Poddar Pigments Ltd., New Delhi V. DCIT, cicle-20(1), New Delhi

ITA 6560/DEL/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 0754 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 11-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 131; 54; 43; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.6560/Del/2018 Assessment Year 2007-08 Poddar Pigments Ltd., A-283, Ground Floor, Okhla Industrial Area, Phase-I, New Delhi. v. Dy. Commissioner of Income Tax, Circle-20(1), New Delhi. TAN/PAN: AAACP1125E (Appellant) (Respondent) Appellant by: Shri P.C. Parwal, CA Respondent by: Shri Toufel Tahir, Sr.D.R. Date of hearing: 07 06 2022 Date of pronouncement: 31 08 2022 O R D E R PER PRADIP KUMAR KEDIA, A.M.: Th e cap tio n ed ap peal h as b een fil ed b y th e Assessee ag ain st th e o rd er o f th e C o mmiss io n er o f In co me T ax (Ap p eals)-VII, New Delh i [‘CIT(A)’ in sh o rt] d a ted 2 7 .0 8 .2 01 8 arisin g fro m th e assess men t o rd er d ated 3 0 .0 3 .20 17 p assed by th e Assessin g Officer (AO) un d er Sectio n 1 43 (3 ) r.w. Sectio n 2 5 4 o f th e In co me Tax Act, 1 9 6 1 (th e Act) co n cern in g AY 2 0 07 -08 . 2 . Th e g ro u nd s o f ap p eal ra ised b y th e assesse e read as u n d er: “ 1 . U n d e r t h e f a c t s a n d c i r c u m st a n c e s o f t h e c a se , t h e o r d e r p a s se d b y A O u / s 1 4 3 (3 ) r. w. s. 2 5 4 o f t h e A c t i s i ll e g a l & b a d i n I.T.A. No.6560/Del/2018 2 l a w b e i n g b a r r e d b y l i m i t a t i o n . T h e L d . CI T (A ) h a s e r re d o n f a c t s a n d i n l a w i n c o nf i r m i n g t h e a d d i t i o n o f R s . 1 7 , 6 6 , 3 9 5 / - b y h o l d i n g t h a t s a l e s ta x i n c e n t i v e p r o v i d e d b y G o v e rn m e n t o f R a j a s t h a n t o e n c o u ra g e e s t a b l i sh m e n t / e n h a n c e m e n t o f p ro d u c t i o n c a p a c i t y an d f o r g e n e ra t i o n o f e m p l o y m e n t i s a r e v e n u e re c e i p t a n d no t a c a p i t a l re c e i p t a s c l a i m e d b y t h e a s se s s e e . ” 3 . Gro un d No .1 is d i smissed b e in g n o t p ressed in the co u rse o f h earin g . 4 . Gro un d No .2 co n cern s ad d itio n o f Rs.1 7 ,6 6 ,3 9 5 /- receiv ed b y way o f sal es tax in c en tiv e p ro v id ed b y th e Go vern men t o f Raj asth an as Rev e n u e receip t ag ain s t th e cap i ta l rece i p t cla i med b y th e asses see . 5 . Brie fly sta ted th e assess ee re ce iv ed sal es tax in cen ti v e o f Rs.1 7 ,6 6 ,3 9 5 /- which was cl ai med b y th e assessee o utsid e th e p u rv iew o f tax at io n b ein g cap ital re ceip t . Th e Assessi n g Officer , h o wev er, h eld th e same to b e rev en u e receip t in th e assess men t o rd er on th e g ro und th at th e In cen tiv e Sch eme was op erativ e fro m 2 0 00 -01 fo r a p erio d o f 1 1 y ears an d th e assessee has b een receiv in g th e s ale s tax u n d er th e sch eme in th e p ast an d o ffer in g it fo r tax a tio n . As o b serv ed , th e asses see h i mse l f treate d th e ab o v e receip t as rev en u e receip t s fo r p ast s o man y y ears. Th e Assessin g Officer fu rth er o b serv ed th at assess ee h as n o t p l aced co mp le te fac ts su p p o rted with ev id en ces fo r ta k in g a d ifferen t st an d in th e assess men t y ear i n qu estio n . Th e Assessin g Officer a cco rd in g ly rejec ted th e cl ai m o f th e assesse e fo r treat men t o f su ch in cen tiv e as cap ita l r ece ip t. I.T.A. No.6560/Del/2018 3 6 . Ag g riev ed b y th e d en ial o f cl ai m b y th e Assessing Officer, th e ass essee p refer red ap p eal b e fo re t h e CIT(A). The CI T(A) also d id n o t fin d an y merit in th e p lea o f t h e assesse e to wards cl ai m o f sales tax in cen t i v e as cap ita l rec eip t . Th e CIT(A) h as th us d eclin ed to in terfere wi th th e o rd er o f th e Asses sin g Offi cer h o ld in g su ch in cen tiv e to b e a rev en u e rece ip t . 7 . Fu rth er ag g riev ed , th e assessee h as p referred app eal b efo re th e Trib u n al in th e seco n d ro u n d o f pro ceed in g s. 8 . We h av e p eru sed th e ap p ell ate o rd e r an d th e o rd er of th e Assessin g Officer an d o th er mater i al ad v erted in the co u rse of h earin g . Th e so li t ary q u estio n in co n ten tio n is to d et ermin e th e n atu re an d ch aracter o f sal es tax in cen tiv e o f Rs.17 ,6 6 ,3 95 /- receiv ed b y th e a ssessee in th e fac ts an d c ircu ms tan ces o f th e case. It is th e cas e o f th e assesse e th at sa les t ax in ce n tiv e was g iv en by th e Go v ern men t o f Ra jas th an fo r in v estmen t in Rajas th an to en co u rag e th e estab lish men t / en h an cemen t o f p rodu ctio n cap aci ty an d fo r g en eratio n o f e mp lo y men t as en v is ag ed in cl au se (3 ) o f th e sch eme , n ame ly , ‘Th e Rajas th an Sales Ta x / Cen tral Sales Tax Ex emp t Sch eme fo r In d u stries, 1 9 9 8 ’ as n otifi ed b y th e Go v ern men t o f R ajas th an v id e S. No . 1 13 1 -F.14 (8 ) FD/ Tax Div n /9 8 d ated 7 .4 .1 9 98 . It i s th e cl a im o f th e a ssesse e th at su ch su b sid y h as d irect n ex u s with in v estmen t in th e capit a l reso u rces an d th erefo re th e s ame i s a cap i ta l re ceip t . 9 . To au g men t i ts cla i m th a t su ch in cen tiv e is a rev en ue receip t , th e assess ee h as referred to v ario u s ju dg men ts in simi lar fac ts wh ich are su mmari zed h ereu n d er: “ ( i ) C I T v s. C h a p h a l k a r Br o t h e r P u n e ( 2 0 1 8 ) 1 6 1 D T R 4 1 / 25 2 I.T.A. No.6560/Del/2018 4 Ta x ma n 3 6 0 ( S C ) O b j e c t o f g i v i n g su b s i d y t o n e w m u l t i p l e x t h e a t r e co m p l e x e s w a s t o p r o m o t e t h e se c o m p l e x e s a s a m e a n s o f e n t e r t a i n me n t fa c i l i t i e s b y p r o v i d i n g G o v e r n m e n t su p p o r t i n t h e fo r m o f e x e mp t i o n / r e mi s si o n fr o m e n t e r t a i n m e n t d u t y a s t h e se c o m p l e x e s a r e h i g h l y c a p i t a l i n t e n si v e a n d t h e i r g e st a t i o n p er i o d i s q u i t e l o n g . I d e a w a s t h a t e x e m p t i o n fr o m e n t e r t a i n me n t d u t y f o r a p e r i o d o f t h r e e y e a r s a n d p a r t i a l r e m i ss i o n f o r a p e r i o d o f ne x t t w o ye a r s w o u l d g o t o w a r d s h e l p i n g t h e i n d u st r y t o s e t u p s u ch h i g h l y c a p i t a l i n t e n si v e e n t e r t a i n m e n t c e n t r e s. I t i s d i f fi c u l t t o a c c e p t t h e a r g u m e n t t h a t i t i s o n l y t h e i m m e d i a t e o b j e c t a n d no t t h e l a r g e r o b j e c t w h i c h m u st b e k e p t i n m i n d i n t h a t t h e s u b sid y s c h e m e k i c k s i n o n l y p o st - c o n st r u c t i o n , t h a t i s w h e n c i n e m a t i c ke t s a r e a c t u a l l y so l d . T h e f a c t t h a t t h e i n c e n t i v e s a r e n o t a v a i l a b le u n l e s s a n d u n t i l c o m m e r c i a l p r o d u c t i o n h a s st a r t e d a n d t h a t t h e i n c en t i v e s a r e n o t g i v e n t o t h e a s s e s se e e x p r e s sl y f o r t h e p u r p o se o f p u r c h a s i n g c a p i t a l a s s e t s o r f o r t h e p u r p o s e o f p u r c h a si n g m a ch i n e r y i s i r r e l e v a n t . T h e o b j e c t h a s t o b e s e e n a n d n o t t h e fo r m i n w h i c h i t i s g r a n t e d . U n d e r t h e W e st B e n g a l sc h e m e a l so , t h e a m ou n t o f e n t e r t a i n m e n t t a x c o l l e c t e d i s t o b e r e t a i n e d b y t he n e w m u l t i p l e x t h e a t r e c o m p l e x e s f o r a p e r i o d n o t e x c e e d i n g fo u r ye a r s a n d t h e o b j e c t s o f b o t h t h e sc h e m e s a r e s a m e . T h e r e fo r e , t he s u b si d y b y w a y o f e x e mp t i o n / r e mi s si o n o f e n t e r t a i n me n t d u t y u nd e r b o t h t h e sc h e m e s i s c a p i t a l r e c e i p t . ( i i ) P C I T V s. D e e p a k V e g p r o ( P ) Lt d . ( 2 0 1 8 ) 4 0 1 I TR 8 9 ( R a j . ) ( H C ) S u b si d y fr o m G o v e r n m e n t i n t h e fo r m o f V A T r e i m b u r se m e n t r e l a t e d t o e n c o u r a g e s e t t i n g u p o f t h e n e w u n i t s a nd t o g e n e r a t e fr e s h e m p l o y m e n t o p p o r t u n i t i e s i n t h e S t a t e i s n o t t a x a b l e si n c e i t c o n s t i t u t e d c a p i t a l r e c e i p t . I.T.A. No.6560/Del/2018 5 ( i i i ) C I T & A n r . S h r e e Ba l a j i A l l o y s & O r s. ( 2 0 1 6 ) 1 3 8 D T R 3 6 ( S C ) E x c i s e r e f u n d a n d i n t e r e st s u b si d y r e c e i v e d b y t h e a s s e s s e e i n p u r su a n c e o f t h e i n c e n t i v e s a n n o u n c e d a n d s a n c t i o n ed v i d e G o v e r n m e n t o f I n d i a , Mi n i st r y o f Co m m e r c e a n d I n d u st r y ’ s O f f i c e M e mo r a n d u m d t . 1 4 . 0 6 . 2 0 0 2 a n d Ce n t r a l E x c i se N o t i f ic a t i o n N o s . 5 6 a n d 5 7 d t . 1 4 . 1 1 . 2 0 0 2 a n d o t h e r n o t i fi c a t i o n s i ssu e d o n t h e su b j e c t , p e r t a i n i n g t o t h e I n d u st r i a l P o l i c y fo r t he st a t e o f Ja m m u & K a sh m i r , i s c a p i t a l r e c e i p t . ( i v ) S h i v S h a kt i F l o u r M i l l s P v t . Lt d . V s. C I T ( 2 0 17 ) 1 4 5 D T R 1 8 ( G a u h . ) T r a n sp o r t s u b si d y r e c e i v e d b y t h e a s se s se e i s i n t e nd e d t o s t i mu l a t e i n d u s t r i a l a c t i v i t y i n t h e b a c k w a r d r e g i o n , t o g e n er a t e e m p l o y m e n t o p p o r t u n i t i e s a n d b r i n g d e v e l o p m e n t i n N o r t h - E a st St a t e s a n d n o t m e a n t t o p r o v i d e h i g h e r p r o fi t fo r t h e e n t r e p r e n e u r. I t i s i n t e n d e d t o e n c o u r a g e i n v e s t m e n t i n d i f fi c u l t a n d f a r fl u n g S t a t e s a n d t h u s su c h i n c e n t i v e sh o u l d b e t r e a t e d a s c a p i t a l r e c e i p t. ( v ) C I T V s . B i r l a V X L Lt d . ( 2 0 1 3 ) 9 0 D TR 3 7 6 ( G u j . ) ( H C ) ( P B 8 0 - 8 5 ) S a l e s t a x e x e m p t i o n g r a n t e d b y t h e G o v e r n m e n t a s a p a r t o f i n i t i a t i v e t o e n c o u r a g e mo d e r n i z a t i o n o f e x i st i n g in d u s t r i e s i n u n d e r - d e v e l o p e d a r e a s c o n st i t u t e d c a p i t a l r e c e i p t . 2 . T h e L d . C 1 T ( A ) h a s r e l i e d o n t h e d e c i s i o n o f H o n’b l e D e l h i H i g h C o u r t i n c a se o f CI T V s . B h u sh a n S t e e l s & S t r ip s L t d . ( 2 0 1 7 ) 1 5 6 D T R 4 9 ( P B 3 7 - 6 3 ) w h e r e i t w a s h e l d t h a t s u b si dy i n t h e f o r m o f r e t e n t i o n b y a s se s s e e o f sa l e s- t a x c o l l e c t e d fr om c u st o m e r s I.T.A. No.6560/Del/2018 6 c o u l d b e u s e d fo r a n y p u r p o s e a n d t h e r e w a s n o c o n di t i o n t o w a r d s c a p i t a l u t i l i z a t i o n w h i c h i m p l i e d t h a t t h e p o l i c y ma k e r s e n v i si o n e d g r e a t e r p r o fi t a b i l i t y a s a n i n c e n t i v e f o r i n v e s t o r s t o e x p a n d u n i t s , fo r r a p i d i n d u s t r i a l i z a t i o n o f t h e S t a t e , e n su r i n g g r e a t e r e mp l o y m e n t a n d t h u s t h e su b si d y i s r e v e n u e i n n a t u re . I t i s su b mi t t e d t h a t t h e s a i d d e c i si o n o f H o n ’b l e D e l h i Hi g h Co u r t h a s b e e n st a y e d b y H o n ’b l e S u p r e m e Co u r t v i d e o r d e r d t . 2 0 . 1 1 . 2 0 1 7 ( P B 3 6 ) a n d t h u s t h i s d e c i si o n i s n o t a p p l i c a b l e mor e p a r t i c u l a r l y w h e n t h e S u p r e me Co u r t a f t e r t h e d e c i si o n o f D e l h i H i g h Co u r t h a s h e l d su c h r e c e i p t s a s c a p i t a l r e c e i p t . 10. On a reading of the incentive scheme, it is noticed that the Govern ment of Rajasthan proposed incentive by wa y of exe mption from p a yment of sales tax on goods manuf actured by industrial unit with a view to encourage for establishment / enhance ment of production capacity and for generation of e mplo yment. 11. A conspectus of case law cited above would show that the ‘purpose’ of subsidy is para mount for deter mination of character of subsidy in the hands of the recipient for the purposes of deter mination of character of subsidy whether revenue or capital. The source of fund and mec hanism of giving subsidy is held to be immaterial. The subsidy i n the instant case was given for promotion of capital investment by wa y of co mmissioning of new industrial units or industrial units going for expansion/diversion or revival of sick industrial units. Thus, the subsidy was principally ai med to cover the capital outla y of the assessee for undertaking moderniza tion industries in Rajasthan and thus subsidy in the form of sales tax waiver deferment was I.T.A. No.6560/Del/2018 7 not meant to give an y benefit on da y to da y functioning of the business or to ma ke it more profitable per se. Hence, such sales tax incentive is clearl y capital in nature as claimed by the assessee. 12. The CIT( A) has followed the judg ment rendered by the Hon’ble Delhi High Court in the case of CIT vs. Bhushan Steels and Strips Ltd. and Others in ITA No.681/2004 judgment dated 13.07.2017 against the assessee, the operation of the aforesaid judg ment rendered by the Hon’ble Delhi High Court has been found to be staye d by the Hon ’ble Supre me Court vide its order dated 20.11.2017 in SLP to Appeal ( C) No .30728-30732/2017. 13. The subsidy in the instant case though computed in ter ms of sales tax defer ment/waiver, it was essentially meant for capital outlay expanded by the asses see for set up of unit in case of new industrial unit and for expansion and diversification of existing unit. The entitlement was also stated to be related to percentage of fixed capital investme nt. 14. In this backdrop, we have no hesitation to accept the plea of the assessee. While doing so, we do not see an y merit in the plea of the Revenue that necessary facts are not placed on record. It is nowhere spelt out what additional facts were exactly required to appreciate the factual matri x. We also observe that notwithstanding that the assessee has treated such incentive as revenue receipt in past, the same cannot be deterrent for making a correct clai m in the subsequent assessment yea r. We also do not see any me rit in the adverse observation mad e b y the CIT( A) with reference to the I.T.A. No.6560/Del/2018 8 a mend ment brought out by Finance Act, 2015 by insertion of clause (xviii) to Section 24 whereby such subsidy has been included in the definition of income . Such inclusion is to be regarded as prospective in operation in the light of the judg ment in CIT vs. Vatika Township Pvt. Ltd., 109 DTR 33 (SC ). 15. In the result, the a ppeal of the assessee is allowed. Order pronounced in the open Court on 31/08/2022. Sd /- Sd /- [KUL BHARAT] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /08/2022 Prabhat