BACKWARD AREA FOR THE PURPOSE OF PACKAGE SCHEME OF INCENTIVE, 1993, ISSUED BY THE GOVERNMENT OF MAHARA SHTRA. THIS SCHEME WAS DEVISED TO ENCOURAGE THE ENTREPRENEUR TO ESTABLISH INDUSTRIES IN BACKWARD AREAS SO AS TO DEVELOP REMOTE AREA AND ALSO TO PROM OTE EMPLOYMENT IN THOSE BACKWARD AREAS. UNDER THE SAID SCHEME ELIGIBL E CERTIFICATE BY DISTRICT INDUSTRIES CENTRE WAS TO BE OBTAINED AND ALSO CERTI FICATE OF ENTITLEMENT BY COMMISSIONER OF SALES TAX. UNDER THE SAID PACKAGE S CHEME OF INCENTIVE, THE GOVT. OF MAHARASHTRA HAD GRANTED SPECIAL CAPITAL IN CENTIVE AND SALES TAX DEFERRAL SCHEME FOR ENCOURAGING THE ELIGIBLE INDUST RIES FOR SETTING UP INDUSTRIES IN THE BACK WARD AREAS. THE ASSESSEE HAD APPLIED FOR ELIGIBILITY CERTIFICATE FOR GRANT OF CAPITAL INCENTIVE UNDER TH E PACKAGE SCHEME OF INCENTIVE, 1993, WHICH WAS GRANTED VIDE CERTIFICATE DATED 29 TH JUNE 2000. ACCORDING TO THE SAID CERTIFICATE, THE ASSESSEE COM PLIED WITH NECESSARY FORMALITIES AND SUBMITTED THE SAME TO DISTRICT INDU STRY CENTRE, THANE, ON M/S. MIHIR PACKAGING 3 12 TH OCTOBER 2001, AND ON COMPLETION OF THE SAID FORMAL ITIES, THE INCENTIVE AMOUNTS TO ` 20,00,000, WAS ISSUED ON 22 ND NOVEMBER 2001, THROUGH LETTER ISSUED BY THE COMPETENT AUTHORITY. THE SAID AMOUNT RECEIVED BY WAY OF SUBSIDY WAS TREATED AS CAPITAL RECEIPT AND SHOWN IN THE BALANCE SHEET UNDER THE HEAD RESERVE & SURPLUS AND THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2002-03. THE RETURN OF INCOME WAS FILED DECLAR ING LOSS OF ` 23,88,548, ON 31 ST OCTOBER 2001. SUCH RETURN OF INCOME WAS SELECTED F OR SCRUTINY AND IN PURSUANCE OF THAT, THE ASSESSMENT ORDER UNDER SECTI ON 143(3) WAS PASSED VIDE ORDER DATED 31 ST DECEMBER 2004, AT A NET LOSS OF ` 23,12,368, AFTER MAKING CERTAIN ADDITION / DISALLOWANCE OF EXPENDITU RE DEBITED IN THE PROFIT & LOSS ACCOUNT. THE ASSESSMENT SO COMPLETED UNDER SEC TION 143(3), WAS SUBJECT MATTER OF REVISION UNDER SECTION 263, VIDE SHOW CAUSE NOTICE DATED 18 TH JANUARY 2007, ISSUED BY THE COMMISSIONER-XXIII, MU MBAI, ON THE GROUND THAT THE SUBSIDY / INCENTIVE RECEIVED AT ` 20,00,000, HAS NOT BEEN EXAMINED PROPERLY AS THE SAME AMOUNTS TO REVENUE RE CEIPTS IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT IN SAHANI STEELS AND PRESS WORKS LTD. V/S CIT, 220 ITR 253 (SC) . IN RESPONSE, THE ASSESSEE SUBMITTED THAT A DETAIL REPLY THAT THE SUBSIDY RECEIVED WAS IN THE N ATURE OF CAPITAL RECEIPT AND NOT ON REVENUE ACCOUNT. HOWEVER, ASSESSEES OBJECTI ON AND REPLY WAS REJECTED AND THE ASSESSMENT ORDER WAS CANCELLED BY THE COMMISSIONER UNDER SECTION 263, VIDE ORDER DATED 27 TH FEBRUARY 2007, BY HOLDING THAT THE SUBSIDY RECEIVED IS A REVENUE RECEIPT AND DIRECTED THE ASSESSING OFFICER TO PASS ASSESSMENT ORDER AFRESH. 3. IN PURSUANCE THEREOF, THE ASSESSING OFFICER, AFTER REPRODUCING THE SHOW CAUSE NOTICE ISSUED BY THE COMMISSIONER UNDER SECTI ON 263 AND THE ORDER PASSED BY THE COMMISSIONER UNDER SECTION 263, REQUI RED THE ASSESSEE TO FILE ITS OBJECTIONS. IN RESPONSE, THE ASSESSEE FILED A D ETAIL REPLY WITH REGARD TO THE NATURE OF SCHEME UNDER WHICH SUBSIDY WAS RECEIV ED AND HOW THE JUDGMENT OF SAHANI STEELS AND PRESS WORKS LTD. (SUPRA) IS NOT APPLICABLE IN CASE OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICE R REJECTED THE SAID CONTENTION SOLELY ON THE GROUND THAT THE SAME HAS B EEN CONSIDERED BY THE M/S. MIHIR PACKAGING 4 COMMISSIONER. ACCORDINGLY, HE TREATED THE AMOUNT OF ` 20,00,000, RECEIVED AS SUBSIDY AS REVENUE RECEIPT AND ACCORDINGLY TAXED THE SAME. 4. BEFORE THE COMMISSIONER (APPEALS), THE ASSESSEE MAD E DETAIL SUBMISSION AFTER REFERRING TO THE PACKAGE SCHEME OF INCENTIVE, 1993, AND ON OTHER CRITERIA FOR BEING ELIGIBLE FOR GRANTING OF S PECIAL CAPITAL INCENTIVE AND THAT THE SUBSIDY WAS GIVEN FOR SETTING UP OF INDUST RIES IN THE BACKWARD AREA AND THE SAME SHOULD BE TREATED AS CAPITAL RECEIPT O NLY. IN SUPPORT OF THIS CONTENTION, THE RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN CIT V/S PONNI SUGARS AND CHEMICALS LTD., [2008] 306 ITR 392 (SC) . THE COMMISSIONER (APPEALS), AFTER DULY CONSIDERIN G THE FACTS AND THE SUBMISSIONS OF THE ASSESSEE AND ALSO THE RATIO AND THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN PONNI SUGARS AND CH EMICALS LTD. (SUPRA) HELD THAT THE SAME IS SQUARELY APPLICABLE IN THE AS SESSEES CASE AND AFTER REFERRING TO THE RELEVANT FINDINGS OF THE HON'BLE S UPREME COURT, OBSERVED AND HELD AS UNDER:- 7. IN VIEW OF THESE DETAILS AVAILABLE, I AM CONVINC ED THAT THE AMOUNT RECEIVED UNDER THE CAPITAL INCENTIVE SCHEME FOR SETTING UP THE INDUSTRY TO MEET THE CAPITAL COST OF PROJECT WHICH HAD COST OF LAND, BUILDING, PLANT AND MACHINERY INCLUDED FOR THE PURP OSE OF THE RECEIPT IS CAPITAL IN NATURE AND HENCE NOT TAXABLE. ACCORDINGL Y, THE CAPITAL SUBSIDY AMOUNT OF ` 20,00,000 RECEIVED BY THE APPELLANT IS NOT TAXABLE. 12. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE, AFTER REFERRING TO THE VARIOUS TERMS GIVEN IN THE SCHEME OF INCENTIVE, 1993, SUBMITTED THAT IT IS VERY DIFFICULT TO INFER THAT THE SUBSIDY GIVEN W AS IN THE FORM OF CAPITAL SUBSIDY. HE SUBMITTED THAT THE NAME ITSELF DOES NOT INDICATE THAT IT IS A CAPITAL INCENTIVE AND NOT REVENUE IN NATURE. HE THU S STRONGLY RELIED UPON THE FINDINGS GIVEN BY THE ASSESSING OFFICER. 13. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSE SSEE DREW OUR ATTENTION TO THE PREAMBLE OF THE SCHEME AND ALSO VA RIOUS TERMS AND CONDITIONS UNDER WHICH THE ASSESSEE WAS ELIGIBLE FO R AVAILING THE SCHEME AND SUBMITTED THAT THE ASSESSEE IN TERMS OF CLAUSE 5.2 OF THE SAID SCHEME WAS M/S. MIHIR PACKAGING 5 GIVEN A SUM OF ` 20,00,000, COMPUTED ON THE BASIS OF FIXED CAPITAL INVESTMENT. HE FURTHER SUBMITTED THAT THE ENTIRE PU RPOSE OF THE SCHEME WAS FOR SETTING UP OF INDUSTRY IN THE BACKWARD AREAS AN D ALL THE CRITERIA NECESSARY FOR AVAILING THE SCHEME HAS BEEN FULFILLED IN CASE OF THE ASSESSEE WHICH WAS CLEARLY IN THE NATURE OF CAPITAL SUBSIDY. HE STRONG LY RELIED UPON THE FINDING GIVEN BY THE COMMISSIONER (APPEALS). 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS, PERUSED THE FINDINGS GIVEN BY THE AUTHORITIES BELOW AND THE MAT ERIAL AVAILABLE ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS ESTA BLISHED A SMALL SCALE INDUSTRIES UNDERTAKING IN A DULY NOTIFIED BACKWARD AREA IN THE DISTRICT OF THANE, WHICH HAS BEEN CATEGORIZED AS D+ LOCALITY I.E., REMOTE BACKWARD AREA FOR THE PURPOSE OF NEW PACKAGE SCHEME OF INCEN TIVE, 1993. THE PREAMBLE OF THE SAID SCHEME, READS AS UNDER:- IN ORDER TO ACHIEVE DISPERSAL OF INDUSTRIES OUTSIDE THE BOMBAY-THANE- PUNE BELT AND TO ATTRACT THEM TO, THE UNDERDEVELOPE D AND DEVELOPING AREAS OF THE STATE, GOVERNMENT HAS BEEN GIVING A PA CKAGE OF INCENTIVES TO NEW/EXPANSION UNITS SET UP IN THE DEV ELOPING REGION OF THE STATE SINCE 1964 UNDER A SCHEME POPULARLY KNOWN AS THE PACKAGE SCHEME OF INCENTIVES. THE PACKAGE SCHEME OF INCENTIVES, INTRODUCED IN 196 4, WAS AMENDED FROM TIME TO TIME. THE LAST AMENDED SCHEME, COMMONL Y KNOWN AS THE 1988 SCHEME WAS OPERATIVE FROM 1ST OCTOBER 1988 TO 30TH SEPTEMBER, 1993. THE QUESTION OF REVISING THE 1988 SCHEME TO RATIONA LISE THE SCOPE OF INCENTIVES, VARIOUS SCALES AND MODE OF RELEASE OF I NCENTIVES TO INTENSIFY AND ACCELERATE THE PROCESS OF DISPERSAL O F INDUSTRIES FROM THE DEVELOPED AREAS AND FOR DEVELOPMENT OF THE UNDER- D EVELOPED REGIONS OF THE STATE, PARTICULARLY THOSE FARTHER AWAY FROM THE BOMBAY-THANE- PUNE BELT, HAD BEEN UNDER CONSIDERATION OF THE GOVE RNMENT. IN THE LIGHT OF THE EXPERIENCE GAINED IN IMPLEMENTATION OF THE EARLIER SCHEMES,, PARTICULARLY THE 1988 SCHEME, AND IN THE CHANGED CIRCUMSTANCE OF THE LIBERALISED INDUSTRIAL POLICY O F THE GOVERNMENT OF INDIA, AND WITH A VIEW TO ACHIEVING THE OBJECTIVES OUTLINED ABOVE, THE GOVERNMENT HAS DECIDED TO REVISE THE 1988 SCHEME AN D BRING INTO FORCE A NEW SCHEME, VIZ., THE PACKAGE SCHEME OF INC ENTIVES, 1993 (HEREINAFTER REFERRED TO AS THE 1993 SCHEME). 15. UNDER THE SAID SCHEME, ONE OF THE ELIGIBLE UNIT IN TERMS OF CLAUSE 1.1 WERE THE INDUSTRIES FALLING WITHIN THE PURVIEW OF S MALL SCALE INDUSTRIES BOARD M/S. MIHIR PACKAGING 6 AND THE IMPLEMENTING AGENCY FOR THE PURPOSE OF THE SCHEME IN CASE OF SMALL SCALE INDUSTRIES UNIT WAS DISTRICT INDUSTRIES CENTRE UNDER WHICH ELIGIBLE CERTIFICATE HAS TO BE PROCURED AFTER FULFILLING CER TAIN CONDITIONS. CLAUSE 5 PROVIDED VARIOUS NATURE OF INCENTIVE, WHICH SHOULD BE GIVEN AND ONE OF THEM INCLUDED SPECIAL CAPITAL INCENTIVE FOR SSI UNIT . THE SAID SCHEME ALSO PROVIDES THE EFFECTIVE STEPS COMPRISING OF INITIAL EFFECTIVE STEPS AND FINAL EFFECTIVE STEPS WHICH WERE TO BE UNDERTAKEN BEFORE BEING ELIGIBLE FOR THE GRANT OF SUBSIDY. FINALLY, IN TERMS OF CLAUSE 5.2, SPECIAL CAPITAL INCENTIVE FOR SSI UNIT, WAS ADMISSIBLE AS A GRANT AFTER COMPLETIO N OF ALL INITIAL AND FINAL EFFECTIVE STEPS AND WILL BE COMPUTED ON THE BASIS O F FIXED CAPITAL INVESTMENT ACTUALLY MADE BY THE ELIGIBLE SSI UNIT. THE MAXIMUM CEILING FOR D+ CATEGORY HAS BEEN PUT AT ` 20,00,000. 16. THE ASSESSEE HAD FULFILLED THE ELIGIBLE CRITERIA AN D ALSO COMPLIED WITH THE EFFECTIVE STEPS TO BE TAKEN AND THEREAFTER, IT HAS RECEIVED THE SUBSIDY UNDER SPECIAL CAPITAL INCENTIVE FOR SSI UNIT BASED ON ITS CAPITAL INVESTMENT, WHICH FINALLY WORKED OUT TO ` 20,00,000. THUS, FROM THE PREAMBLE AND ALSO VARIOUS OTHER TERMS, IT IS SEEN THAT THE PURPOSE OF THE SUBSIDY WAS TO SET-UP A NEW UNIT IN THE NOTIFIED BACKWARD AREAS PARTICULA RLY THOSE BETWEEN BOMBAY, THANE, PUNE, BELT FOR THE DEVELOPMENT OF TH E REMOTE AREA. THE SAID SCHEME PROVIDE SPECIAL CAPITAL INCENTIVE FOR SSI UN IT AND, THEREFORE, THE SUBSIDY RECEIVED UNDER THE SCHEME IS CLEARLY ON ACC OUNT OF CAPITAL ONLY. THIS HAS BEEN ALSO MENTIONED IN THE ELIGIBLE CERTIFICATE DATED 29 TH JUNE 2000, ISSUED BY THE DISTRICT INDUSTRIAL CENTRE, IMPLEMENT ING AGENCY FOR THE SSI UNIT. THE HON'BLE SUPREME COURT IN PONNI SUGARS AND CHEMICALS LTD. (SUPRA) , AFTER RELYING UPON THE JUDGMENT IN SAHANI STEELS AND PRESS WORKS LTD. (SUPRA), HELD THAT CHARACTER OF THE RECEIPT IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FO R WHICH SUBSIDY IS GIVEN. THE PROPOSE TEST HAS TO BE APPLIED WHILE DETERMINING WHETHER THE SUBSIDIARY IS IN ACCOUNT OF REVENUE ACCOUNT OR CAPI TAL SUBSIDY. THE RELEVANT OBSERVATION GIVEN IN PONNI SUGARS AND CHEMICALS LTD ., BY THEIR LORDSHIPS ARE REPRODUCED HEREIN BELOW:- M/S. MIHIR PACKAGING 7 14. IN OUR VIEW, THE CONTROVERSY IN HAND CAN BE RES OLVED IF WE APPLY THE TEST LAID DOWN IN THE JUDGMENT OF THIS CO URT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. (SUPRA). IN THAT CASE, ON BEHALF OF THE ASSESSEE, IT WAS CONTENDED THAT THE S UBSIDY GIVEN WAS UP TO 10 PER CENT OF THE. CAPITAL INVESTMENT CA LCULATED ON THE BASIS OF THE QUANTUM OF INVESTMENT IN CAPITAL A ND, THEREFORE, RECEIPT OF SUCH SUBSIDY WAS ON CAPITAL ACCOUNT AND NOT ON REVENUE ACCOUNT. IT WAS ALSO URGED IN THAT CASE THA T SUBSIDY GRANTED ON THE BASIS OF. REFUND OF SALES TAX ON RAW MATERIALS, MACHINERY AND FINISHED GOODS WERE ALSO OF CAPITAL N ATURE AS THE OBJECT OF GRANTING REFUND OF SALES TAX WAS THAT THE ASSESSEE COULD SET UP NEW BUSINESS OR EXPAND HIS EXISTING BU SINESS. THE CONTENTION OF THE ASSESSEE IN THAT CASE WAS DISMISS ED BY THE TRIBUNAL AND, THEREFORE, THE ASSESSEE HAD COME TO T HIS COURT BY WAY OF A SPECIAL LEAVE PETITION. IT WAS HELD BY THI S COURT ON THE FACTS OF THAT CASE AND ON THE BASIS OF THE ANALYSES OF THE SCHEME THEREIN THAT THE SUBSIDY GIVEN WAS ON REVENUE ACCOU NT BECAUSE IT WAS GIVEN BY WAY OF ASSISTANCE IN CARRYING ON OF TRADE OR BUSINESS. ON THE FACTS OF THAT CASE, IT WAS HELD TH AT THE SUBSIDY GIVEN WAS TO MEET RECURRING EXPENSES. IT WAS NOT FO R ACQUIRING THE CAPITAL ASSET. IT WAS NOT TO MEET PART OF THE C OST. IT WAS NOT GRANTED FOR PRODUCTION OF OR BRINGING INTO EXISTENC E ANY NEW ASSET. THE SUBSIDIES IN THAT CASE WERE GRANTED YEAR AFTER YEAR ONLY AFTER SETTING UP OF THE NEW INDUSTRY AND ONLY AFTER COMMENCEMENT OF PRODUCTION AND, THEREFORE, SUCH A S UBSIDY COULD ONLY BE TREATED AS ASSISTANCE GIVEN FOR THE P URPOSE OF CARRYING ON THE BUSINESS OF THE ASSESSEE. CONSEQUEN TLY, THE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE ON THE FACTS OF THAT CASE STOOD REJECTED AND IT WAS HELD THAT THE SUBSID Y RECEIVED BY SAHNEY STEEL COULD NOT BE REGARDED AS ANYTHING BUT A REVENUE RECEIPT. ACCORDINGLY, THE MATTER WAS DECIDED AGAINS T THE ASSESSEE. THE IMPORTANCE OF THE JUDGMENT OF THIS CO URT IN SAHNEY STEEL & PRESS WORK S LTD. S CASE (SUPRA) LI ES IN THE FACT THAT IT HAS DISCUSSED ARID ANALYSED THE ENTIRE CASE LAW AND. IT HAS LAID DOWN THE BASIC TEST TO BE APPLIED IN JUDGING T HE CHARACTER OF A SUBSIDY. THAT TEST IS THAT THE CHARACTER OF THE R ECEIPT IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RES PECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. IN OTHER WO RDS, IN SUCH CASES, ONE HAS TO APPLY THE PURPOSE TEST. THE POINT OF TIME 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 BE UTILIZED FOR REPAYMENT OF LOANS TAKEN BY THE ASSESSEE TO SETUP NEW UNITS O R FOR SUBSTANTIAL EXPANSION OF EXISTING UNITS; ON THIS AS PECT THERE IS NO DISPUTE. IF THE OBJECT OF THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY TH EN THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND, IF THE OB JECT OF THE ASSISTANCE UNDER THE SUBSIDY SCHEME WAS TO ENABLE T HE ASSESSEE M/S. MIHIR PACKAGING 8 TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT THEN THE RECEIPT OF THE SUBSIDY WAS ON CAPITAL ACCOUNT. THER EFORE, IT IS THE OBJECT FOR WHICH THE SUBSIDY/ASSISTANCE IS GIVEN WH ICH DETERMINES THE NATURE OF THE INCENTIVE SUBSIDY. THE FORM OF THE MECHANISM THROUGH WHICH THE SUBSIDY IS GIVEN IS IRR ELEVANT . 17. APPLYING THE ABOVE RATIO AND THE TEST LAID DOWN BY THE HON'BLE SUPREME COURT, WE FIND THAT THE SUBSIDY RECEIVED BY THE ASSESSEE UNDER THE NEW PACKAGE SCHEME INCENTIVE OF 1993, WAS SOLELY FO R THE PURPOSE OF SETTING UP OF SSI UNIT IN THE BACKWARD AREA FOR WHICH IT HA S RECEIVED SPECIAL CAPITAL INCENTIVE COMPUTED ON THE BASIS OF FIXED CAPITAL IN VESTMENT ACTUALLY MADE BY THE ASSESSEE AND, THEREFORE, THE SAME IS CAPITAL IN NATURE AND HENCE, NOT TAXABLE. THUS, THE FINDING AND CONCLUSION GIVEN BY THE COMMISSIONER (APPEALS) IS UPHELD AND, ACCORDINGLY, GROUND NO.1, RAISED BY THE REVENUE IS DISMISSED. 18. AS REGARDS GROUND NO.2, THIS ISSUE IS NEITHER ARISI NG OUT OF THE ASSESSMENT ORDER NOR FROM THE COMMISSIONER (APPEALS )S ORDER, HENCE, THE SAME IS NOT MAINTAINABLE AND IS DISMISSED AS SUCH. 19. . 5 1 / .1 / 1 67 8 19. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ! / 3( 9 :&5 21 ST SEPTEMBER 2012 3 / ; 8 ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER 2012 SD/- . .. . . . . . R.S. SYAL ACCOUNTANT MEMBER SD/- !' !' !' !' # # # # AMIT SHUKLA JUDICIAL MEMBER MUMBAI, :& :& :& :& DATED: 21 ST SEPTEMBER 2012 M/S. MIHIR PACKAGING 9 ! / +# < =<( / COPY OF THE ORDER FORWARDED TO : (1) #& '. / THE ASSESSEE; (2) 1 / THE REVENUE; (3) > () / THE CIT(A); (4) > / THE CIT, MUMBAI CITY CONCERNED; (5)