Rasiklal M. Dhariwal, HUF, V. ACIT,Cir-1(1), Pune,

ITA 575/PUN/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7385 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-10-2007
• Assessment Year: 2003-2004
• Appeal Filed On: 24-04-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHISHIR DHAMESH
• Assessee Lawyers: NITESH S JOSH I
• Keywords: Capital asset; Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 575/PN/07 & 150/PN/08 (ASSTT. YEAR 2003-04 & 2004-05) RASIKLAL M. DHARIWAL (HUF), MANIICHAND HOUSE, PLOT NO 100-101, .. APP ELLANT BEHIND HOTEL LE-MERIDIEN, PUNE PAN NO AABHD5583L VS. DY. COMMISSIONER OF INCOME-TAX, CIR.2, PUNE .. RESPONDENT APPELLANT BY :SHRI NITESH S. JOSHI RESPONDENT BY :SHRI SHISHIR DHAMESH ORDER PER G S PANNU, A.M: THE CAPTIONED TWO APPEALS BY THE ASSESSEE ARE DIRE CTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)- I/II, PUNE DATED 27.3.2007 AND 30.11.2007 WHICH, IN TURN, HAVE ARISE N FROM ORDERS DATED 28.2.2006 AND 08.12.2006 PASSED BY THE ASSESSING OF FICER UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE A CT), PERTAINING TO THE ASSESSMENT YEAR 2003-04 AND 2004-05 RESPECTIVELY. AS A COMMON ISSUE IS INVOLVED IN BOTH THE CAPTIONED APPEALS, THEY WERE H EARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF A COMPOSITE ORDER FOR T HE SAKE OF CONVENIENCE. 2. THE COMMON GROUND OF APPEAL RAISED IN THESE APPE ALS RELATES TO THE CLAIM OF THE ASSESSEE THAT THE AMOUNT RECEIVED ON T RANSFER OF SALES-TAX ELIGIBILITY IS NOT LIABLE FOR TAXATION, IT BEING IN THE NATURE OF CAPITAL RECEIPT. SINCE THE FACTS AND RIVAL ARGUMENTS ARE SIMILAR FOR BOTH THE ASSESSMENT YEARS, WE SHALL FIRST TAKE UP THE ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2003-04. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE , AN HUF, IS ENGAGED IN ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 2 CARRYING OUT WIDE RANGE OF BUSINESS ACTIVITIES AS A MANUFACTURER AND TRADER. THE ASSESSEE IS A GROUP CONCERN UNDER THE UMBRELLA OF DHARIWAL GROUP OF INDUSTRIES. DURING THE COURSE OF ASSESSMENT PROCEED INGS FOR THE ASSESSMENT YEAR 2003-04, THE ASSESSING OFFICER NOTICED THAT TH E ASSESSEE HAD SET UP WIND-MILLS IN MAHARASHTRA FOR GENERATING WIND POWER . THE GOVERNMENT OF MAHARASHTRA HAS GIVEN SUBSIDY BY WAY OF ENTITLEMENT TO SALES-TAX EXEMPTION TO THE ASSESSEE AS PER A SCHEME. DURING THE ASSESS MENT YEAR 2003-04, ASSESSEE TRANSFERRED ITS SALES-TAX BENEFIT ENTITLEM ENT FOR AN AMOUNT OF RS 63,74,291/-. THE ASSESSEE CLAIMED THAT THE AMOUNT S O RECEIVED ON TRANSFER OF SALES-TAX ELIGIBILITY IS A CAPITAL RECEIPT AND, THEREFORE, NOT TAXABLE. IN SUPPORT OF THE AFORESAID CLAIM, THE ASSESSEE REFERR ED TO THE FOLLOWING RESOLUTIONS OF THE GOVERNMENT OF MAHARASHTRA, WHICH INCORPORATED THE GOVERNMENT OF MAHARASHTRAS SCHEME IN CONNECTION WI TH THE WIND-MILLS: (A) NCP-1097/CR-57/ENERGY-7 DATED 12.03.1998; AND (B) N CP-1099/CR- 202/ENERGY/7 DATED 01.10.1999. FURTHER, IT WAS SUBM ITTED BY THE ASSESSEE THAT THE SALES-TAX BENEFITS GRANTED UNDER THE ABOVE SCHEME HAD TWO OPTIONS, VIZ. EITHER THE BENEFICIARY CAN OPT FOR DE FERRAL OF SALES-TAX PAYMENT BEYOND 10 YEARS, OR THE BENEFICIARY CAN OPT FOR SAL ES-TAX EXEMPTION AND NOT TO COLLECT SALES-TAX FROM CUSTOMERS. THE ASSESSEE H UF DECIDED TO TRANSFER THE ENTITLEMENT TO A THIRD PARTY IN TERMS OF THE PR OCEDURE LAID DOWN IN THE G.R DATED 01.10.1999 (SUPRA). IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT IT HAD IN FACT INSTALLED AND COMMISSIONED A TOTAL OF T HREE WIND-MILLS AND FIRST FULL FINANCIAL YEAR OF GENERATION OF ELECTRICITY WAS 200 0-01 AND DURING THE ASSESSMENT YEAR 2003-04, THE SALES-TAX ENTITLEMENT WAS TRANSFERRED TO LIBERTY OIL MILLS LTD. FOR RS 63,74,201/- VIDE ELIG IBILITY CERTIFICATE RECEIVED FROM MEDA DATED 13.6.2002 AND SALES-TAX DEPARTMENT DATED 26.6.2002. ACCORDING TO THE ASSESSEE, SALES-TAX ENTITLEMENT WA S NOT AVAILABLE FROM THE DATE OF MANUFACTURE OR THE DATE OF GENERATION OF EL ECTRICITY, BUT FROM THE SUBSEQUENT YEAR AFTER THE COMMISSIONING OF WIND-MIL LS PROJECT, AND THE INCENTIVES HAD NOTHING TO DO WITH THE PROFITABILITY OR OTHERWISE OF THE WIND-MILL ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 3 PROJECT. THE ASSESSEE FURTHER EXPLAINED THAT IN THE CASE OF THE ASSESSEE SALES-TAX INCENTIVE WAS GIVEN BY THE STATE GOVERNME NT NOT FOR ASSISTING THEM IN CARRYING OUT THE BUSINESS OPERATION OF THE WIND-MILLS, BUT FOR THE PURPOSE OF ENTERING INTO THE PROJECT OF WIND-MILLS, I.E. GENERATION OF ELECTRICITY WITH NON-CONVENTIONAL ENERGY SOURCE, AND THE INCENT IVES CAN BE UTILIZED IN ANY BUSINESS OF THE PROMOTER, OR EVEN TRANSFERRED T O THIRD PARTY. ACCORDING TO THE ASSESSEE, INCENTIVE AND SALES-TAX IS FOR THE CA PITAL INVESTED FOR THE GENERATION OF ELECTRICITY WITH THE HELP OF WIND-MIL LS AND THE INCENTIVE IS NOT TO BE CONSIDERED TO BE AN OPERATIONAL SUBSIDY OR A PRO DUCTION INCENTIVE. ACCORDING TO THE ASSESSEE, THE FACT THAT THE INCENT IVE IS GIVEN AFTER COMMENCEMENT OF OPERATION IS NOT IMPORTANT, BUT THE PURPOSE OF THE GRANT IS IMPORTANT. RELIANCE WAS PLACED ON THE FOLLOWING DEC ISIONS: A. CIT V P.J.CHEMICALS 210 ITR 830 (SC) B. RELIANCE INDUSTRIES LTD ITA NO 7554(BOM) OF 1989 ON THESE FACTS, IT WAS CONTENDED BY THE ASSESSEE TH AT SALES-TAX INCENTIVE FOR THE WIND-MILLS INSTALLED IN MAHARASHTRA IS A CAPITA L RECEIPT AND IS NOT GIVEN AS A PORTION OF THE COST OF ASSETS ACQUIRED IN THE WIN D MILLS PROJECT. 3. ON A PERUSAL OF THE SCHEME, THE ASSESSING OFFICE R OBSERVED THAT THE INCENTIVE RECEIVED BY THE ASSESSEE COULD NOT BE SAI D TO HAVE BEEN RECEIVED ON CAPITAL ACCOUNT. ACCORDING TO THE ASSESSING OFFI CER, UNDER THE SCHEME, THE GOVERNMENT OF MAHARASHTRA OFFERED TWO SETS OF I NCENTIVES FOR SETTING UP WIND-MILLS IN THE STATE. AS PER RESOLUTION NCP/1097 /CR 57/ENERGY 7 DATED 13.3.1998, CLAUSE 7, CAPITAL SUBSIDY IS BEING PROVIDED BY THE STATE GOVERNMENT @ 30% OF THE FIXED CAPITAL INVESTMENT S UBJECT TO A MAXIMUM LIMIT OF RS 30 LAKHS IN THE WIND POWER PLANT. ACCOR DING TO THE ASSESSING OFFICER, THIS INCENTIVE HAS BEEN SPECIFICALLY PROVI DED FOR SETTING UP OF WIND- MILLS AND THE ONLY OTHER CONDITION ATTACHED WITH TH IS IS THAT THE PLANT MUST BE SUCCESSFULLY OPERATED IN THE RANGE OF 17% PLAN LOAD FACTOR (PLF). THE OTHER SET OF INCENTIVES COMPRISED OF SUBSIDY ON ACCOUNT O F SALES-TAX INCENTIVES. SUCH OTHER KIND OF SUBSIDY WAS NOT LINKED WITH ANY CAPITAL INVESTMENT AS ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 4 SUCH AND SUCH SALES-TAX INCENTIVE WAS GRANTED ONLY WHEN THE WIND-MILL HAS BEEN SUCCESSFULLY RUN IN THE PRECEDING YEAR AT THE MINIMUM PLANT LOAD FACTOR OF 12%. SUCH DIFFERENT CONDITIONS FOR AVAILING THE SALES-TAX INCENTIVE CLEARLY ESTABLISHED THAT THE DOMINANT PURPOSE OF GRANTING S UCH INCENTIVE WAS OPERATION OF THE WIND MILL AND NOT SETTING-UP THERE OF ALONE. AS PER THE SCHEME, EVEN AFTER ACHIEVING THE PLANT LOAD FACTOR OF 12%, ONLY 50% OF THE TOTAL INCENTIVE WAS AVAILABLE AND IN ORDER TO GET F ULL SALES TAX INCENTIVE, MINIMUM PLANT LOAD FACTOR OF 17% WAS TO BE ACHIEVED , WHICH ACCORDING TO THE ASSESSING OFFICER SHOWED THAT THE SALES-TAX INCENTI VE IS INDEED RELATED TO THE OPERATIONAL EFFICIENCY AND NOT TO SETTING UP OF WIN D-MILLS ALONE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE AS SESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAS NOT DIRECTLY ADDRESS ED THE ISSUE OF CHARGEABILITY OF RECEIPT ON ACCOUNT OF SALES-TAX DE FERRAL. ACCORDING TO THE ASSESSING OFFICER, THE ARGUMENT OF THE ASSESSEE REL ATED TO THE ASPECT OF LEGAL SANCTITY OF SALES-TAX EXEMPTION ELIGIBILITY T RANSFER, GENUINENESS OF WIND- MILL INSTALLATION, OPTIONS AVAILABLE UNDER SALES-TA X BENEFIT, WHETHER THE BENEFIT IS IN THE FORM OF AN INCENTIVE OR GRANT OF SUBSIDY ETC. AND NONE OF THESE ISSUES HAD A DIRECT BEARING ON THE TAXABILITY OF TH E SAID RECEIPT. DRAWING SUPPORT FROM THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD 228 ITR 253 (SC), TH E ASSESSING OFFICER HELD THAT LOOKING TO THE DOMINANT PURPOSE OF THE SU BSIDY, THE SUBSIDY RECEIVED BY THE ASSESSEE HAS TO BE TREATED AS OF RE VENUE NATURE AND TAXED ACCORDINGLY. FOR ALL THESE REASONS, AMONGST OTHERS, THE ASSESSING OFFICER TREATED THE AMOUNT OF RS 63,74,291/- RECEIVED BY TH E ASSESSEE ON ACCOUNT OF SALES-TAX EXEMPTION ENTITLEMENT TRANSFER AS A REVEN UE RECEIPT EARNED DURING THE ASSESSMENT YEAR 2003-04 AND ADDED IT BACK TO TH E TOTAL INCOME OF THE ASSESSEE. BEING AGGRIEVED BY THE ORDER OF THE ASSES SING OFFICER, ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. 4. BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE ASSES SING OFFICER. THE ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 5 ASSESSEE PLACED STRONG RELIANCE ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF RELIANCE INDUSTRIES LTD. (S UPRA). IT WAS PLEADED BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THE S UBSIDY IS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX AND THAT THE SUBSIDY WAS NOT LIABLE TO BE REDUCED FROM THE ACTUAL COST OF ANY CAPITAL ASSET. THE COMMISSIONER OF INCOME-TAX (APPEALS) ON A CAREFUL CONSIDERATION OF THE VARIOUS SUBMISSIONS MADE BY THE ASSESSEE, PROCEEDED TO EXAMINE RELEVANT GOVERNMENT RESOLUTIONS DATED 12.03.1998 (SUPRA) AND DATED 01.1 0.1999 (SUPRA) OF THE GOVERNMENT OF MAHARASHTRA AND OBSERVED THAT SALIENT FEATURE OF SCHEME FOR PROVIDING SUBSIDY WERE THE SAME AS THOSE CONTAINED IN NOTIFICATION ISSUED BY ANDHRA PRADESH GOVERNMENT WHICH WAS SUBJECT MATTER OF APPEAL BEFORE THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD (SUPRA). ACCORDING TO THE COMMISSIONER OF INCOME-TA X (APPEALS), THE FACTS OF THE CASE OF THE ASSESSEE BEING IDENTICAL TO THOSE C ONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS W ORKS LTD. (SUPRA), THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE AFORESAID CASE WOULD BE DIRECTLY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. AFTER THOROUGHLY ANALYZING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD (SUPRA) WHEREIN THE RESOLUT ION OF THE ANDHRA PRADESH HIGH COURT WAS DISCUSSED AND THE RESOLUTION S OF THE GOVERNMENT OF MAHARASHTRA RELIED UPON BY THE ASSESSEE IN SUPPO RT OF ITS CASE, THE COMMISSIONER OF INCOME-TAX (APPEALS) OBSERVED THAT FROM THE DECISION OF THE HONBLE SUPREME COURT CITED (SUPRA), IT WAS ABS OLUTELY CLEAR THAT IN CASE WHERE NO SUBSIDY WAS GIVEN UNTIL THE TIME PRODUCTIO N WAS ACTUALLY COMMENCED, IT HAS TO BE INTERPRETED TO MEAN THAT SU CH SUBSIDY WAS GIVEN AS HELP NOT FOR SETTING UP OF THE INDUSTRY, BUT AS ASS ISTANCE FOR THE PURPOSE OF THE TRADE. HE, THEREFORE, HELD THAT SUCH SUBSIDIES WOULD BEAR THE CHARACTER OF REVENUE RECEIPT AND ARE CHARGEABLE TO TAX. THE COMM ISSIONER OF INCOME-TAX (APPEALS) ACCORDINGLY AFFIRMED THE DECISION OF THE ASSESSING OFFICER. ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 6 AGGRIEVED WITH THE ORDER OF THE COMMISSIONER OF INC OME-TAX (APPEALS), THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. BEFORE US, THE LEARNED COUNSEL FOR THE APPELLANT HAS VEHEMENTLY SUBMITTED THAT THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THE CLAIM OF THE ASSESSEE IN ITS PROPER PERSPECTIVE. ACCORDING TO HI M, THE AUTHORITIES BELOW HAVE ERRED IN LAW AS WELL AS ON FACTS IN REJECTING THE CLAIM OF THE ASSESSEE THAT THE AMOUNT RECEIVED ON TRANSFER OF SALES-TAX E LIGIBILITY OF RS 63,74,291/- IS NOT LIABLE FOR TAXATION, BEING RECEIPTS OF CAPIT AL NATURE. IT HAS BEEN EXPLAINED THAT THE AMOUNT HAS BEEN RECEIVED IN TERM S OF A SCHEME FORMULATED BY THE STATE GOVERNMENT FOR THE PURPOSES OF PROMOTING WIND ENERGY GENERATION AT SELECTED SITES. IT HAS BEEN PO INTED OUT WITH REFERENCE TO THE RELEVANT RESOLUTIONS OF THE STATE GOVERNMENT OF MAHARASHTRA THAT THE AMOUNTS RECEIVED WERE UNDER A SALES-TAX INCENTIVE S CHEME WITH THE OBJECT OF PROMOTING THE WIND ENERGY GENERATION. IT WAS EXPLAI NED THAT THE ASSESSEE HAD SET UP WIND MILLS IN THE STATE OF MAHARASHTRA F OR GENERATION OF WIND POWER AND THE GOVERNMENT OF MAHARASHTRA HAD OFFERED BENEFITS AGAINST THE INVESTMENTS IN PLANT AND MACHINERY, NEW BUILDING ET C. IN THE FORM OF SALES-TAX BENEFIT IT WAS CONTENDED THAT THE PURPOSE OF THE SC HEME WAS TO PROMOTE INVESTMENT IN THE GENERATION OF WIND POWER AND, THE REFORE, THE SALES-TAX BENEFIT AVAILED BY THE ASSESSEE WAS TO BE CONSIDERE D AS A CAPITAL RECEIPT AND IN SUPPORT, RELIANCE HAS BEEN PLACED ON THE FOL LOWING DECISIONS: I. DCIT V. RELIANCE INDUSTRIES LTD. 88 ITD 273 (MUM .SB) II. CIT V RELIANCE INDUSTRIES LTD. ITA NO 1299 OF 2008 DATED 15.4.2009 OF THE HONBLE BOMBAY HIGH COURT, III. HALKAR BROTHERS (ITA NO 1342 & 1343/PN/06 FOR ASSESSMENT YEAR 2003-04 AND 2004-05 DATED 30.6.2009, IV. ITO V SANTOSH LAXMI BINNY MODERN RICE MILL 1 SO T 137 (HYD) V. SASISRI EXTRACTIONS LTD V ACIT 119 TTJ 976 (VISA KHA) VI. CIT V PONNI SUGARS & CHEMICALS LTD. 306 ITR 392 (SC) VII. SAHNEY STEEL & PRESS WORKS LTD. V CIT 228 ITR 253 (SC) 6. FACTUALLY SPEAKING, IT HAS BEEN ARGUED WITH REFE RENCE TO THE RESOLUTIONS OF THE STATE GOVERNMENT THAT FOR THE IM PUGNED RECEIPT, THE DOMINANT PURPOSE WAS NOT RUNNING/OPERATION OF THE C ONCERNED WIND MILLS AS ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 7 CONCLUDED BY THE LOWER AUTHORITIES. ACCORDING TO TH E LEARNED COUNSEL, THE AFORESAID PERCEPTION OF THE REVENUE IS BASED ON INC ORRECT UNDERSTANDING OF THE NATURE AND DOMINANT PURPOSE OF THE SALES-TAX SU BSIDY. THE LEARNED COUNSEL SUBMITTED THAT THE PURPOSE OF THE SCHEME WA S TO PROMOTE GENERATION OF ENERGY, THE BENEFIT BEING LINKED WITH THE QUANTUM OF QUALIFYING INVESTMENT MADE IN THE WIND POWER PROJECT THUS BRIN GING OUT THE DOMINANT OBJECT OF THE SCHEME AS BEING TO PROMOTE THE GENERA TION OF ENERGY THROUGH NON-CONVENTIONAL SOURCES. CONTESTING THE ARGUMENT O F THE LOWER AUTHORITIES THAT REQUIREMENT OF ACHIEVING A MINIMUM 12% PLANT L OAD FACTOR SO AS TO AVAIL OF THE SALES-TAX BENEFIT AND THEREFORE THE SUBSIDY WAS REVENUE IN NATURE, THE LEARNED COUNSEL SUBMITTED THAT THE TIMING OF THE SU BSIDY OR THE SOURCE OF THE SUBSIDY ARE NOT THE RELEVANT CRITERIA TO EXAMINE IT S NATURE. IN THIS REGARD, RELIANCE WAS PLACED ON THE OBSERVATIONS OF THE SPEC IAL BENCH IN THE CASE OF RELIANCE INDUSTRIES LTD. (SUPRA) WHICH DECISION HAS SINCE BEEN APPROVED BY THE HONBLE BOMBAY HIGH COURT VIDE ORDER DATED 15.4 .2009 (SUPRA). IN SUM AND SUBSTANCE, THE CLAIM OF THE ASSESSEE IS THAT TH E IMPUGNED RECEIPT IS A CAPITAL RECEIPT NOT CHARGEABLE TO TAX, BECAUSE THE OBJECT OF THE SCHEME OF THE STATE GOVERNMENT WAS TO PROMOTE GENERATION OF E NERGY THROUGH NON- CONVENTIONAL SOURCES TO SUPPLEMENT THE EVER INCREAS ING DEMAND OF ELECTRICITY IN THE STATE IMPLYING THAT THE INCENTIVE WAS TO SE T UP NEW WIND MILL PROJECTS AND NOT TO MERELY SUPPORT THE PROFITABILITY OF THE MANUFACTURING/GENERATING ACTIVITIES OF THE WIND MILLS SET UP BY THE ASSESSEE . 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE, APPEARING FOR THE REVENUE HAS ASSAILED THE STAND OF THE APPELLANT BY REFERRING TO THE DISCUSSION MADE BY THE LOWER AUTHO RITIES IN THEIR RESPECTIVE ORDERS. IT HAS BEEN POINTED OUT THAT THE CONDITION S ATTACHED WITH THE SALES- TAX INCENTIVES AVAILED BY THE ASSESSEE CLEARLY SHOW THAT THE DOMINANT PURPOSE OF GRANTING SUCH INCENTIVES WAS NOT ONLY TH E OPERATION OF THE WIND MILLS BUT SUCH OPERATIONS WERE REQUIRED TO BE OPERA TED AT DESIRED LEVELS OF EFFICIENCY. IN THIS CONNECTION, IT WAS POINTED OUT THAT ON ACHIEVING A PLANT LOAD ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 8 FACTOR OF 12% ONLY, 50% OF THE TOTAL INCENTIVE WAS AVAILABLE AND IT WAS ONLY ON ACHIEVING THE PLANT LOAD FACTOR OF 17%, FULL SAL ES-TAX INCENTIVE WAS AVAILABLE. IT WAS THUS POINTED OUT THAT THE SALES-T AX INCENTIVE WAS INDEED RELATED TO THE OPERATIONAL EFFICIENCY OF THE WIND M ILLS AND NOT FOR SETTING UP OF WIND MILL PROJECT ALONE. IT WAS ALSO POINTED OUT W ITH REFERENCE TO THE SCHEME OF THE STATE GOVERNMENT THAT THE INCENTIVES WERE TO PROMOTE GENERATION OF POWER AND NOT MERELY TO SET UP WIND MILL PROJECTS. IT WAS ALSO ARGUED THAT MERELY BECAUSE THE QUANTUM OF SALES-TAX BENEFIT WAS LINKED TO THE INVESTMENTS MADE IN PLANT AND MACHINERY, NEW BUILDI NG, LAND, DEVELOPMENT ETC. IT DOES NOT PROVE THAT THE SALES-TAX BENEFITS WAS CAPITAL IN NATURE. IT WAS POINTED OUT THAT THE SALES-TAX BENEFIT WAS AVAILABL E ONLY IN RELATION TO THE RUNNING OF THE PROJECT AND NOT LINKED TO MERELY SET TING UP OF THE PROJECT. ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIV E THE LOWER AUTHORITIES MADE NO MISTAKE IN HOLDING THAT THE SALES-TAX INCEN TIVE RECEIVED BY THE ASSESSEE IS OF REVENUE NATURE FOLLOWING THE RATIO O F THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEEL ( SUPRA). ANOTHER ARGUMENT OF THE ASSESSING OFFICER WHICH HAS BEEN RE FERRED BY THE LD DR IS THAT THE LIABILITY TOWARDS STATUTORY DUES LIKE SALE S-TAX HAVE A DIRECT BEARING ON THE PROFITS OF AN ENTITY FOR A PARTICULAR YEAR AND IF THE ASSESSEE GETS A BENEFIT WHICH REDUCES THE CHARGE OF THE SALES-TAX, SUCH BEN EFIT IS ON REVENUE ACCOUNT SINCE IT HAS A DIRECT IMPACT IN INCREASING THE REVENUE EARNINGS OF THE ASSESSEE FOR A PARTICULAR YEAR. FOR THIS REASON ALS O, IT IS CONTENDED THAT THE IMPUGNED RECEIPT IS LIABLE TO BE TAXED AS A REVENUE RECEIPT AND CANNOT BE TREATED AS CAPITAL IN NATURE SO AS TO BE OUTSIDE TH E AMBIT OF TAXATION. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. IN TERMS OF THE POLICY ON WIND POWER GENERATION FORMULATED BY THE G OVERNMENT OF MAHARASHTRA, VIDE RESOLUTIONS DATED 12.3.1998 (SUPR A), 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 RASIKLAL M. DHARIWAL (HU F),PUNE 9 TAXATION. ON THE CONTRARY, AS PER THE REVENUE SUCH AMOUNT IS A REVENUE RECEIPT CHARGEABLE TO TAX. 9. BEFORE WE TOUCH UPON THE DIFFERING STANDS OF THE ASSESSEE AND REVENUE ON THE ISSUE, IT WOULD BE APPROPRIATE TO CU LL 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. MANUFACTURE AND SALE OF MANICKCHAND ZARDA, PAN MASALA, CONSTRUCTION ACTIVITIES, MANUFAC TURING OF TILES ETC. INCLUDING GENERATION AND SALE OF POWER. IN THE COUR SE OF ITS ACTIVITIES, THE ASSESSEE COMPANY SET UP WIND MILLS IN THE STATE OF MAHARASHTRA FOR GENERATION OF WIND POWER. THE GOVERNMENT OF MAHARAS HTRA IN TERMS OF ITS POLICY ON WIND POWER GENERATION GRANTED VARIOUS BEN EFITS, INCLUDING SALES-TAX BENEFIT. IN TERMS OF THE PROCEDURE FOR AVAILING SA LES-TAX BENEFITS ON NON- CONVENTIONAL ENERGY GENERATING PROJECTS, SUCH AS WI ND MILLS, ASSESSEE WAS ALSO ENTITLED TO THE FACILITY OF TRANSFERRING THE S ALES-TAX BENEFIT TO THE THIRD PARTY. THE ASSESSEE AFTER OBTAINING THE REQUISITE P ERMISSION FROM THE STATE GOVERNMENT TRANSFERRED THE SALES-TAX BENEFIT ENTITL EMENTS TO A THIRD PARTY AND THE CONSIDERATION THEREOF AMOUNTING TO RS 63,74,291 /- WAS CLAIMED AS A CAPITAL RECEIPT. AT THIS STAGE, IT WOULD BE APPROPR IATE TO BRIEFLY TOUCH UPON THE RESOLUTION OF THE STATE GOVERNMENT DATED 12.3.1998 (SUPRA), THE RELEVANT PORTION OF WHICH IS REPRODUCED AS UNDER: PREAMBLE THE STATE GOVERNMENT HAS A POLICY TO PROMOTE GENERA TION OF ENERGY THROUGH NON- CONVENTIONAL SOURCES TO SUPPLEMENT THE EVER INCREAS ING DEMAND OF ELECTRICITY IN THE STATE. IT WAS FOUND AFTER A SURVEY THAT THERE IS AN IMMENSE POTENTIAL FOR GENERATION OF WIND POWER IN THE STATE. SURVEYS CONDUCTED BY ME DA IN ASSOCIATION WITH MNES, NEW DELHI AND IITM, BANGALORE INDICATE THAT THE POT ENTIAL IS ABOUT 300 TO 400 MW. EIGHT DIFFERENT SITES HAVE BEEN SELECTED FOR THIS P URPOSE AND FURTHER SURVEY IS BEING CARRIED OUT. THE STATE GOVERNMENT HAD ENUNCIATED ITS POLICY ON G ENERATION THROUGH NON- CONVENTIONAL SOURCES IN JANUARY, 1996. THIS POLICY HOWEVER COULD NOT ATTRACT THE PROMOTERS. DURING THE INTERVENING PERIOD, THE GOVER NMENT 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 E NERGY GENERATION WERE UNDER ACTIVE CONSIDERATION OF THE STATE GOVERNMENT. RESOLUTION : IN PARTIAL MODIFICATION OF ITS EXISTING POLICY TO P ROMOTE WIND ENERGY GENERATION, THE STATE GOVERNMENT HAS TAKEN FOLLOWING DECISIONS TO P ROMOTE WIND ENERGY GENERATION IN THE STATE:- (1) TARIFF : ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 10 MAHARASHTRA STATE ELECTRICITY BOARD SHALL PURCHASE ENERGY GENERATED FROM WIND POWER PLANTS AT A RATE OF 225 PAISE PER UNIT. THE F INANCIAL 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 F OR THE FIRST 10 YEARS OF THE PROJECT LIFE. THE LIABILITY OF THE PROJECT REDUCES AFTER RE PAYMENT OF DEBT. DUE TO THIS, FOR THE NEXT 3 YEARS THERE WILL BE NO ESCALATION AND THE RA TE WILL BE KEPT CONSTANT. THEREAFTER, FOR THE BALANCE LIFE OF THE PROJECT (7 YEARS), AN ESCALATION OF 5% PER ANNUM WILL BE AVAILABLE TO THE DEVELOPERS. (2) BANKING IN LINE WITH THE CENTRAL GOVERNMENT POLICY, WIND PO WER DEVELOPERS WOULD BE GIVEN PERMISSION TO BANK THE ENERGY GENERATED FROM WIND P OWER 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 YE AR. THE BALANCE OF ENERGY ACCOUNT WILL BE SETTLED BETWEEN THE MSEB AND PROMOT ERS 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 EN ERGY TRANSMISSION FOR THE FIRST THREE YEARS. THEREAFTER, TRANSMISSION LOSSES WILL B E LEVIABLE AT THE RATE OF 1%. (4) THIRD PARTY SALE : PROMOTERS WILL BE PERMITTED TO SELL EXPORTABLE POWE R TO ANY TWO (INDUSTRIAL OR COMMERCIAL) CONSUMERS PER MW. WHEELING CHARGES FOR THIS WILL BE LEVIABLE AT THE RATE OF 2%. (5) EVACUATION ARRANGEMENT: MSEB SHALL INITIALLY BEAR THE EXPENDITURE FOR ERECT ION 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. D EVELOPERS SHALL BEAR THE COST OF TRANSMISSION LINES FROM THE SUB-STATION TO THE PROJ ECT AND ALL OTHER RELATED EQUIPMENT. (6) APPROACH ROADS : MEDA SHALL BEAR THE COST OF CONSTRUCTION OF ROADS T O THE PROJECT SITES. MEDA WOULD BE ENTITLE TO GOVERNMENT GRANTS FOR THIS EXPENDITUR E. (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 INVEST MENT (LIMITED TO RS 20 LAKHS) TO THE PROMOTERS SUBJECT TO A CONDITION THAT WIND POWE R PLANT HAS SUCCESSFULLY OPERATED WITH A MINIMUM 12% PLANT LOAD FACTOR FOR A T LEAST ONE YEAR. (8) ENTRY TAX/OCTROI REFUND : ENTRY TAX/OCTROI AS PAID Y PROMOTERS WHILE MAKING C APITAL EXPENDITURE WILL BE REIMBURSED BY MEDA. (9) SALES TAX BENEFITS : INVESTMENTS IN PLANT AND MACHINERY, NEW BUILDING, L AND DEVELOPMENT, TECHNICAL DEVELOPMENT AND DESIGN IN A WIND POWER PROJECT WOUL D BE CONSIDERED AS QUALIFYING INVESTMENT. PROMOTER SHALL BE ENTITLED 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 AVAILAB LE TO ANY OTHER COMPANY ASSOCIATED WITH THE PROMOTERS. DETAILED INSTRUCTIONS ABOUT THE MODUS OPERANDI ABOU T SALES TAX BENEFITS WILL BE SEPARATELY ISSUED BY THE FINANCE DEPARTMENT. BY ORDER AND IN THE NAME OF THE GOVERNOR OF MAHARAS HTRA. SD/-(L.V.NILESH) DEPUTY SECRETARY TO GOVERNMENT 10. A PERUSAL OF THE PREAMBLE TO SUCH RESOLUTION RE VEALS THAT THE STATE GOVERNMENT HAS A POLICY TO PROMOTE GENERATION OF EN ERGY THROUGH NON CONVENTIONAL SOURCES TO SUPPLEMENT THE EVER INCREAS ING DEMAND OF ELECTRICITY ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 11 IN THE STATE OF MAHARASHTRA. IT WAS FOUND THAT THER E IS IMMENSE POTENTIAL FOR GENERATION OF WIND POWER IN THE STATE AND DIFFERENT SITES WERE SELECTED BY THE GOVERNMENT FOR THIS PURPOSE. IT APPEARS THAT THE ST ATE GOVERNMENT HAD ENUNCIATED ITS POLICY OF GENERATION THROUGH NON CON VENTIONAL SOURCES IN JANUARY 1996, WHICH WAS NOT FOUND ATTRACTIVE BY THE PROMOTERS. IN TERMS OF THE SAID RESOLUTION THE GOVERNMENT MODIFIED ITS EXI STING POLICY TO PROMOTE WIND ENERGY GENERATION BY ANNOUNCING CERTAIN CONCES SIONS AS INCENTIVES ENUMERATED THEREIN. SUCH INCENTIVES RELATED TO TAR IFF STRUCTURING, BANKING OF POWER GENERATED BY WIND MILLS WITH MSEB, BEARING OF TRANSMISSION LOSSES BY MSEB, PERMITTING PROMOTERS TO SELL POWER TO THIRD P ARTIES, BEARING INITIAL EXPENDITURE FOR ERECTION OF HIGH TENSION AND SUB-ST ATION AND TRANSMISSION INFRASTRUCTURE, BEARING 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 INVESTMENT (LIMITED TO RS 20 LAKHS), AND SALES-TAX BENEFITS. SINCE THE PRIMARY DISPUTE BEFORE US IS IN RELATION TO THE SALES-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 INTE NDED THAT INVESTMENTS IN PLANT AND MACHINERY, NEW BUILDING, LAND DEVELOPMENT , TECHNICAL DEVELOPMENT AND DESIGN IN A WIND POWER PROJECT WOULD CONSTITUTE QUALIFYING INVESTMENT AND A PROMOTER SHALL BE ENTITLED TO SALES-TAX BENEF ITS UPTO THE AMOUNT OF SUCH QUALIFYING INVESTMENT. SUCH SALES-TAX BENEFIT WAS T O BE GIVEN IN SIX EQUAL INSTALMENTS OVER A PERIOD OF SIX YEARS, I.E. 1/6 TH OF THE QUALIFYING INVESTMENT AMOUNT EVERY YEAR ON THE CONDITION THAT THE PLANT SUCCESSFULLY OPERATES EVERY YEAR WITH A MINIMUM OF 12% PLANT LOAD FACTOR. IN TERMS OF SUCH BROAD FRAMEWORK OF THE SALES-TAX BENEFIT, THE STATE GOVER NMENT ISSUED SEPARATE DETAILED INSTRUCTIONS ABOUT THE MODUS OPERANDI TO A VAIL SUCH BENEFITS, BY WAY OF GOVERNMENT RESOLUTION DATED 1.10.1999 (SUPRA)S. THE RELEVANT PORTION OF THE SAID 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 POLICY VIDE ABOVE MENTIO NED GOVERNMENT RESOLUTION. ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 12 ACCORDING TO THE SAID POLICY SALES TAX BENEFIT IS A VAILABLE, EQUIVALENT TO THE QUALIFYING INVESTMENT ON WIND ENERGY 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/TAX ATION 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 INDUSTRIALIST S HAVE EXPRESSED CERTAIN DIFFICULTIES WHICH HAVE BEEN BROUGHT TO THE NOTICE OF THE GOVERN MENT. TAKING INTO CONSIDERATION THE REQUESTS OF THE WIND POWER PROMOTERS AS WELL AS THEIR DIFFICULTIES, THE PROPOSAL FOR MODIFIED DETAILED PROCEDURE FOR AVAILING SALES TAX BENEFIT WAS UNDER CONSIDERATION OF THE GOVERNMENT. GOVERNMENT RESOLUTION : CONSIDERING THE DIFFICULTIES OF THE INDUSTRIALISTS AND WITH A VIEW TO MAKE AVAILABLE SALES TAX BENEFIT, GOVERNMENT HAS DECIDED TO SIMPLI FY THE PROCEDURE AS FOLLOWS: 1. THE SALES TAX BENEFIT WILL BE AVAILABLE ON ELECT RICITY GENERATING UNITS IN RELATION TO ACHIEVEMENT OF PLANT LOAD FACTOR AS FOLLOWS: S.NO. PLANT LOAD FACTOR SALES TAX BENEFIT EQUIVALENT OF 1//6 TH OF QUALIFYING INVESTMENT WITHOUT BANK GUARANTEE 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 MON THS AFTER THE DATE OF PUBLICATION OF THE GOVERNMENT RESOLUTION. SALES TAX BENEFIT WIL L BE AVAILABLE FOR CONTINUOUS 6 YEARS AFTER OBTAINING THE ENTITLEMENT CERTIFICATE FROM THE SALES TAX DEPARTMENT. 2. WHILE DETERMINING THE PLANT LOAD FACTOR, THE AVA ILABILITY OF THE TRANSMISSION LINES DURING THE MONTHS FROM MAY TO SEPTEMBER OF TH AT FINANCIAL YEAR AVERAGE AVAILABILITY OF TRANSMISSION LINES SHALL BE TAKEN I NTO CONSIDERATION AND THIS PERCENTAGE WILL BE INCREASED PROPORTIONATELY TO 100 %, AND THEN THE PLANT LOAD FACTOR WILL BE DETERMINED. FOR EXAMPLE, IF TRANSMIS SION LINES AVAILABILITY IS 85%, THEN THAT YEARS AVERAGE PLANT LOAD FACTOR WILL BE INCREASED PROPORTIONATELY TO CORRESPOND TO 100% AVAILABILITY OF TRANSMISSION LIN ES AND THE SALES TAX BENEFIT WILL BE INCREASED PROPORTIONATELY. THE AVAILABILITY OF THE TRANSMISSION LINES DURING THE MONTHS FROM MAY 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 CERTIFICATE, FOR A PERIOD OF CONTINUO US 6 YEARS. AND FOR EVERY YEAR, SUCH BENEFIT WILL BE LIMITED TO 1/6 TH OF THE QUALIFYING INVESTMENT. HOWEVER, IN ANY ONE YEAR, PLANT LOAD FACTOR OF 12% IS NOT ACHIEVED THEN THAT YEARS SALES TAX BENEFIT WILL GET CANCELLED AND THAT UNIT WILL HAVE TO LOSE SALES TAX BENEFIT FOR THAT YEAR FOREVER. 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 PERIO D WILL BE COUNTED FOR CONTINUOUS 6 (SIX) YEARS. THE FINANCIAL YEAR PERIOD WILL BE FROM 1 ST APRIL TO 31 ST MARCH. 4. THE FACILITY OF TRANSFERRING THE SALES TAX BENEF IT TO THE THIRD PARTY THE PROMOTERS OF THE PROJECT, IF SELL ELECTRICITY T O THE THIRD PARTY, FOR SUCH THIRD PARTY, TRANSFERRING OF SALES TAX BENEFIT WILL BE PERMITTED . THE PROMOTERS OF THE PROJECT CAN CHOOSE THE THIRD PARTY FOR THIS FACILITY AND IT WIL L BE APPLICABLE FOR THAT YEAR ONLY. HOWEVER, NO PERMISSION WILL BE GIVEN DURING THAT PE RIOD TO CHANGE THE NAME OF THE THIRD PARTY. THIRD PARTY UNITS CAN AVAIL THE BENEFI T UPTO THE AMOUNT MENTIONED IN PARAGRAPH 1. FOR THIS, ELIGIBILITY CERTIFICATE WI LL BE GIVEN BY DIRECTOR, MAHARASHTRA ENERGY DEVELOPMENT AGENCY. PROMOTERS OF THE PROJECT WILL BE ALLOWED TO CHOOSE, A THE MOST TWO NAMES OF THE THIRD PARTY UNITS TO GET THE SALES TAX BENEFIT. THE ENTITLEMENT CERTIFICATE FOR UNITS OF THIRD PARTY WILL E CERTIFIED BY COMMISSIONER OF SALES TAX. AMOUNT OF SALES TAX BENEFIT IS RELATED T O THE WIND ENERGY GENERATION 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 THEY HAVE SOLD THE ELECTRICITY. AMOUNT OF SALES TAX ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 13 BENEFIT IS RELATED TO THE QUALIFYING INVESTMENT AND PLANT LOAD FACTOR. THE ELECTRICITY SOLD TO THE UNIT/UNITS OF THIRD PARTY CAN AVAIL SAL ES TAX BENEFIT LIMITED ONLY TO THE QUALIFYING INVESTMENT AND PLANT LOAD FACTOR. THE EL ECTRICITY SOLD TO THE UNIT/UNITS OF THIRD PARTY CAN AVAIL SALES TAX BENEFIT LIMITED ONL Y TO THE QUALIFYING INVESTMENT AS MENTIONED IN PARAGRAPH 1. 5. AFTER SATISFYING THE CONDITION OF AVERAGE PLANT LOAD FACTOR, SALES TAX BENEFIT CAN BE AVAILED BY THE ELIGIBLE WIND ENERGY GENERATION U NIT IN THE IMMEDIATE FOLLOWING YEAR. HOWEVER, IF SOME PROMOTERS DESIRE TO AVAIL TH IS BENEFIT IN THE CURRENT FINANCIAL YEAR IMMEDIATELY ON COMMISSIONING OF WIND ENERGY PROJECT, THEY CAN AVAIL THE BENEFIT ON THE FOLLOWING CONDITIONS: A) BANK GUARANTEE EQUIVALENT TO QUALIFYING INVESTME NT WILL HAVE TO BE GIVEN EVERY YEAR FOR AVAILING SALES TAX BENEFIT OF FOLLOWING FI NANCIAL YEAR. 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 MAHARASHT RA ENERGY DEVELOPMENT AGENCY. 6. FACILITY TO BULK LICENSEES IF THE BULK LICENSEE HAS INSTALLED WIND ENERGY GENE RATION UNIT, PERMISSION WILL BE GRANTED TO AVAIL BY ADJUSTMENT IN THE TAX ON SALE O F ELECTRICITY, SALES TAX BENEFIT DETERMINED ON QUALIFYING INVESTMENT IN THE PROJECT. FOR THAT PURPOSE ENTITLEMENT CERTIFICATE WILL BE GIVEN BY ENERGY DEPARTMENT OF GOVERNMENT OF MAHARASHTRA AND ELIGIBILITY CERTIFICATE WILL BE ISSUED BY MAHARAS HTRA 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 T HE DIRECTOR OF MAHARASHTRA ENERGY DEVELOPMENT AGENCY AND COMMISSIO NER OF SALES TAX RESERVE THE RIGHT TO CANCEL THE ENTITLEMENT CERTIF ICATE AND THE ELIGIBILITY CERTIFICATE. 8. SALES TAX BENEFIT CAN BE AVAILED ON THE FINISHED PRODUCT AS WELL AS ON THE RAW MATERIALS USED AND ITS PROCEDURE SHALL BE AS PER PA CKAGE SCHEME OF INCENTIVE (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 SU CH 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 CERTIFICATE WILL BE ISSUED BY MA HARASHTRA ENERGY DEVELOPMENT AGENCY ONLY AFTER SUBMISSION OF UNDERTAKING FROM TH E CONCERNED MANUFACTURER AND PROMOTER THAT THE MACHINERY USED FOR WIND GENERATIO N PROJECT IS NEW. 11. THERE IS NO RESTRICTION FOR EXPANSION OF PROJEC TS. HOWEVER, CAPACITY OF THE WIND ENERGY GENERATOR SHOULD 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 DIE SEL HYBRID, SELF STARTING GENERATOR (HYBRID STAND ALONE SYSTEM) AND AS PER MA HARASHTRA GOVERNMENTS DECLARED POLICY PUBLISHED IN THIS CONNECTION. BY THE ORDER ANDS ON BEHALF OF 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 TH E PROMOTERS. IT IS CLEAR THAT THE SALES-TAX BENEFITS CAN BE AVAILED BY ALL PROJEC TS WHICH ARE COMMISSIONED AS WELL AS CONNECTED TO THE TRANSMISSION LINES FROM TWO MONTHS AFTER THE DATE ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 14 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 AL SO ENTAILS THAT THE SALES- TAX BENEFIT WILL BE AVAILABLE FOR THE PROMOTERS FRO M THE DATE OF OBTAINING OF ENTITLEMENT CERTIFICATE FOR A PERIOD OF CONTINUOU S SIX YEARS, AND FOR EVERY YEAR SUCH BENEFIT WILL BE LIMITED TO 1/6 TH OF THE QUALIFYING INVESTMENT. IT 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 AN D THAT SUCH UNIT WOULD LOOSE SALES-TAX BENEFIT OF THAT YEAR FOR EVER. ANOTHER PE RTINENT PROCEDURE OUTLINED IN THE RESOLUTION PERMITTED THE FACILITY OF TRANSFERRI NG THE SALES-TAX BENEFIT TO THIRD PARTIES. IN TERMS OF SUCH FACILITY, THE PROM OTERS OF THE PROJECT WERE PERMITTED TO TRANSFER SALES-TAX BENEFIT TO THIRD PA RTY, IF IT SOLD ELECTRICITY TO SUCH THIRD PARTY. SUCH TRANSFER WAS SUBJECT TO ISS UANCE OF THE ENTITLEMENT CERTIFICATE TO BE ISSUED BY THE COMMISSIONER OF SAL ES-TAX. THE SAID RESOLUTION ALSO PROVIDED THAT THE SALES-TAX BENEFIT CAN BE AVAILED ON THE FINISHED PRODUCT AS WELL AS ON THE RAW MATERIALS US ED. IT IS FURTHER NOTIFIED BY THE STATE GOVERNMENT THAT THE PROMOTER WILL NOT BE ELIGIBLE FOR SALES-TAX BENEFIT FOR USE OF SECOND HAND MACHINERY AND ON OLD WIND ELECTRIC GENERATOR. THE POLICY FURTHER PROVIDED THAT THERE WAS NO RESTR ICTION FOR EXPANSION OF PROJECT. HOWEVER, THE MINIMUM CAPACITY OF WIND MILL GENERATION WAS STATED TO BE 200 KW. IN TERMS OF THE AFORESAID SCHEME, THE AS SESSEE OBTAINED THE ENTITLEMENT CERTIFICATE AND TRANSFERRED THE SALES -TAX BENEFIT TO A THIRD PARTY. THE ASSESSEE AVAILED THE SALES-TAX BENEFIT FOR ITS WIND POWER PROJECT INSTALLED AT VILLAGE KUSHI (VANKUSAWADE) TAL. SATARA, DIST. S ATARA AND SUCH BENEFIT AMOUNTING TO RS 63,74,291/- PERTAINING TO THE YEAR UNDER CONSIDERATION HAS BEEN CLAIMED AS A CAPITAL RECEIPT. FACTUALLY SPEAKI NG, ON THE ASPECT OF THE ASSESSEE HAVING RECEIVED THE SAID AMOUNT IN TERMS O F THE SCHEME OF THE STATE GOVERNMENT AS SALES-TAX BENEFIT UNDER THE AFO RESAID GOVERNMENT RESOLUTIONS, IS NOT IN DISPUTE. ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 15 12. IN ORDER TO EXAMINE THE TAXABILITY OF SUCH AMOU NT, IT WOULD BE APPROPRIATE TO REFER TO THE PROPOSITIONS BASED ON T HE CASE LAWS REFERRED TO US. IN THE CASE OF SAHNEY STEELS (SUPRA), THE QUESTION BEFORE THE HONBLE SUPREME COURT WAS WHETHER THE SUBSIDY RECEIVED BY T HE ASSESSEE THEREIN FROM ANDHRA PRADESH GOVERNMENT WAS TAXABLE AS A REV ENUE RECEIPT OR NOT. THE ANDHRA PRADESH GOVERNMENT HAD NOTIFIED CERTAIN FACILITIES AND INCENTIVES FOR ALL THE NEW INDUSTRIAL UNDERTAKINGS COMMENCING PRODUCTION ON OR AFTER 1.9.1969 WITH INVESTMENT CAPITAL (EXCLUDIN G WORKING CAPITAL) NOT EXCEEDING RS 5 CRORES. THE INCENTIVES WERE TO BE AL LOWED FOR A PERIOD OF FIVE 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 CAPACITIES, PROVIDED SUCH EXPANSION WAS LO CATED IN A CITY OR TOWN OR PANCHAYAT AREA OTHER THAN THAT IN WHICH THE EXISTIN G UNIT WAS LOCATED. THE HONBLE SUPREME COURT NOTICED THAT THE SALIENT FEAT URE OF THE SCHEME FORMULATED BY THE ANDHRA PRADESH GOVERNMENT WAS THA T THE INCENTIVES WERE NOT AVAILABLE UNLESS AND UNTIL PRODUCTION HAD COMME NCED AND THAT THE SAME WAS LIMITED TO A PERIOD OF 5 YEARS FROM THE DATE OF COMMENCEMENT OF PRODUCTION. THE HONBLE SUPREME COURT NOTED THAT AL L 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 WAS INFERRED THAT THE SUBSIDIES WERE OPERATIONAL SUBSIDIES, INASMUCH AS THEY WERE GIVEN TO ENCOURAGE SETTING UP OF INDUSTRIES IN THE STATE OF ANDHRA PRADESH BY MAK ING THE BUSINESS OF PRODUCTION AND SALE OF GOODS IN THE STATE MORE PROF ITABLE. THE HONBLE SUPREME COURT OBSERVED THAT THE CHARACTER OF SUBSID Y WHETHER REVENUE OR CAPITAL WILL HAVE TO BE DETERMINED, HAVING REGARD T O THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. THE FOLLOWING OBSERVATIONS ARE RE LEVANT: 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 (HU F),PUNE 16 TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. IF I T IS GIVEN Y WAY OF ASSISTANCE TO THE ASSESSEE IN CARRYING ON OF HIS TRADE OR BUSINESS, I T HAS TO E TREATED AS TRADING RECEIPT. THE SOURCE OF THE FUND IS QUITE IMMATERIAL . FOR EXAMPLE, IF THE SCHEME WAS THAT THE ASSESSEE WI LL BE GIVEN REFUND OF SALES TAX ON PURCHASE OF MACHINERY AS WELL AS ON RA W MATERIALS TO ENABLE THE ASSESSEE TO ACQUIRE NEW PLANT AND MACHINERY FOR FUR THER EXPANSION OF ITS MANUFACTURING CAPACITY IN A BACKWARD AREA, THE ENTI RE SUBSIDY MUST BE HELD TO BE A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. IT WI LL NOT BE OPEN TO THE REVENUE TO CONTEND THAT THE REFUND OF SALES TAX PAID ON RAW MA TERIALS OR FINISHED PRODUCTS MUST BE TREATED AS REVENUE RECEIPT IN THE HANDS OF THE A SSESSEE. IN BOTH THE CASES, THE GOVERNMENT IS PAYING OUT OF PUBLIC FUNDS TO THE ASS ESSEE FOR A DEFINITE PURPOSE. IF THE PURPOSE IS TO HELP THE ASSESSEE TO SET UP ITS B USINESS OR COMPLETE A PROJECT AS IN SEAHAM HARBOUR DOCK CO.S CASE (1931) 16 TC 333 (HL ), THE MONIES MUST E TREATED AS HAVING BEEN RECEIVED FOR A CAPITAL PURPO SE. BUT IF MONIES ARE GIVEN TO THE ASSESSEE FOR ASSISTING HIM IN CARRYING OUT THE BUSI NESS 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 EXISTENCE ANY NEW ASSET. THE S UBSIDIES WERE GRANTED YEAR AFTER YEAR ONLY AFTER SETTING UP OF THE NEW INDUSTRY 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 TE ST OF VISCOUNT SIMON IN THE 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 ACCORDI NGLY. 13. ANOTHER DECISION WHICH HAS BEEN REFERRED TO IS THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD. (SUPRA). IN THIS CASE ALSO, THE ISSUE RELATED TO TH E CHARACTER OF SUBSIDY RECEIVED BY SUGAR FACTORIES . THE HONBLE SUPREME C OURT REITERATED THE PARAMETERS APPLIED IN THE EARLIER JUDGMENT OF SAHNE Y STEEL (SUPRA). AS PER THE HONBLE SUPREME COURT, THE CHARACTER OF THE REC EIPT OF A SUBSIDY IN THE HANDS OF THE RECIPIENT HAS TO BE DETERMINED WITH RE GARD TO THE PURPOSE FOR WHICH THE SUBSIDY HAS BEEN GRANTED. THE FOLLOWING DISCUSSION IS IMPORTANT TO NOTICE: ON THE FACTS OF THAT CASE, IT WAS HELD THAT THE SU BSIDY GIVEN WAS TO MEET RECURRING EXPENSES. IT WAS NOT FOR ACQUIRING THE CAPITAL ASSE T. IT WAS NOT TO MEET PART OF THE COST. IT WAS NOT GRANTED FOR PRODUCTION OF OR BRING ING INTO EXISTENCE ANY NEW ASSET. THE SUBSIDIES IN THAT CASE WERE GRANTED YEAR AFTER YEAR ONLY 6 AFTER SETTING UP OF THE NEW INDUSTRY AND ONLY AFTER COMMENCEMENT OF PRODUCT ION AND, THEREFORE, SUCH A SUBSIDY COULD ONLY BE TREATED AS ASSISTANCE GIVEN F OR THE PURPOSE OF CARRYING ON THE BUSINESS OF THE ASSESSEE. CONSEQUENTLY THE CONTENTI ONS RAISED ON BEHALF OF THE ASSESSEE ON THE FACTS OF THAT CASE STOOD REJECTED A ND IT WAS HELD THAT THE SUBSIDY RECEIVED BY SAHNEY STEEL COULD NOT BE REGARDED AS A NYTHING BUT A REVENUE RECEIPT. ACCORDINGLY, THE MATTER WAS DECIDED AGAINST THE ASS ESSEE. THE IMPORTANCE OF THE JUDGMENT OF THIS COURT IN SAHNEY STEEL CASE LIES IN THE FACT THAT IT HAS DISCUSSED AND ANALYSED THE ENTIRE CASE LAW AND IT HAS LAID DOWN T HE BASIC TEST TO BE APPLIED IN JUDGING THE CHARACTER OF A SUBSIDY. THAT TEST IS TH AT THE CHARACTER OF THE RECEIPT IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RES PECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. IN OTHER WORDS, IN SUCH CASES , ONE HAS TO APPLY THE PURPOSE TEST. THE POINT OF TIME AT WHICH THE SUBSIDY IS PAI D IS NOT RELEVANT. THE SOURCE IS IMMATERIAL. THE FORM OF SUBSIDY IS IMMATERIAL. THE MAIN ELIGIBILITY CONDITION IN THE SCHEME WITH WHICH WE ARE CONCERNED IN THIS CASE IS THAT THE INCENTIVE MUST BE UTILIZED FOR REPAYMENT OF LOANS TAKEN BY THE ASSES SEE TO SET UP NEW UNITS OR 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 ASSE SSEE TO RUN THE BUSINESS MORE PROFITABLY THEN THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND, IF THE OBJECT OF THE ASSISTANCE UNDER THE SUBSIDY SCHEME WAS TO ENAB LE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT THEN THE RE CEIPT OF THE SUBSIDY WAS ON CAPITAL ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 17 ACCOUNT. THEREFORE, IT IS THE OBJECT FOR WHICH THE SUBSIDY/ASSISTANCE IS GIVEN WHICH DETERMINES THE NATURE 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 S TEEL AND PRESS WORKS LTD. THIS COURT FOUND THAT THE ASSESSEE WAS FREE TO USE THE MONEY IN ITS BUSINESS ENTIRELY AS IT LIKED. IT WAS NOT OBLIGED TO SPEND T HE MONEY FOR A PARTICULAR PURPOSE. IN THE CASE OF SEAHAM HARBOUR DOCK CO. THE ASSESSEE WA S OBLIGED TO SPEND THE MONEY FOR EXTENSION OF ITS DOCKS. THIS ASPECT IS VE RY IMPORTANT. IN THE PRESENT CASE ALSO, RECEIPT OF THE SUBSIDY WAS CAPITAL IN NATURE AS THE ASSESSEE WAS OBLIGED TO UTILIZE THE SUBSIDY ONLY FOR REPAYMENT OF TERM LOAN S UNDERTAKEN BY THE ASSESSEE FOR SETTING UP NEW UNITS/EXPANSION OF EXISTING BUSINESS . APPLYING THE ABOVE TESTS TO THE FACTS OF THE PRESE NT CASE AND KEEPING IN MIND THE OBJECT BEHIND THE PAYMENT OF THE INCENTIVE SUBSIDY, WE ARE SATISFIED THAT SUCH PAYMENT RECEIVED BY THE ASSESSEE UNDER THE SCH EME WAS NOT IN THE COURSE OF A TRADE BUT WAS OF CAPITAL NATURE. 14. ANOTHER DECISION RELIED UPON BY THE APPELLANT IS IN THE CASE OF RELIANCE INDUSTRIES LTD. (SUPRA). IN THIS CASE, THE FACTS WERE THAT THE PATALGANGA UNIT OF THE ASSESSEE WAS LOCATED IN A NO TIFIED BACKWARD AREA. THE SALES-TAX LIABILITY OF THE ASSESSEE WAS EXEMPTE D BY THE STATE GOVERNMENT AND UNDER THE SCHEME OF INCENTIVES, ASSE SSEE WAS NOT REQUIRED TO PAY ANY SALES-TAX TO THE GOVERNMENT. THE CONTENT ION OF THE ASSESSEE WAS THAT NON-PAYMENT OF SALES-TAX BE CONSIDERED AS A SU BSIDY BY THE GOVERNMENT, WHICH IS OF CAPITAL IN NATURE. THE SPEC IAL BENCH OF THE TRIBUNAL FOUND THAT THE INCENTIVES WERE PROVIDED FOR FOLLOWI NG FOUR OBJECTS, NAMELY, DEVELOPMENT OF BACKWARD REGIONS OF THE STATE OF MAH ARASHTRA; DISPERSAL OF INDUSTRIES; PROMOTION OF INDUSTRIES FOR EMPLOYMENT ORIENTED UNITS; AND, PROVIDING LOCAL EMPLOYMENT TO SC/ST. THE TRIBUNAL OBSERVED THAT IN ORDER TO DECIDE THE CHARACTER OF RECEIPT THE PURPOSE OF GRAN TING SUBSIDY WAS RELEVANT, WHILE THE MODE OF PAYMENT AND THE APPLICATION OF MO NEY FOR CAPITAL OR REVENUE PURPOSES WAS IRRELEVANT. THEREFORE, AS PER THE SPECIAL BENCH THE DECISIVE FACTOR WAS THE OBJECTS WITH WHICH THE INCE NTIVE WAS GIVEN AND, THEREFORE, SUCH SUBSIDY WAS HELD TO BE A CAPITAL RE CEIPT. THE SAID DECISION HAS ALSO BEEN FURTHER APPROVED BY THE HONBLE HIGH COURT VIDE ORDER DATED 15.4.2009 (SUPRA). THE HONBLE HIGH COURT APPLIED T HE PURPOSE TEST AND FOUND THAT THE OBJECT OF THE SUBSIDY BEING TO SET U P UNITS IN BACKWARD AREAS FOR GENERATION OF EMPLOYMENT, COULD CONSTRUE THE SU BSIDY AS A CAPITAL RECEIPT. ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 18 15. ON THE BASIS OF THE AFORESAID DECISIONS AN UNDI SPUTED PREMISE WHICH CAN BE DEDUCED IS THAT IN ORDER TO DETERMINE THE CH ARACTER OF THE IMPUGNED RECEIPT WHETHER CAPITAL OR REVENUE, THE SAME HAS TO BE DECIDED IN THE LIGHTS OF THE OBJECTS AND PURPOSE FOR WHICH THE SCH EME HAS BEEN FORMULATED BY THE STATE GOVERNMENT. IT IS QUITE CLEAR THAT THE POINT OF TIME AT WHICH THE SUBSIDY IS PAID OR THE FORM OF INCENTIVE GRANTED UN DER A SCHEME ARE IMMATERIAL CONSIDERATIONS. IN A CASE WHERE THE SUBS IDY/INCENTIVE UNDER A SCHEME IS GRANTED TO ENCOURAGE SETTING UP OF NEW IN DUSTRIES THE SAME IS LIABLE TO BE CHARACTERIZED AS A CAPITAL RECEIPT, WH ILE AN INCENTIVE/SUBSIDY GRANTED IN THE COURSE OF TRADE FOR THE PURPOSE OF C ARRYING ON THE BUSINESS OF THE ASSESSEE, THE SAME IS LIABLE TO BE REGARDED AS A REVENUE RECEIPT. 16. IN THIS BACKGROUND, WE MAY NOW REVERT BACK AND EXAMINE THE SCHEME UNDER WHICH THE ASSESSEE HAS AVAILED OF THE SALES-T AX BENEFIT. IN THE PRESENT CASE, AS NOTED EARLIER, THE STATE GOVERNMENT VIDE ITS RESOLUTION DATED 12.3.1998 MODIFIED ITS EXISTING POLICY FOR THE PURP OSES OF PROMOTING WIND ENERGY GENERATION IN THE STATE OF MAHARASHTRA. THIS POLICY HAS BEEN FORMULATED IN THE BACKGROUND OF THE FACT THAT THE E ARLIER POLICY OF THE STATE GOVERNMENT ON GENERATION THROUGH NON CONVENTIONAL S OURCES IN JANUARY, 1996 DID NOT ACHIEVE THE DESIRED RESULTS. IN THE SA ID POLICY, NINE DIFFERENT INCENTIVES HAVE BEEN LAID OUT, WHICH HAVE BEEN EXTR ACTED BY US IN EARLIER PART OF THIS ORDER. THE DISPUTE BEFORE US IS IN RELATION TO THE SALES-TAX BENEFITS. THE PREAMBLE OF THE POLICY ITSELF REFLECTS THE AREA WHICH IS SOUGHT TO BE ADDRESSED BY THE POLICY WHICH IS THE PROBLEMS BEIN G FACED BY PROMOTERS OF WIND ENERGY GENERATION. IT IS QUITE CLEAR THAT THE SALES-TAX BENEFIT IS NOT INTENDED TO BE GRANTED FOR CREATION OF OR BRINGING INTO EXISTENCE ANY NEW ASSET. IT IS ALSO CLEAR THAT THERE IS NO PRESCRIBED CRITERIA AS TO THE MANNER IN WHICH SUCH INCENTIVES ARE TO BE UTILIZED. THE CLAIM OF THE ASSESSEE IS THAT THE SALES-TAX BENEFIT IS GRANTED HAVING REGARD TO THE Q UALIFYING INVESTMENT, WHICH IS STATED TO BE TOWARDS INVESTMENTS IN PLANT AND MA CHINERY, NEW BUILDING, LAND DEVELOPMENT, TECHNICAL DEVELOPMENT AND DESIGN OF WIND PRODUCTS. ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 19 ACCORDING TO THE APPELLANT, THE INCENTIVE BEING LIN KED TO THE QUALIFYING INVESTMENT SHOWS THAT IT IS INTENDED AS A RECOUPMEN T OF THE FIXED COST ALREADY INCURRED BY THE ASSESSEE AND, THEREFORE, SU CH INCENTIVES ARE TO BE REGARDED AS CAPITAL IN NATURE. IN OUR CONSIDERED O PINION, SUCH PURPOSE, AS ARTICULATED ON BEHALF OF THE APPELLANT IS NOT EMERG ING FROM THE SCHEME OF THE STATE GOVERNMENT. RATHER, THE EMPHASIS ON OF THE G RANT OF SALES-TAX BENEFIT IS ON ACTUAL RUNNING OF THE PLANT AND THAT TOO UNDE R PRESCRIBED EFFICIENCY LEVELS. IN FACT, IN THE RESOLUTION DT 1.10.1999 STA GGERED PLANT LOAD FACTORS ACHIEVED BY THE UNIT ENTITLED THE UNIT TO VARYING L EVELS OF SALES-TAX BENEFIT. THEREFORE, IT COULD NOT BE SAID THAT THE SALES-TA X BENEFIT IS AVAILABLE MERELY ON COMMENCEMENT OF GENERATION. WE ARE CONSCIOUS THA T MERE TIMING OF THE GRANT OF SUBSIDY IS NOT RELEVANT. HOWEVER, IN THE P RESENT CASE, IT IS NOT THE TIMING OF THE SUBSIDY ALONE BUT THE GRANT IS LINKED TO ACHIEVING OPERATIONAL EFFICIENCIES AND THAT TOO FOR ONLY SIX CONTINUOUS Y EARS. IF A UNIT WHICH IS OTHERWISE ELIGIBLE FOR INCENTIVE, DOES NOT ACHIEVE THE PLANT LOAD FACTOR OF 12% OR ABOVE, IT WOULD NOT BE ENTITLED TO RECEIVE THE S ALES TAX BENEFIT. THEREFORE, IN OUR CONSIDERED OPINION, THOUGH THE OBJECT OF THE SCHEME IS TO PROMOTE GENERATION OF ENERGY THROUGH NON CONVENTIONAL SOURC ES BUT THE SAME IS SOUGHT TO BE ACHIEVED BY THE GOVERNMENT IN THE FORM OF SUPPORTING THE UNITS TO PERFORM MORE EFFICIENTLY AND PROFITABLY. 17. IN FACT THE HONBLE SUPREME COURT IN THE CASE O F PONNI SUGARS & CHEMICALS LTD. (SUPRA) CLEARLY NOTED THAT THE SUBSI DY RECEIVED THEREIN WAS TO BE UTILIZED ONLY FOR REPAYMENT OF TERM LOANS TAKEN BY THE ASSESSEE FOR SETTING UP NEW UNITS/EXPANSION OF EXISTING BUSINESS. IN THE PRESENT CASE, THERE IS NO SUCH RESTRICTION OR OBLIGATION ON THE PART OF THE A SSESSEE TO UTILIZE THE INCENTIVES AVAILED. IN FACT, ON THIS ASPECT THE INS TANT SCHEME IS AKIN TO THE SCHEME NOTED BY THE HONBLE SUPREME COURT IN THE CA SE OF SAHNEY STEELS (SUPRA) WHEREIN THE ASSESSEE WAS FOUND FREE TO USE THE MONEY IN ITS BUSINESS ENTIRELY AS IT LIKED. IN THE PRESENT CASE ALSO, THE ASSESSEE IS NOT OBLIGED TO SPEND THE MONEY FOR ANY PARTICULAR PURPO SE. THUS, APPLYING THE ITA NO 575/PN/07,150/PN/08 RASIKLAL M. DHARIWAL (HU F),PUNE 20 PURPOSE TEST TO THE FACTS OF THE PRESENT CASE AND K EEPING IN MIND THE OBJECTS BEHIND THE PAYMENT OF INCENTIVE SUBSIDY, WE ARE SAT ISFIED THAT THE SALES-TAX BENEFITS RECEIVED BY THE ASSESSEE UNDER THE INSTANT SCHEME ARE IN THE COURSE OF CARRYING ON ITS TRADE MORE PROFITABLY AND THEREFORE SUCH RECEIPT CANNOT BE CHARACTERIZED AS CAPITAL IN NATURE. THUS, THE ASSESSEE FAILS ON THIS GROUND. 18. SIMILAR IS THE GROUND RAISED BY THE ASSESSEE IN ITS APPEAL FOR THE ASSESSMENT YEAR 2004-05. ON THE PARITY OF REASONING , THEREFORE, THIS GROUND ALSO FAILS. 19. IN THE RESULT, APPEALS OF THE ASSESSEE ARE DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MARCH, 2011. SD/- SD/- (I.C. SUDHIR) (G.S. PANN U) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 31 ST MARCH, 2011 COPY TO:- 1) RASIKLAL M DHARIWAL (HUF) PUNE 2) DCIT CIR. 2 PUNE 3) THE CIT-(A)-II, PUNE 4) ]\THE CIT-II, PUNE 4) THE DR, B BENCH, ITAT, PUNE BY ORDER TRUE COPY ASST. REGISTRAR, I.T.A.T., PUNE B