MAN INDUSTRIES INDIA LTD, MUMBAI V. ACIT (LTU), MUMBAI

ITA 6697/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2768 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 05-11-2014
• Court: TRIBUNAL
• Department Lawyers: N P SINGH
• Assessee Lawyers: JEHANGIR D MISTRI
• Keywords: Sale consideration of property below Jantri Value; Capital receipt
• Section: 115JB

Judgement Text

I N THE I NC OME TAX APPELLATE TR I BUNAL B BENCH, MUMBA I BEFORE SHR I R.C. SHARMA, A M AND SHR I RAM LAL NEG I , JM ./ I .T.A. NO. 6696,6697&6698/MUM/2014 ( / ASSESSMENT YEAR: 2009 - 10 TO 2011 - 12 ) M/S. MAN I NDUSTR I ES I ND I A LTD 101, MAN HOUSE, S.V. ROAD, OFF. PAWAN HANS, V I LE PARLE (WEST), M UMBA I - 400 056 . / VS. ASSTT. COMM I SS I ONER OF I NCOME TAX - (LTU), 29 TH FLOOR, CENTRE NO 1, WORLD TRADE CENTRE, CUFFE PARADE, M UMBA I - 400 005 . ./ ./ PAN/G I R NO. AAACM 2 675G ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHR I JEHANG I R D. M I STR I / RESPONDENT BY : SHR I N.P.SINGH CITDR / DATE OF HEAR I NG : 24/06 /201 6 / DATE OF PR ONOUNCEMENT : 13/07/2016 / O R D E R PER R.C. SHARMA , A. M.: T HESE ARE APPEALS F I LED BY THE ASSESSEE D I RECTED AGA I NST THE ORDER BY THE COMM I SS I ONER OF I NCOME TAX (APPEALS) - 24 , MU MBA I (C I T(A) FOR SHORT) DATED 01.08 .2014 FOR THE ASSESSMENT Y EAR (A.Y.) 20 09 - 10 TO 201 1 - 2012 , I N THE MATTER OF ORDER PASSED U/S 143 (3) OF THE I NCOME TAX ACT. 2. COMMON GR I EVANCE OF AS SESSEE I N ALL THE YEAR RELATE TO TREAT I NG THE SUBS I DY RECE I VED BY THE ASSESSEE BY WAY OF REFUND/EXEMPT I ON OF EXC I SE DUTY AND 2 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT SALES TAX , AS A REVENU E RECE I PT I N PLACE OF CAP I TAL RECE I PT. PREC I SE GROUNDS OF APPEAL RA I SED I N A.Y. 2009 - 10 READS AS UNDER: 1. THE LEARNED COMM I SS I ONER OF I NCOME TAX (APPEALS) - LTU ERRED I N CONF I RM I NG THE ADD I T I ON OF SUBS I DY BY WAY OF REFUND/EXEMPT I ON OF EXC I SE DUTY/VAT OF RS .26,33,63,463/ - (VAT: RS.15,84,40,288/ - AND EXC I SE DUTY : RS.10,49,23,175/ - ) AVA I LED I N THE RELEVANT YEAR BY TREAT I NG I T AS A REVENUE RECE I PT. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNED COMM I SS I ONER OF I NCOME TAX (APPEALS) - LTU ON THE GROUNDS BE S ET AS I DE AND THAT CLA I M OF THE APPELLANT BE ALLOWED. 3. R I VAL CONTENT I ONS HAVE BEEN HEARD AND RECORD PERUSED . FACTS I N BR I EF ARE THAT ASSESSEE COMPANY I S ENGAGED I N THE BUS I NESS OF MANUFACTUR I NG SAW P I PES AND SP I RAL P I PES. IT SET UP AND STARTED INDUSTRI ES IN ANJAR - KUTCH (GUJARAT) IN 2005. ACCORDINGLY THE ASSESSEE COMPANY BECAME ELIGIBLE FOR SUBSIDY SCHEME PROVIDED BY CENTRAL AND STATE GOVERNMENT FOR DEVELOPMENT OF EARTHQUAKE PRONE AREA ANJAR - KUTCH (GUJARAT). THE ASSESSEE I S REGULARLY ASSESSED TO TAX UND ER THE PROV I S I ONS OF THE I NCOME TAX ACT,1961. FOR THE RELEVANT YEAR, I .E., A.Y. 2009 - 10, THE ASSESSEE HAD F I LED THE RETURN OF I NCOME ON 29/09/2009 COMPUT I NG TOTAL I NCOME AT RS.37,21,96,759/ - . I N THE COURSE OF THE ASSESSMENT PROCEED I NGS, BY A LETTER DATED 1 1/01/2013, THE ASSESSEE F I LED A REV I SED COMPUTAT I ON OF I NCOME WHERE I N THE SUBS I DY BY WAY OF VAT EXEMPT I ON OF RS.15,84,40,288/ - AND EXC I SE REFUND OF RS.10,49,23,175/ - WAS REDUCED FROM THE TOTAL I NCOME AND THE BOOK PROF I T U/S 115JB OF THE ACT TREAT I NG THEM A S CAP I TAL RECE I PTS. THE LEARNED ASSESS I NG OFF I CER COMPLETED THE ASSESSMENT BY PASS I NG AN ORDER U/S 143 (3) OF THE ACT DATED 01/04/2013 REJECT I NG THE ABOVE CLA I M OF THE ASSESSEE AND 3 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT COMPUT I NG THE TOTAL I NCOME AT RS.37,64,98,251/ - . I T WAS STATED BY THE ASSESS I NG OFF I CER THAT ASSESSEE HAD CLA I MED EXCLUS I ON OF SALES TAX (ST) /VALUE ADDED TAX (VAT) OF RS.15,84,40,288/ - AND OF EXC I SE DUTY I NCENT I VES BY WAY OF EXC I SE DUTY REFUND(ED) I N THE COMPUTAT I ON OF BUS I NESS/TOTAL I NCOME UNDER THE NORMAL PROV I S I ONS OF I .T. ACT , 1961 AND HAD ALSO CLA I MED EXCLUS I ON FOR THE SAME WH I LE COMPUT I NG THE BOOK PROF I TS A/S. 115JB OF I .T. ACT, 1961 BY WAY OF LETTER DATED 11/1/2013 DUR I NG THE ASSESSMENT PROCEED I NGS THAT SALES TAX I NCENT I VE BY WAY OF SALES TAX EXEMPT I ON AT SOURCE AND EXC I S E DUTY I NCENT I VES BY WAY OF EXC I SE DUTY REFUNDS WERE CAP I TAL RECE I PTS NOT CHARGEABLE TO TAX AS I NCOME AND THESE TWO I NCENT I VES, THAT I S, SALES TAX I NCENT I VES OF RS. 15,84,40,288/ - AND EXC I SE DUTY I NCENT I VES OF RS. 10,49,23,175/- SHOULD BE EXCLUDED FROM THE BUS I NESS I NCOME AND ALSO WH I LE COMPUT I NG THE BOOK PROF I TS U/S. 115JB OF LT. ACT, 1961. ASSESS I NG OFF I CER CALLED FOR THE DETA I LS AND DOCUMENTS RELAT I NG TO VAR I OUS SCHEMES . I N RESPECT OF SALES TAX/VALUE ADDED TAX AND EXC I SE DUTY AO EXAM I NE D ASSESSEES CLA I M FOR TREA T I NG SALES TAX/VALUE ADDED TAX I NCENT I VES OF RS. 15,84,40,288/ - A ND EXC I SE DUTY I NCENT I VES OF RS.10,49,23,175/ - AS CAP I TAL RECE I PT. THE A SSESS I NG OFF I CER NOT I CED THAT AS PER THE PROV I S I ONS OF VAR I OUS SCHEMES AND THE PROV I S I ONS OF LAW/RULES AND NOT I F I CAT I ONS, THE BENEF I TS OF SALES TAX/VALUE ADDED TAX EXEMPT I ON AVA I LED BY THE ASSESSEE UNDER THE RELEVANT PROV I S I ONS OF ST/VAT LAW OF THE GUJARAT STATE ARE NOT I N THE NATURE OF CAP I TAL RECE I PT, ACCORD I NGLY HE REJECT ASSESSEES CLA I M FOR SALES TAX EX EMPT I ON AND EXC I SE DUTY REFUNDS AS CAP I TAL RECE I PT. 4 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT 4. ASSESSEE SUBM I TTED BEFORE THE AO THAT THE CENTRAL GOVERNMENT HAD I SSUED I NCENT I VE SCHEME TO DEVELOP THE EARTHQUAKE PRONE AREA ANJAR KUTCH (GUJ.) V I DE NOT I CE 39 OF 2001 CE DATED 31 ST JULY, 2001. I N THE SA I D N OT I F I CAT I ON MANUFACTUR I NG UN I T W I LL GET EXC I SE I NCENT I VE UPTO 5YEARS FROM THE DATE OF PRODUCT I ON EQU I VALENT TO CASH PAYMENT OF EXC I SE DUTY TO THE GOVT . ACCOUNT. FURTHER THE GUJARAT GOVERNMENT HAD ALSO I SSUED AN I NCENT I VE PACKAGE AS KUTCH PACKAGE SCHEME 20 01' FOR SETT I NG UP' A NEW I NDUSTRY. I N THE SCHEME NEW I NDUSTR I ES W I LL GET TAX EXEMPT I ON EQU I VALENT TO THE I NVESTMENT MADE W I TH I N A PER I OD OF 10 YEARS FROM THE DATE OF F I RST SALE. I N THE SCHEME I NDUSTR I AL UN I T W I LL CHARGE VAT AND RETA I N THE SAME AS AN I NCEN T I VE. 4. 1 FOLLOWING JUDGMENTS OF VAR I OUS H I GH COURTS SAY I NG THAT I NCENT I VES DECLARED BY THE GOVERNMENT FOR DEVELOPMENT ARE OF CAP I TAL NATURE WERE REFERRED BEFORE THE AO : - . 1. SHREE BALAJL ALLOYS VS. C I T 333 ITR 335 - H I GH COURT OF JAMMU KASHM I R HELD THAT REFUND OF EXC I SE UNDER SUBS I DY SCHEME I S A CAP I TAL NATURE AND NOT TAXABLE, 2. V I NOD KUMAR JA I N VS. I TO, JAMMU, I TAT, AMR I TSAR BENCH (SPEC I AL BENCH) ( I T APPEAL NOS. 65& 68 (ASR.) OF 2010) 140 ITD 1, HELD THAT EXC I SE DUTY REFUND I S TO BE TREATED AS CA P I TAL RECE I PT. 3. C I T VS. RASOL I LTD. [2011J 245 CTR. 667 (CAL H I GH COURT ) - SALES TAX SUBS I DY RECE I VED I S CAP I TAL RECE I PT. 4. C I T VS. REL I ANCE I NDUSTR I ES L I D. [2011] 339 ITR 632 (BOM. H I GH COURT ) SALES TAX I NCENT I VE WAS A CAP I TAL RECE I PT. 5 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT 5. HOWEVER , THE AO D I D NOT CONV I NCE W I TH THE ASSESSEES REPLY AND HELD AS UNDER: 1. ALL THE I NCENT I VES ARE PRODUCT I ON I NCENT I VES I N THE SENSE THAT THE COMPANY W I LL BE ENT I TLED TO THESE I NCENT I VES ONLY AFTER I T GOES I NTO PRODUCT I ON. 2. THE SCHEME WAS NOT TO MAKE ANY PAYMENT D I RECTLY OR I ND I RECTLY FOR SETT I NG UP OF THE I NDUSTR I ES. I T I S ONLY AFTER THE I NDUSTR I ES HAD BEEN SET UP AND PRODUCT I ON HAD BEEN COMMENCED THAT THE I NCENT I VES WERE TO BE G I VEN FOR THE L I M I TED PER I OD OF 5/7 YEARS. 3. NO RESTR I CT I ON I S PUT I N THE SCHEME FOR UT I L I ZAT I ON OF I NCENT I VES. 6. THE AO ALSO DEALT W I TH JUD I C I AL PRONOUNCEMENTS C I TED BY LD. AR AND HELD THAT THESE WERE D I ST I NGU I SHABLE ON FACTS. THE AO HELD THAT FACTS OF THE CASE OF ASSESSEE ARE S I M I LAR TO THE FACTS OF SHANEY STEELS AND PRESS WORKS LTD. 228 ITR 253 WHEREIN HONBLE SUPREME COURT HAS HELD AS FOLLOWS: I N THE I NSTANT CASE, SUBS I D I ES HAD NOT BEEN GRANTED FOR PRODUCT I ON OF OR BR I NG I NG I NTO EX I STENCE ANY NEW ASSET. THE SUBS I D I ES WERE GRANTED YEAR AFTER YEAR ONLY AFTER SETT I NG UP OF THE NEW I NDUSTRY AND COMMENCEMENT OF PRODUCT I ON. SUCH AS SUBS I DY COULD ONLY BE TREATED AS ASS I STANCE G I VEN FOR THE PURPOSE OF CARRY I NG ON THE BUS I NESS OF THE ASSESSEE AND, THEREFORE, THESE WERE OF REVENUE CHARACTER AND WOULD HAVE TO BE TAXED ACCORD I NGLY. 7. BY THE I MPUG NED ORDER C I T(A) CONF I RMED THE ACT I ON OF AO AFTER OBSERVING INTER ALIA THAT ASSESSEE AVA I LED OF BENEF I T OF EXEMPT I ON OF SALES TAX/VAT UNDER THE NOT I F I CAT I ONS I SSUED UNDER THE RESPECT I VE SALES TAX/VALUE ADDED TAX SCHEMES, WH I CH WERE FORMULATED UNDER THE BRO AD OUTL I NES OF THE DEVELOPMENT OF KUTCH D I STR I CT I N L I GHT OF DEVASTAT I NG EARTHQUAKE I N THE SATE ON 26/1/2001. PERUSAL OF THE 6 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT NOT I F I CAT I ON DATED 9/11/2001 OF THE GUJARAT GOVERNMENT SHOWS THAT EVEN THOUGH THE BROAD PARAMETERS OF TH I S NOT I F I CAT I ON WAS CREAT I O N OF, NEW I NVESTMENT AND NEW EMPLOYMENT OPPORTUN I T I ES AND ATTRACT I NG NEW I NDUSTR I ES AND I MPROV I NG ,THE OVERALL ECONOM I C ENV I RONMENT I N 'THE D I STR I CT OF KUTCH I N THE STATE OF GUJARAT' AT MACRO LEVEL, THE, BAS I C AND ULT I MATE PURPOSE OF G I V I NG I NCENT I VES I N T HE FORM OF SALES TAX/VALUE ADDED TAX FROM, PURCHASES AND SALES WAS TO A I M FOR COMMERC I AL PRODUCT I ON WH I CH W I LL ULT I MATELY RESULT I N EMPLOYMENT OF LOCAL PERSONS AND PRODUCT I ON , AND SALE OF F I N I SHED MANUFACTURED GOODS. HOWEVER, THE BENEF I T OF THE ST/VAT EXE MPT I ON WAS TO START ONLY AFTER THE DATE OF COMMERC I AL PRODUCT I ON WH I CH WAS DEF I NED I N CLAUSE 3.3/4.2 OF THE NOT I F I CAT I ON DATED 09/ - 11/2001 TO START FROM THE DATE OF THE - F I RST SALE B I LL ONLY AND ASSESSEE WAS ENT I TLED TO PURCHASE THE RAW MATER I ALS, PACK I NG M ATER I ALS AND ALL THE PROCESS I NG MATER I ALS UT I L I ZED FOR THE PURPOSE OF MANUFACTUR I NG GOOD S W I THOUT PAYMENT OF SALES TAX/VAT. S I M I LARLY, ASSESSEE WAS ALSO ENT I TLED TO EXEMPT I ON FROM THE PAYMENT OF SALES TAX I N RESPECT OF SALE OF F I N I SHED GOODS I NTERMED I AR I ES , BY PRODUCTS, WASTE AND SCRAP PRODUCED BY THE EL I G I BLE UN I T AND ASSESSEE WAS REQU I RED TO FURN I SH DETA I LS OF PURCHASES OF RAW MATER I ALS AND SALES TO MEET W I TH THE I NPUT/OUTPUT NORMS PRESCR I BED UNDER THE EX I M POL I CY OF THE CENTRAL GOVERNMENT AND THE SAME HA D TO BE , CERT I F I ED BY THE CHARTERED ACCOUNTANT, EVEN THOUGH THE QUANTUM OF I NCENT I VES BY WAY OF SALES TAX/VALUE ADDED TAX EXEMPT I ON WAS L I NKED TO AND RESTR I CTED BY THE EL I G I BLE F I XED CAP I TAL I NVESTMENT, THE BENEF I TS/ I NCENT I VES WERE TO BE AVA I LABLE FOR A P ER I OD OF 5 / 7/10 YEARS, DEPEND I NG UPON THE QUANTUM I NVESTMENT AND THE BENEF I T OF SALES 7 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT TAX EXEMPT I ON WAS AVA I LABLE ONLY FROM THE DATE OF COMMENCEMENT OF COMMERC I AL PRODUCT I ON' AND WH I CH WAS DEF I NED AS 'DATE OF F I RST SALE B I LL' UNDER CLAUSE 3.3 OF THE NOT I F I CAT I ON. COND I T I ONS I N CLAUSE 5, 7 AND 8 OF THE NOT I F I CAT I ON DATED 09/11/2001 CLEARLY SHOW THAT THE COMMERC I AL PRODUCT I ON WAS TO BE THE BED ROCK FOR AVA I L I NG THE SALES TAX REM I SS I ON BENEF I TS AND THE ' I NDUSTR I AL UN I T SHALL HAVE TO CONT I NUE PRODUCT I ON UPTO T HE PER I OD OF EL I G I B I L I TY OF 5/7/10 YEARS AS PER CLAUSE 4.6 OF NOT I F I CAT I ON DATED 09/11/2001 AND I F ASSESSEE WAS NOT I N A POS I T I ON TO REMA I N I N CONT I NUOUS PRODUCT I ON ON ACCOUNT OF THE REASONS BEYOND CONTROL OF THE MANAGEMENT, THE ASSESSEE WAS REQU I RED TO OB TA I N PERM I SS I ON O F THE GUJARAT GOVERNMENT BEFORE D I SCONT I NUANCE OF PRODUCT I ON. THUS, I T BECOMES CL EAR FROM THE POL I CY GU I DEL I NES I SSUED BY THE GOVT. OF GUJARAT FOR ATTRACT I NG NEW I NDUSTR I ES AND I NVESTMENTS I N KUTCH D I STR I CT OF GUJARAT THAT THE CR I TER I A OF 'EL I G I BLE F I XED CAP I TAL I NVESTMENT WAS ONLY FOR THE DETERM I NAT I ON OF THE QUANTUM AND UPPER L I M I T OF SALES TAX I NCENT I VES BY WAY OF SALES TAX/VAT EXEMPT I ONS UNDER THE ST/VAT PROV I S I ONS OF THE GUJARAT STATE. HOWEVER, THE BAS I S OF AVA I LAB I L I TY, EL I G I B I L I TY F OR EXEMPT I ON QUANT I F I CAT I ON OF ST/VAT I NCENT I VES, COMMENCEMENT OF DATE OF ST/VAT ETC., COMMERC I AL PRODUCT I ON WAS TO BE RECKONED W I TH DATE OF F I RST SALE B I LL AND TH I S DATE OF SALE/COMMERC I AL PRODUCT I ON WAS W I TH REFERENCE TO THE PURCHASE OF RAW MATER I ALS/PAC K I NG MATER I AL, AND PRODUCT I ON OF GOODS AND SALE OF F I N I SHED GOODS, AND EXEMPT I ON OF SALES TAX/VALUE ADDED TAX WAS D I RECTLY L I NKED TO PURCHASE OF RAW MATER I ALS, PRODUCT I ON OF GOODS AND SALE OF F I N I SHED GOODS ONLY. HOWEVER, W I THOUT PAYMENT OF SALES TAX/VALUE ADDED TAX UNDER THE EL I G I B I L I TY 8 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT PER I OD OF I NCENT I VES AND UPPER L I M I T FOR THE GRANT OF QUANTUM OF SALES TAX I NCENT I VES WERE L I NKED TO A N D WERE TO BE MADE W I TH REFERENCE TO THE EL I G I BLE F I XED CAP I TAL I NVESTMENT I N LAND, BU I LD I NGS AND PLANT/MACH I NERY AS PER THE NORMS PRESCR I BED I N THE SALES TAX AND VALUE ADDED TAX NOT I F I CAT I ONS/RULES/LAWS AND NOTH I NG ELSE. 7.1 THE CIT(A) FURTHER OBSERVED THAT AS PER THE NOTIFICATION TOTAL STRESS I S LA I D ON THE BUS I NESS ACT I V I TY CONS I ST I NG OF PURCHASE, MANUFACTURE AND SALE ONL Y AND THE ASSESSEE BECAME ENT I TLED TO THE BENEF I TS OF SALES TAX I NCENT I VES BY WAY OF REM I SS I ONS OF PURCHASE TAX/SALES TAX ONLY AFTER THE START OF COMMERC I AL PRODUCT I ON WH I CH WAS DEF I NED TO BEG I N W I TH THE F I RST SALE B I LL ONLY. THUS, THE ENT I RE PROV I S I ONS RE LAT I NG TO THE GRANT OF REM I SS I ON OF PURCHASE TAX/SALES TAX OVERWHELM I NGLY SPEAK ABOUT THE EL I G I B I L I TY AND AVA I LAB I L I TY OF BENEF I TS OF SALES TAX EXEMPT I ONS ONLY I F MANUFACTURE/PRODUCT I ON I S DONE AND' GOODS ARE PURCHASED AND SOLD. S I M I LARLY, PROV I S I ONS OF SE CT I ON 18A, 18B AND 18C OF GUJARAT VALUE ADDED TAX ACT 2003 WH I CH CAME I NTO EFFECT FROM 1/4/20,06, ALSO UNEQU I VOCALLY SPEAK ABOUT AND L I NK THE GRANT OF VALUE ADDED TAX I NCENT I VES BY WAY OF EXEMPT I ON' OF VAT TO BECOME AVA I LABLE, ONLY IF, THE GOODS ARE PURCH ASED AND SALES ARE EFFECTED BY THE, EL I G I BLE UN I T LOCATED . I N BHUJ D I STR I CT OF GUJARAT STATE AFTER CERTA I N DATE ONLY. THUS, EVEN UNDER THE GUJARAT VALUE ADDED TAX 2003, PROV I S I ONS FOR AVAILING VAT REM I SS I ON BENEF I TS BY WAY OF EXEMPT I ON FROM PAYMENT OF VAT AT SOURCE ARE MORE OR LESS S I M I LAR TO THE SALES TAX PROV I S I ONS. 9 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT 8. THE CIT(A) FURTHER OBSERVED THAT THERE WAS NO PHYS I CAL RECE I PT OF BENEF I TS BY WAY OF SALES TAX I NCENT I VES I N THE FORM OF EXEMPT I ON OF SALES TAX, PURCHASE TAX/VALUE, ADDED TAX S I NCE ASSESSE E WAS EXEMPTED FROM PAYMENT OF PURCHASE/SALES/VALUE ADDED TAX AT THE PO I NT AND SALE I TSELF FROM THE F I RST DAY OF SALE I TSELF. THUS, THERE WAS NE I THER A CONSTRUCT I VE RECE I PT NOR A CONSTRUCT I VE PAYMENT BY THE ASSESSEE AND WHEN THAT I S THE FACT OF THE CASE, T HE QUEST I ON OF ST/VAT EXEMPT I ONS BE I NG CAP I TAL RECE I PTS DO NOT AR I SE. 9. AF TER HAV I NG ABOVE D I SCUSS I ON C I T(A) CONF I RMED THE ACT I ON OF AO DECL I N I NG ASSESSEEES CLA I M FOR TREAT I NG SUBS I DY AS CAP I TAL RECE I PT B ASICALLY ON THE PLEA THAT INCENTIVE HAS TO BE GIVE N AFTER COMMENCING OF PRODUCTION AND DEPENDING UPON THE QUANTUM OF INVESTMENT AND THAT BENEFIT OF SALES TAX EXEMPTION WAS AVAILABLE ONLY FROM THE DATE OF COMMERCIAL PRODUCTION. AGA I NST THE ORDER OF C I T(A) ASSESSEE I S I N FURTHER APPEAL BEFORE US. 10. IT WAS ARGUED BY LD. SR. AR THAT INCENTIVE SCHEME BY WAY OF PROVIDING SUBSIDY TO THE UNIT TO BE ESTABLISHED IN BHUJ DISTRICT OF GUJARAT WAS PROVIDED BY CENTRAL & STATE GOVERNMENT. HE FURTHER INVITED OUR ATTENTION TO THE CENTRAL EXCISE DUTY REFUND AND STATE VAT E XEMPT SCHEME LAUNCHED FOR NEW INDUSTRIAL UNIT TO BE SET UP IN KUTCH DISTRICT BETWEEN 2001 - 2005. PURSUANT TO THE GOVERNMENT SCHEME THE ASSESSEE HAS SET UP AND STARTED ITS INDUSTRIAL UNIT IN ANJAR - KUTCH (GUJARAT) AND SATISFIED ALL THE ELIGIBILITY CONDITION O F THE SAID SUBSIDY FROM CENTRAL AND STATE GOVERNMENT. HE INVITED OUR ATTENTION TO THE CHAPTER - IVA OF GUJARAT VALUE ADDED TAX RULES 2006, ACCORDING TO WHICH SUCH INDUSTRIAL UNIT 10 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT SHALL BE ENTITLED TO TAX INCENTIVES IN THE FORM OF EXEMPTION AND DEFERMENT OF THE TAX SO COLLECTED. OUR ATTENTION WAS ALSO INVITED TO THE RELEVANT PROVISIONS WHICH MAKE ELIGIBLE UNIT ENTITLEMENT FOR ESTIMATION OF CENTRAL SALES TAX PAYABLE UNDER THE PROVISIONS OF CENTRAL SALES TAX ACT, 1956 ON THE SALES EFFECTED BY THEM IN THE COURSE OF INTER - STATE TRADE AND COMMERCE. LD. AR FURTHER STRESSED THAT ALL THESE INCENTIVES WERE GIVEN TO COVER THE DISASTER HAPPENED AT KUTCH DISTRICT BY MOTIVATING ESTABLISHMENT OF NEW UNIT IN THE KUTCH FOR ITS REVIVAL. AS PER LD. AR IT IS CLEAR FROM THE SCHEM E THAT SUBSIDY WAS GIVEN ONLY FOR THE NEW UNIT TO BE SET UP IN THESE AREA AND, THEREFORE, IN THE NATURE OF CAPITAL RECEIPT . HE FURTHER RELIED ON THE DECISION OF HONBE SUPREME COURT IN THE CASE OF PONNI SUGAR AND CHEMICALS LTD.(SUPRA), SHANEY STEELS PRESS WORKS LTD. (SUPRA) AND P.J.CHEMICALS LTD.(SUPRA) . RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE INDUSTRIES LTD. (SUPRA) AND DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF BARODA INOX LEISURE LT D. 11. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF LOWER AUTHORITIES AND CONTENDED THAT INCENTIVES SO RECEIVED BY THE ASSESSEE IN THE FORM OF REFUND OF EXCISE DUTY AND SALES TAX WAS IN THE NATURE OF INCOME INSOFAR AS SAME WAS RECEIVED ONLY AFTER COMME NCEMENT OF THE PRODUCTION. HE FURTHER CONTENDED THAT INCENTIVE WAS NOT PAID AS PERCENTAGE OF INVESTMENT SO AS TO CALL THE SAME AS CAPITAL RECEIPT BUT WAS PAYABLE TO ASSESSEE ONLY AFTER COMMENCEMENT OF THE COMMERCIAL PRODUCTION. RELIANCE WAS PLACED ON THE D ECISION OF HONBLE SUPREME COURT IN THE CASE OF SHANEY STEELS PRESS WORKS LTD. (SUPRA). 11 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT 1 2 . WE HAVE CONS I DERED R I VAL CONTENT I ONS AND CAREFULLY GONE THROUGH ORDERS OF AUTHOR I T I ES BELOW. WE HAVE ALSO DEL I BERATE D ON THE JUD I C I AL PRONOUNCEMENTS REFERRED BY LOW ER AUTHOR I T I ES I N THE IR RESPECT I VE ORDERS AS WELL AS C I TED BY LD. AR AND LD. DR DUR I NG THE COURSE OF HEAR I NG BEFORE US IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. 1 2 .1 FROM THE RECORD WE FOUND THAT T O AVAIL THE BENEFITS OF INCENTIVE SCHEME ISSUED BY CEN TRAL AND STATE GOVERNMENT, THE ASSESSEE HAS SET UP AND STARTED INDUSTRIES AT ANJAR - KUTCH (GUJ.) IN THE YEAR 2005. THE ASSESSEE GOT THE BENEFITS YEAR TO YEAR ON INVESTMENT MADE UNDER THE INCENTIVE SCHEME AND CREDITED TO PROFIT AND LOSS ACCOUNT. THE SAID R ECEIPT ARE CAPITAL RECEIPT IN NATURE THEREFORE NOT LIABLE TO TAX WHILE COMPUTING THE INCOME TAX ON SUCH INCOME AS THE VARIOUS HIGH COURTS HAS GIVEN THEIR DECISION THAT THE EXCISE DUTY AND SALES TAX INCENTIVES RECEIVED FOR SETTING UP NEW INDUSTRIES FOR DEV ELOPMENT OF SPECIFIC AREA AS NOTIFIED BY GOVT ARE NOT IN THE NATURE OF CAPITAL RECEIPT. B OTH THE SUBS I DY SCHEMES I.E. CENTRAL - EXC I SE DUTY REFUND AND STATE - VAT EXEMPT I ON, WERE APPL I CABLE ONLY TO NEW I NDUSTR I AL UN I TS SET UP I N THE KUTCH D I STR I CT BETWEEN 2001 AND 2005. THE ASSESSEE COMPANY WAS SET UP AND STARTED I NDUSTR I AL UN I TS I N ANJAR - KUTCH (GUJ) I N THE YEAR 2005 AND SAT I SF I ED THE COND I T I ONS OF EL I G I B I L I TY FOR THE SA I D SUBS I DY FROM THE CENTRAL GOVERNMENT AND THE STATE GOVERNMENT. AS A RESULT, THE ASSESSEE C OMPANY BECAME EL I G I BLE FOR THE SA I D I NCENT I VE UNDER THE SA I D SUBS I DY SCHEME I MMED I ATELY ON SETT I NG UP OF THE NEW I NDUSTR I AL UN I T I N KUTCH THOUGH THE SUBS I DY WAS RECE I VABLE ONLY AFTER PRODUCT I ON BY WAY OF REFUND OF EXC I SE DUTY AND VAT 12 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT EXEMPT I ON. I N THE CASE OF THE ASSESSEE THE I NCENT I VE SO RECEIVED WAS FOR SETT I NG UP NEW I NDUSTRY I N THE EARTHQUAKE PRONE ANJAR - KUTCH AREA OF GUJARAT AND NOT A PRODUCT I ON I NCENT I VE AS I N THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. VS. C I T , 228 I TR 253(SC) REL I ED ON BY THE LEAR NED ASSESS I NG OFF I CER. HOWEVER, THE AO HAS DECLINED ASSESSEES CLAIM OF SUBSIDY AS A CAPITAL RECEIPT ON THE PLEA THAT SUBSIDY SO RECEIVED WAS PRODUCTION INCENTIVE AND NOT A INCENTIVE FOR SETTING UP NEW INDUSTRIAL UNIT IN THE NOTIFIED AREAS. THE SUBS I DY REC E I VED BY THE ASSESSEE I S CAP I TAL I N NATURE AND NOT I NCOME. THE D I ST I NCT I ON BETWEEN PRODUCT I ON SUBS I DY AND THE SUBS I DY FOR SETT I NG UP NEW I NDUSTRY HAS BEEN CONS I DERED BY COURTS I N MANY JUDGMENTS AND I N PART I CULAR BY THE HON'BLE SUPREME COURT I N D I FFERENT J UDGMENTS I NCLUD I NG I N THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. VS. C I T; 228 I TR 253 (SC). I N ALL THE CASES I T HAS BEEN HELD THAT THE I NCENT I VE/SUBS I DY FOR SETT I NG UP NEW I NDUSTRY I S A CAP I TAL RECE I PT AND NOT I NCOME. I N C I T VS. P. J. CHEM I CALS LTD.; 210 I TR. 830 (SC) I T HAS BEEN ACCEPTED BY THE DEPARTMENT THAT THE SUBS I DY FOR SETT I NG UP OF NEW I NDUSTRY I S A CAP I TAL RECE I PT AND NOT I NCOME. THUS THE LEARNED ASSESS I NG OFF I CER WAS WRONG I N REJECT I NG THE CLA I M OF THE ASSESSEE THAT THE SUBS I DY I S A CAP I TAL REC E I PT AND NOT I NCOME. I N C I T VS. PONN I SUGAR AND CHEM I CALS LTD.; 306 I TR 392 (SC), THE HON'BLE SUPREME COURT HAS FOLLOWED THE NORMS/LA I D DOWN I N SAHNEY STEEL AND PRESS WORKS LTD. VS. C I T; 248 I TR 253 (SC) AND HAS OBSERVED AT PAGE 400 AS UNDER: .. THE I MPOR TANCE OF THE JUDGMENT OF TH I S COURT I N SAHNEY STEEL CASE L I ES I N THE FACT THAT I T HAS D I SCUSSED AND ANALYZED THE ENT I RE CASE LAW AND I T HAS LA I D DOWN THE BAS I C TEST TO BE APPLIED I N JUDG I NG 13 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT THE CHARACTER OF A SUBS I DY. THAT TEST I S THAT THE CHARACTER OF THE RECE I PT I N THE HANDS OF THE ASSESSEE HAS TO BE DETERM I NED W I TH RESPECT TO THE PURPOSE FOR WH I CH THE SUBS I DY I S G I VEN. I N OTHER WORDS, I N SUCH CASES, ONE HAS TO APPLY THE PURPOSE TEST. THE PO I NT OF T I ME AT WH I CH THE SUBS I DY I S PA I D I S NOT RELEVANT. THE SO URCE I S I MMATER I AL. THE FORM OF SUBS I DY I S I MMATER I AL. THE MA I N EL I G I B I L I TY COND I T I ON I N THE SCHEME W I TH WH I CH WE ARE CONCERNED I N TH I S CASE I S THAT THE I NCENT I VE MUST BE UT I L I ZED F OR REPAYMENT OF LOANS TAKEN BY THE ASSESSEE TO SET UP NEW UN I TS OR FOR SUBS TANT I AL EXPANS I ON OF EX I ST I NG UN I TS. ON TH I S ASPECT THERE I S NO D I SPUTE. I F THE OBJECT OF THE SUBS I DY SCHEME I S TO ENABLE THE ASSESSEE TO RUN THE BUS I NESS MORE PROF I TABLY THEN THE RECE I PT I S ON REVENUE ACCOUNT. ON THE OTHER HAND, I F THE OBJECT OF THE ASS I S TANCE UNDER THE SUBS I DY SCHEME I S TO ENABLE THE ASSESSEE TO SET UP A NEW UN I T OR TO EXPAND AN EX I ST I NG UN I T THEN THE RECE I PT OF THE SUBS I DY WOULD BE ON CAP I TAL ACCOUNT. THEREFORE, I T I S THE OBJECT FOR WH I CH THE SUBS I DY/ ASS I STANCE I S G I VEN WH I CH DETERM I NES THE NATURE OF THE I NCENT I VE SUBS I DY THE FORM OR THE MECHAN I SM THROUGH WH I CH THE SUBS I DY I S GIVE N ARE I RRELEVANT. 13. FROM THE RECORD WE FOUND THAT THE SUBS I DY WAS G I VEN TO ASSESSEE FOR SETTING UP UNIT IN THE KUTCH DISTRICT. THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGAR & CHEMICALS (SUPRA) AND IN THE CASE OF SHREE BALAJI ALLOYS, AFFIRMING THE VIEW OF HONBLE JAMMU AND KASHMIR HIGH COURT, HELD THAT SUCH SUBSIDY WAS OF CAP I TAL NATURE AND NOT I NCOME. TH I S JUDGMENT OF THE HONBLE SUPREME COURT HAS BEE N APPLIED BY VARIOUS HIGH C OURTS AND TR I BUNALS I N SUBSEQUENT JUDGEMENTS FOR DEC I D I NG THE NATURE OF THE SUBS I DY RECE I PTS. 13.1 FACTS IN THE INSTANT CASE BEFORE US ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY JUR I SD I CT I ONAL H I GH COURT I N THE CASE OF RE L I ANCE I NDUSTR I ES LTD. 339 I TR 632 (BOM ) WHEREIN COURT OBSERVED THAT I N 1979, THE GOVERNMENT OF MAHARASHTRA HAD FRAMED A SUBS I DY SCHEME BY WAY OF SALES TAX I NCENT I VE FOR SETT I NG UP NEW I NDUSTR I ES I N NOT I F I ED BACKWARD AREAS I N MAHARASHTRA FOR 14 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT DEVELOPMENT OF THE AREA AND GENERAT I ON OF EMPLOYMENT. THE SCHEME WAS FORMULATED BY A RESOLUT I ON DATED 05/01/1980. THE SALES TAX I NCENT I VE RECE I VED BY THE ASSESSEE I N TH I S CASE I N THE A. YS. 1984 - 85 TO 1986 - 87 WAS HELD BY THE BOMBAY HIGH COURT TO BE CAP I TAL RECE I PT AND N OT I NCOME. 13.2 THE I SSUE WAS ALSO CONS I DERED BY THE ITAT SPEC I AL BENCH I N DY. C I T VS. REL I ANCE I NDUSTR I ES LTD. 273 I TR (AT) 16 (MUM) (SB) WHEREIN SIMILAR SALES TAX INCENTIVE WAS HELD I N FAVOUR OF THE ASSESSEE, BEING CAPITAL RECEIPT. TH I S V I EW WAS UPHELD BY THE HONBLE BOMBAY H I GH COURT I N TH E ABOVE CASE. WHILE DECIDING SO T HE HONBLE BOMBAY H I GH COURT FOLLOWED THE JUDGMENT OF THE HONBLE SUPREME COURT I N C I T VS. PONN I SUGAR AND CHEM I CALS LTD.; 306 I TR 392 (SC). 14 . WE FOUND THAT THE FACTS I N THE INSTANT CASE BEFORE US ARE I DENT I CAL TO THE ABOVE CASES DECIDED BY SUPREME COURT IN CASE OF SHREE BALAJI ALLOYS (SUPRA), PONNI SUGAR & CHEMICALS LTD(SUPRA) AND BY BOMBAY HIGH COURT IN THE CASE OF RELIANCE INDUSTRIES (SUPRA) , CHAPHALKAR BROTHERS 351 ITR 309, KIRLOS KAR OIL ENGINES LTD., 364 ITR 88, BY GUJARAT HIGH COURT IN THE CASE OF INOX LEISURE LTD. 351 ITR 314. HOWEVER, THE LEARNED ASSESS I NG OFF I CER HAS WRONGLY HELD THAT THE FACTS ARE D I FFERENT AND HAS ERRONEOUSLY REFUSED TO FOLLOW THESE JUDGEM EN T S . FOLLOW I NG TH E PR I NC I PLE LA I D DOWN BY THE HONBLE SUPREME COURT I N C I T VS. PONN I SUGAR AND CHEM I CALS LTD. 306 I TR 392 (SC), THE HONBLE JAMMU AND KASHM I R H I GH COURT IN THE CASE OF SHREE BALAJI ALLOYS, HELD THAT THE SUBS I DY BY WAY OF EXC I SE DUTY REFUND AND I NTEREST SUBS I DY G I VEN BY THE CENTRAL GOVERNMENT FOR SETT I NG UP NEW I NDUSTR I ES I N NOT I F I ED BACKWARD AREAS I N JAMMU AND KASHM I R WAS 15 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT A RECE I PT ON CAP I TAL ACCOUNT AND NOT I NCOME. THE DECISION OF HONBLE JAMMU & KASHMIR HIGH COURT HAS BEEN RECENTLY AFFIRMED BY HONBLE SUPRE ME COURT. THE FACTS I N ALL THESE CASE S ARE I DENT I CAL TO THE CASE OF THE ASSESSEE WITH RESPECT TO SUBSIDY RECEIVED BY WAY OF REFUND/EXEMPTION OF EXCISE DUTY/VAT/SALES TAX. HOWEVER, THE ASSESS I NG OFF I CER HAS WRONGLY HELD THAT THE FACTS ARE D I FFERENT AND HAS R EFUSED TO FOLLOW TH I S JUDGEMENT. ONE OF THE REASON S G I VEN BY THE ASSESS I NG OFF I CE NOT TO FOLLOW TH E JUDGEMENT OF HONBLE BOMBAY HIGH COURT WAS THAT THE SLP AGA I NST TH I S JUDGMENT I S PEND I NG BEFORE THE HONBLE SUPREME COURT. 1 5 . I N THE CASE OF RASO I LTD. 33 5 I TR 438 (CAL), HONB LE CALCUTTA H I GH COURT F OLLOW I NG THE PR I NC I PLE LA I D DOWN BY THE HO NBLE SUPREME COURT I N C I T VS. PONN I SUGAR AND CHEM I CALS LTD.; 306 I TR 392 (SC), HELD THAT THE SUBS I DY BY WAY OF SALES TAX I NCENT I VE FOR EXPANS I ON OF CAPAC I TY, MODERN I Z AT I ON AND I MPROV I NG MARKET I NG CAPAC I TY I S RECE I PT ON CAP I TAL ACCOUNT AND NOT I NCOME. 1 5 .1 I TAT SPEC I AL BENCH I N THE CASE OF V I NOD KUMAR JA I N VS. I TO 140 I TD 1 FOLLOW I NG THE ABOVE JUDGMENT OF THE HONBLE JAMMU AND KASHM I R H I GH COURT , THE AMR I TSAR SPEC I AL BENCH OF THE HONBLE TR I BUNAL HELD THAT THE SUBS I DY BY WAY OF EXC I SE DUTY REFUND I S A CAP I TAL RECE I PT AND NOT I NCOME. 1 5 .2 I N THE CASE OF C I T VS. CHAPHALKAR BROS.351 I TR 309 (BOM): FOLLOW I NG THE PR I NC I PLE LA I D DOWN BY THE HONBLE SUPREME COURT I N C I T V S. PONN I SUGAR AND CHEM I CALS LTD.; 306 I TR 392 (SC), THE HONBLE BOMBAY H I GH COURT HELD THAT THE SUBS I DY BY AY OF GRANT OF CONCESS I ON I N ENTERTA I NMENT DUTY TO PROMOTE CONSTRUCT I ON OF MULT I PLEX THEATRE COMPLEXES WAS A RECE I PT ON CAP I TAL ACCOUNT AND NOT I NCO ME. 16 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT 1 6 . FURTHERMORE FOLLOW I NG THE PR I NC I PLE LA I D DOWN BY THE HONBLE SUPREME COURT I N C I T VS. PONN I SUGAR AND CHEM I CALS LTD.; 306 I TR 392 (SC) AND THE JUDGEMNET OF THE HONBLE BOMBAY H I GH COURT I N C I T VS. CHAPHALKAR BROS.; 351 I TR 309 (BOM), THE HONBLE GUJARAT H I GH COURT IN THE CASE OF BARODA INOX LEISURE LTD.(SUPRA) HELD THAT THE SUBS I DY BY WAY OF EXEMPT I ON FROM PAYMENT OF ENTERTA I NMENT TAX TO BOOST TOUR I SM SECTOR WAS A CAP I TAL RECE I PT AND NOT I NCOME. 1 7 . I N THE CASE OF C I T VS. K I RLOSKAR O I L ENG I NES L TD.;364 I TR 88 HONBLE BOMBAY HIGH COURT F OLLOW I NG THE ABOVE PR I NC I PLE LA I D DOWN BY THE HONBLE SUPREME COURT I N C I T VS. PONN I SUGAR AND CHEM I CALS LTD.;306 I TR 392(SC), HELD THAT THE SUBS I DY FOR SETT I NG UP OF NEW UN I T I S CAP I TAL REC E I PT AND NOT I NCOME. THE HONBLE H I GH COURT HELD AS UNDER: I ) THE CHARACTER OF A RECE I PT I N THE HANDS OF THE ASSESSEE HAS TO BE DETERM I NED W I TH RESPECT TO THE PURPOSE FOR WH I CH THE SUBS I DY I S G I VEN. THE PURPOSE TEST HAS TO BE APPL I ED. THE PO I NT OF T I ME AT WH I CH THE SUBS I DY I S G I VEN I S NOT RELEVANT. THE SOURCE I S I MMATER I AL. THE FORM OF SUBS I DY I S I MMATER I AL. THE MA I N COND I T I ON AND W I TH WH I CH THE COURT SHOULD BE CONCERNED I S THAT THE I NCENT I VE MUST BE UT I L I ZED BY THE ASSESSEE TO SET UP A NEW UN I T OR FOR SUBSTANT I AL EXPANS I ON OF T HE EX I ST I NG UN I T. II ) I F THE OBJECT OF THE SUBS I DY SCHEME I S TO ENABLE THE ASSESSEE TO RUN THE BUS I NESS MORE PROF I TABLY THE RECE I PT I S ON REVENUE ACCOUNT. ON THE OTHER HAND, I F THE OBJECT OF THE ASS I STANCE UNDER THE SUBS I DY SCHEME I S TO ENABLE THE ASSESSEE TO SET UP A NEW UN I T THE RECE I PT OF SUBS I DY WOULD BE ON THE CAP I TAL ACCOUNT. III ) ONCE THE UND I SPUTED FACTS PO I NTED TOWARDS THE OBJECT AND THAT BE I NG TO ENABLE THE ASSESSEE TO SET UP A NEW UN I T THEN THE RECE I PT WAS A CAP I TAL RECE I PT . 1 8 . WE HAD CAREFUL LY GONE THROUGH GUJARAT INDUSTRIAL POLICY 2003 AND INCENTIVE SCHEME 2001 FOR ECONOMIC DEVELOPMENT OF KACHCHH DISTRICT. AS PER GUJARAT 17 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT INDUSTRIAL POLICY FOR SETTING UP INDUSTRIAL PARK STATE GOVERNMENT WAS ENCOURAGING PARTICIPATION OF PRIVATE SECTOR FOR SETT IN G UP SMALL ES TATES AND SPECIALIZED INDUSTRIAL PARKS. AS PER THE SCHEME ELIGIBL E UNIT WILL BE PROVIDED SUBSIDY IN THE FORM OF SALES TAX EXEMPTION IN RESPECT OF UNITS HAVING INVESTMENT UPTO RS.10 CRORE , EQUAL TO 100 % FIXED ELIGIBLE INVEST MENT. IN CASE INVE STMENT IS MORE THAN 10 CRORE AND UPTO 50CRORES THE EXEMPTION WILL BE FOR 7 SEVEN YEARS PERIOD EQUAL TO 100% ON FIXED ELIGIBLE INVESTMENT. THE INCENTIVE SCHEME 2001 FOR ECONOMIC DEVELOPMENT OF KACHCHH DISTRICT CAME INTO FORCE FROM 31 JULY,2001 WHEREIN TH E F OLLOWING UNITS WERE ELIGIBLE UNDER THE SCHEME: - I. NEW SSI UNITS & NEW MEDIUM & LARGE SCALE UNITS ARE ELIGIBLE. II. EXPANSION AND DIVERSIFICATION OR MODERNIZATION PROJECTS OF THE EXISTING UNITS WILL NOT BE ELIGIBLE UNDER THIS SCHEME. III. NEW UNIT MEANS A SEPARATE LICENSE OR REGISTRATION SHALL HAVE TO BE OBTAINED OR NECESSARY AMENDMENTS SHOULD HAVE BEEN CARRIED OUT IN THE EXISTING LICENSE OR REGISTRATION. IV. SEPARATE IDENTIFIABLE INVESTMENT SHALL HAVE TO BE MADE. V. SEPARATE BUILDING AND BOOKS OF ACCOUNTS SHOULD HAVE BEEN MAINTAINED. VI. UNIT HAS TO COMMENCE COMMERCIAL PRODUCTION BEFORE 31.12.2005 VIII. THOSE UNITS WHO HAVE NOT COMMENCED COMMERCIAL PRODUCTION BEFORE 31.12.05 BUT HAD TAKEN EFFECTIVE STEPS BEFORE 31.12.05 ARE ALSO ELIGIBLE AS PIPELINE CASE. PIPELINE UNITS HAVE TO COMMENCE COMMERCIAL PRODUCTION BEFORE 31.12.2007. 1 9 . AS PER THE ABOVE SCHEME THE ELIGIBLE UNITS WILL BE ENTITLED FOR SALES TAX EXEMPTION. SIMILARLY EXCISE DUTY EXEMPTION WAS ALSO PROVIDED UNDER KACHCHH PACKAGE. GOVERNMENT OF INDIA, IN THE MINISTRY OF FINANCE, VIDE NOTIFICATION NO.39/2001 - CENTRAL EXCISE DATED 31 ST JULY 2001 HAS ANNOUNCED A 18 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT FIVE YEAR EXCISE HOLIDAY TO THE NEW INDUSTRIAL UNITS SET UP IN THE DISTRICT OF KACHCHH. 20 . WE HAD CAREFULLY GONE THROUGH THE RELEVANT TERMS OF EXCISE DUTY EXEMPTION - KACHCHH PACKAGE, WHEREIN WE FOUND THAT NEW UNITS ESTABLISHED AFTER THE ISSUE OF THE NOTIFICATION DATED 31.7.2001 ARE ELIGIBLE TO GET EXEMPTION FROM CENTRAL EXCISE. INITIALLY, THE UNIT HAS TO PAY THE EXCISE DUTY AND, THEREAFTER, SUBM IT A STATEMENT OF THE DUTY PAID LESS THE CREDIT AVAILED UNDER CENVAT CREDIT RULES 2001 TO THE CONCERNED JURISDICTIONAL EXCISE AUTHORITY TO CLAIM THE REFUND. AFTER DUE VERIFICATION OF THE CLAIM, THE AMOUNT WILL BE REFUNDED. IN CASE OF UNITS HAVING VALUE OF INVESTMENT IN PLANT AND MACHINERY LESS THAN RS.20CRORE, THE QUANTUM OF EXEMPTIONS AVAILABLE UP TO A MAXIMUM OF TWICE THE VALUE OF SUCH INVESTMENT, OF EXCISABLE GOODS EVERY YEAR. IN ALL OTHER CASES, NO SUCH MONETARY CEILING IS APPLICABLE. THE FACILITY OF EX EMPTION IS EXTENDED FOR A PERIOD OF FIVE YEARS FROM THE DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION. 20 .1 SCHEME FURTHER PROVIDES THAT NEW INDUSTRIAL UNIT MEANS A UNIT ESTABLISHED IN THE DISTRICT OF KUTCH BY ANY INDUSTRIAL UNDERTAKING DURING THE OPERATI VE PERIOD OF THIS SCHEME. THIS UNIT SHALL HAVE TO FULFILL THE FOLLOWING CONDITIONS FOR BEING QUALIFIED AS A NEW INDUSTRIAL PROJECT. (A) FOR NEW PROJECT, A SEPARATE LICENSE OR REGISTRATION SHALL HAVE TO BE OBTAINED OR NECESSARY AMENDMENTS SHOULD HAVE CARRIE D OUT IN THE EXISTING LICENSE OR REGISTRATION. 19 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT (B) FOR THE NEW PROJECT, SEPARATE IDENTIFIABLE INVESTMENT SHALL HAVE TO BE MADE AND IT SHOULD NOT BE A PART OF EXISTING PROJECT OR EXPANSION THEREOF. FOR NEW SCHEME, IT IS NECESSARY TO HAVE A SEPARATE BUILDING AND THE ACCOUNTS SHOULD ALSO BE MAINTAINED SEPARATELY. HOWEVER, THE NEW PROJECT USING THE UTILITIES SUCH AS WATER, POWER, STEAM AND POLLUTION CONTROL FACILITIES FORM THE EXISTING UNITS SHALL NOT LOOSE THE ELIGIBILITY TO RECEIVE THE INCENTIVES UNDER THE SC HEME. 20.2 AS PER CLAUSE ELIGIBLE UNITS WILL BE ABLE TO AVAIL OF THE BENEFITS OF SALES TAX EXEMPTION OR SALES TAX DEPARTMENT ON THEIR ELIGIBLE FIXED CAPITAL INVESTMENT. UNDER THE SALES TAX INCENTIVE, THE - TAX TO - BE RECOVERED AGAINST THE SALES PROCEEDS UND ER THE GUJARAT SALES TAX ACT OR CENTRAL SALE TAX ACT SHALL BE CONSIDERED. THE UNITS SHALL HAVE TO OPT FOR ONE OF THE FOLLOWING INCENTIVES. (A) SALES TAX EXEMPTION (B) SALES TAX DEFERMENT (C) COMPOSITE SCHEME FOR UNITS HAVING CAPITAL INVESTMENT EXCEEDING RS.1 00 CRORE. 20 .3 UNDER THE SALES TAX EXEMPTION THE ELIGIBLE UNIT WILL BE ENTITLED TO PURCHASE THE RAW MATERIALS, PACKING MATERIALS AND ALL THE PROCESSING MATERIALS UTILIZED FOR THE PURPOSE OF MANUFACTURING GOODS, WITHOUT THE PAYMENT OF SALES TA X. IN ADDITION IT WILL BE EXEMPT FROM THE PAYMENT OF SALES TAX IN RESPECT OF SALE OF FINISHED GOODS, INTERMEDIATES, BY- PRODUCTS, WASTE AND CRAP PRODUCED BY IT. THE INDUSTRIES OPTING FOR THE SCHEME OF SALES TAX EXEMPTION WILL BE ELIGIBLE TO RECEIVE BENEFIT S AS PER THE INPUT/OUTPUT NORMS PRESCRIBED UNDER THE EXIM POLICY OF CENTRAL GOVERNMENT FOR SALES TAX EXEMPTION AT VARIOUS STAGES OF THE PURCHASE OF 20 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT MATERIAL. FOR THE PURPOSE, THE UNIT SHALL HAVE TO SUBMIT A CERTIFICATE FROM CHARTERED ACCOUNTANT. SUCH CERTI FICATE SHALL INCLUDE THE DETAILS OF THE SALE OF FINISHED GOODS BASED ON THE PURCHASE AND UTILIZATION OF INPUT MATERIAL. ONE COPY OF THIS CERTIFICATE WILL HAVE TO BE SUBMITTED TO SALES TAX COMMISSIONER. THE NORMS FOR THE ITEMS WHICH ARE NOT COVERED UNDER TH E EXIM POLICY SHALL BE PRESCRIBED BY THE INDUSTRIES COMMISSIONER AND THE SAME WILL BE INFORMED TO THE SALES TAX COMMISSIONER. 21 . FROM THE RECORD WE FOUND THAT AFTER THE ASSESSEE FOUND TO BE ELIG I BLE FOR GRANT OF EXCISE DUTY EXEMPTION, THE COMPETENT AUTHO RITY I.E. OFFICE OF THE CHIEF COMMISSIONER OF CENTRAL E XCISE AHMEDABAD VIDE LETTER DATED 24.11.2005 ISSUE CERTIFICATE TO THE ASSESSEE WHICH READS AS UNDER: OFFICE OF THE CHIEF COMMISSIONER OF CENTRAL EXCISE L 7TH FLOOR, CENTRAL EXCISE BHAVAN, AMBAWADI AHME DABAD - 380 015 BY SPEED POST F. NO. V/30 - 02/CCO/KUTCH/03 - 0 4 DATE: 24 - 11 - 2005 TO, M/S. MAN INDUSTRIES (INDIA) LTD., SURVEY NO. 485/2, ANJAR - MUNDRA HIGHWAY, VILLAGE - KHEDOI, TALUKA - ANJAR, DISTRICT - KUTCH, GUJARAT. SI R, SUB: ISSUANCE OF CERTIFICATE TO M/S. MAN INDUSTRIES (INDIA) LTD., SURVEY NO. 485/2, ANJAR - MUNDRA HIGHWAY, VILLAGE - KHEDOI, TALUKA - ANJAR, DISTRICT - KUTCH, GUJARAT. ENCLOSED PLEASE FIND HEREWITH TWO CERTIFICATES DULY SIGNED BY THE COMMITTEE, ONE IN RESPECT OF SETTING UP OF THE ABOVE SAID UNIT IN KUTCH DISTRICT OF GUJARAT AND ANOTHER IN RESPECT OF ORIGINAL VALUE OF RS.88,70,70,832/ - (RUPEES EIGHTY EIGHT CRORE SEVENTY LAKH SEVENTY 21 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT THOUSAND EIGHT HUNDRED THIRTY TWO ONLY) AS INVESTMENT MADE IN PLANT AND MACHINERY. ' YOURS FAITHFULLY, SD/ - DEPUTY COMMISSIONER (CCO) ENCL. AS ABOVE. COPY TO: THE COMMISSIONER, CENTRAL EXCISE, RAJKOT ALONG WITH ABOVE MENTIONED TWO ORIGINAL CERTIFICATES. OFFICE OF THE CHIEF COMMISSIONER OF CENTRAL EXCISE L 7TH FLOOR, CENTRAL EXCISE AHMEDABAD ZONE AHMEDABAD 7TH FLOOR, CENTRAL EXCISE BHAVAN, B/H. POLYTECHNIC BUS - STAND, NR. PANJRAPOLE, AHMEDABAD - 380 015 F. NO. V /3 0 - 2/CCO/KUTCH/03 - 04 DATE: CERTIFICATE THIS IS TO CERTIFY THAT THE ORIGINAL VALUE OF INVESTMENT IN PLANT AND MACHI NERY IN THE FACTORY OF MIS. MAN INDUSTRIES (INDIA) LTD., SURVEY NO. 485/2, ANJAR - MUNDRA HIGHWAY, VILLAGE - KHEDOI, TALUKA : ANJAR, DIST. - KUTCH, GUJARAT HAVING CENTRAL EXCISE REGISTRATION NO. AAACM2675GXM003 IN TERMS OF NOTIFICATION. NO. 39/2001 - CE DATED 3 1.07.2001 IS RS. 88,70,70,832/ - ( EIGHTY EIGHT CRORES SEVENTY LAKHS SEVENTY THOUSAND EIGHT HUNDRED THIRTY TWO ONLY). THIS CERTIFICATE IS ISSUED ON THE BASIS OF A CERTIFICATE DATED 28.03.2005 ISSUED BY PRADEEP H. AGARWAL & ASSOCIATES, CHARTERED ACCOUNTANTS , MUMBAI. THIS CERTIFICATE IS ISSUED IN TERMS OF PARA 3(IV) OF NOTFN. NO. 39/2001 - CE DATED 31.07.2001 FOR THE PURPOSE OF AVAILING THE EXEMPTION UNDER THE SAID NOTIFICATION. SD/ - SD/ - (D. RAJGOPALANI) (S.C. MATHUR) PRI NCIPAL SECRETARY CHIEF COMMISSIONER INDUSTRIES & MINES DEPARTMENT CENTRAL EXCISE & CUSTOMS GOVERNMENT OF GUJARAT AHMEDABAD ZONE 22 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT TO, DATE OF ISSUE: 24/11/2005 M/S. MAN INDUSTRI ES (INDIA) LTD., SURVEY NO. 485/2, ANJAR - MUNDRA HIGHWAY, VILLAGE - KHEDOI, TALUKA - ANJAR, DISTRICT - KUTCH, GUJARAT. COPY TO: THE COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, RAJKOT 2 2 . SIMILARLY FINAL ELIGIBILITY CERTIFICATE HAS BEEN ISSUED BY THE S ALES TAX AUTHORITY WHICH READS AS UNDER: FINAL ELIGIBILITY CERTIFICATE NO: N A K/V - 25/ RECTIFIED CERTIFICATE/RU LE - 5( 2 )/08 - 07 /G.8 703/05 OFFICE OF THE DY. COMMERCIAL TAX COMMISSIONER, WARD - 25, GANDHIDHAM. (KUTCH) DATE: 28/09/2008. TO, M/S.MAN INDUSTRIES (I) LTD., KHEDOI, TALUKA ANJAR. SUB: INCREASE IN AMOUNT OF TAX EXEMPTION/TAX REMISSION UNDER GUJARAT VALUE ADDE D TAX ACT 2003, RULE 5 (2) REFERENCE: (1) CERTIFICATE NO.K - 5(2)/REMISSION/42/06 - 07 DATED:30/08/2006 ISSUED FROM OUR OFFICE. (2) FINAL ELIGIBILITY CERTIFICATE NO. IC/INC/ST/KUTCH/T - 5/1741 DATED 10/06/2006 ISSUED BY COMMISSIONER OF INDUSTRIES, BHUJ/GANDHI NAGAR. (3) YOUR APPLICATION DATED 16/06/2008 FOR CORRECTION. DEAR SIR, AS MENTIONED IN CERTIFICATE IN REFERENCE TO 1 ABOVE, AMOUNTING TO RS,26,59,47,000/ - AS TAX EXEMPTION/TAX REMISSION WAS SANCTIONED FOR THE PERIOD 28/03/2005 TO 28/03/2015. HENCE, ACC ORDING TO APPLICATION MENTIONED IN REFERENCE 3 AND CERTIFICATE MENTIONED IN REFERENCE 2 FOR AMOUNT OF RS.26,59,47,000/ - TAX EXEMPTION/TAX REMISSION CERTIFICATE 49(2) FOR PERIOD 29/03/2005 TO 31/03/2006 AND 01/04/2006 TO 28/03/2015 IS SANCTIONED UNDER GUJAR AT VALUE ADDED TAX 2003, RULE 5(2). 23 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT AS PER ABOVE DETAILS, CERTIFICATE MENTIONED IN REFERENCE 2 TAX EXEMPTION/TAX REMISSION OF AMOUNT RS.148,13,04,000/ - (RS. ONE HUNDRED FORTY EIGHT CRORES THIRTEEN LAKHS FOUR THOUSAND ONLY) IS SANCTIONED. PLACE: GANDHID HAM DATED: 29/09/2008 SD/ - DY.COMMERCIAL TAX COMMISSIONER, WARD - 25, GANDHIDHAM, (KUTCH). COPY TO: DIRECTOR, E GOVERNANCE CELL, OFFICE OF THE COMMERCIAL TAX COMMISSIONER, AHMEDABAD. COP Y TO: ASSISTANT COMMERCIAL TAX COMMISSIONER, OFFICE OF THE COMMERCIAL TAX, BHUJ/GANDHIDHAM. SD/ - DY.COMMERCIAL TAX COMMISSIONER, WARD - 25, GANDHIDHAM, (KUTCH). MINISTRY OF FINANCE HAS NOTIFIED THE SCHEME OF EXEMPTION FROM EXCISE DUTY FOR THE DISTR ICT OF KUTCH IN THE STATE OF GUJARAT. THE SCHEME IS EFFECTIVE FOR A PERIOD OF 5 YEARS. THE SCHEME IS APPLICABLE TO ALL GOODS WITH EXCEPTION OF TOBACCO AND TOBACCO PRODUCTS. GOODS ATTRACT.ING SPECIAL EXCISE DUTY AND GOODS THAT ARE CHARGEABLE TO A CONFESSION AL RATE OF DUTY OF 4% OR 8%. IT HAS BEEN DECIDED TO EXEMPT GOODS MANUFACTURED IN NEW FACTORIES THAT ARE SET UP IN THE DISTRICT OF KUTCH WITHIN TWO YEARS FROM NOW. IF THE INVESTMENT ON PLANT AND MACHINERY IS NOT LESS THAN RS. 20 C RORE, GOODS MANUFACTURED BY THE FACTORY SHALL BE EXEMPT FROM EXCISE DUTY WITHOUT ANY LIMIT. HOWEVER, IF THE INVESTMENT IS LESS THAN RS. 20 CRORE, THE YEARLY EXEMPTION SHALL BE RESTRICTED TO CLEARANCES UPTO TWICE THE VALUE OF SUCH INVESTMENT. INDUSTRIAL UNIT INTENDING TO AVAIL OF THE SCHEME OF EXEMPTION SHALL HAV E TO OBTAIN CERTIFICATE FROM TH E COMMITTEE COMPRISING THE CHIEF COMMISSIONER OF CENTRAL EXCISE, VADODARA AND THE PRINCIPAL SECRETARY TO THE GOVERNMENT OF GUJARAT, DEPARTMENT OF INDUSTRIES TO THE EFFECT THAT THE UNIT IS A NEW UNIT SET UP IN THE DISTRICT OF KUTCH. IT IS CLARIFIED THAT MERE CHANGE IN THE NAME OR IN THE NATURE OF OWNERSHIP OR A CHANGE IN LOCATION OF AN EXISTING UNIT WOULD NOT BE CONSIDERED AS A NEW INDUSTRIAL UNIT 24 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT THE MINISTRY OF FINANCE HAS ALSO CLARIFIED T HAT IF THE GOODS PRODUCED IN THE DISTRICT OF KUTCH ARE IN THE NATURE OF INDUSTRIAL INPUTS OR CAPITAL GOODS, THE USER - FACTORY SHALL BE ENTITLED TO CLAIM CENVAT CREDIT OF THE DUTY PAYABLE ON SUCH INPUTS OR CAPITAL GOODS. 2 3 . WE ALSO FOUND THAT SIMILAR GUI DELINES WAS ISSUED WITH RESPECT TO D EFERMENT UNDER GUJ A RAT VALUE ADDED TAX (GVAT SCALE W.E.F. 1 ST APRIL, 06). AS PER GVAT RULES THERE WAS PROVISION OF REMISSION OF TAX, REFUND OF TAX PAID ON PURCHASE. AS PER THE RELEVANT RULES OF THE SCHEME THE ELIGIBLE UN IT AVAILING TAX REMISSION SHALL COLLECT THE TAX ON SALES EFFECTED BY IT AND SHALL NOT PAY SUCH TAX INTO GOVERNMENT TREASURY. THE CONCERNED COMMERCIAL TAX OFFICER SHALL PASS ORDER FOR REMISSION OF SUCH TAX SEPARATELY FOR EACH TAX PERIOD. 2 3 . 1 AS PER RULE 18B(4) THE ELIGIBLE UNIT SHALL BE ENTITLED TO EMISSION OF THE C ENTRAL SALES TAX PAYABLE UNDER THE PROVISIONS OF THE CENTRAL SALES TAX ACT,1956 ON THE SALES EFFECTED BY HIM IN THE COURSE OF INTER - STATE TRADE AND COMMERCE. 2 3 . 2 IN PURSUANCE OF THE ABOVE SCH EME THE INDUSTRIAL COMMISSIONER HAS GRANTED FINAL ELIGIBILITY CERTIFICATE TO THE ASSESSEE DATED 4 TH JUNE 2008 AMOUNTING TO RS.14813.04 LACS FOR SALES TAX EXEMPTION TO ASSESSEE. 2 4 . F ROM THE RECORD WE FOUND THAT IN ACCORDANCE WITH THE PROVISION OF SUB RULE (3) & (4) OF RULE 18 B OF GUJARAT VALUE ADDED TAX RULES, 2006 THE ASSESSEE HAD COLLECTED VALUE ADDED TAX (VAT) AND CENTRAL SALES TAX (CST) SEPARATELY ON SALES EFFECTED BY IT AND DID NOT PAY SUCH VAT AND CST TO THE GOVERNMENT TREASURY. 25 . WE HAD VERIFIED THE PURCHASE ORDERS PLACED ON RECORD WHICH WERE RECEIVED FROM CUSTOMERS WHEREIN VAT/CST AMOUNT IS TO BE CHARGED ON SALES PRICE AND TO 25 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT BE COLLECTED AS A PART OF INVOICE VALUE IT CAN BE OBSERVED FROM THE PO RECEIVED FROM M/S GAIL (INDIA) LIMITED DATED 20.11 .2008 AMOUNTING TO RS.267,88,36,636/ - WHEREIN CLAUSE 3.1 IT IS SPECIFICALLY MENTIONED THAT THE TOTAL ORDER VALUE IS INCLUDING CENTRAL SALES TAX (CST) @4%. FURTHER, ANNEXURE 2 OF THE SAID PO GIVES THE BREAKUP OF ENTIRE ORDER VALUE INCLUDING EX - WAREHOUSE UNI T PRICE, EXCISE DUTY ON THE UNIT PRICE AND UNIT SALES TAX APPLICABLE EXTRA. 2 6 . WE OBSERVED FROM THE PO RECEIVED FROM M/S GAIL (INDIA) LIMITED DATED 22.05.2008 AMOUNTING TO RS.108,43,40,915.84/ - THAT THE SALES TAX @4% IS SEPARATELY MENTIONED ON THE PO AND IS TO BE COLLECTED ON SALE PRICE PLUS EXCISE DUTY. IN THE GIVEN PO THE SALE PRICE FOR THE NTIRE CONTRACT IS RS.90,79,17,959/ - , TOTAL EXCISE DUTY INCLUDING CESS IF RS.13,09,21,769.69/ - TOTAL TO RS.103,88,39,728.69/ - AND SALES TAX IS RS.4,15,53,589.15/ - I/E 4% OF RS.103,88,39,728.69/ - . 2 7 . FROM THE ABOVE DOCUMENTARY EVIDENCE A S PLACED ON RECORD WE FOUND THAT ASSESSEE HAS TO CHARGE VAT SEPARATELY TO THE CUSTOMERS OVER AND ABOVE THE SALE PRICE OF THE PRODUCTS SUPPLIED. WE HAD ALSO VERIFIED INVOICES RAISED BY TH E ASSESSEE WHEREIN THE VAT @4% IS CHARGED OVER AND ABOVE THE INVOICE VALUE AND COLLECTED FROM THE CUSTOMERS. THUS, IT IS EVIDENT THAT ASSESSEE HAVE AVAILED THE SALES TAX REMISSION SCHEME WHEREIN ASSESSEE IS CHARGING VAT/CST SEPARATELY ON THE SALE PRICE AN D COLLECTING THE SAME FROM CUSTOMERS. WE HAD ALSO VERIFIED MONTHLY SUMMARY OF VAT AND CST RETURNS FILED FOR FY 2008 - 09,2009 - 10 AND 2010 - 11 (I.E. AY 2009 - 10, 2010 - 11 AND 2011 - 12) WHICH IS THE 26 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT TOTAL OF INVOICES RAISED DURING A PARTICULAR MONTH. AS PER VAT RE TURN OF APRIL - 2008 ASSESSEE HAD TURNOVER OF RS.491,20,100/ - AND TOTAL TAX INCLUDING ADDITIONAL TAX IS SHOWN AT RS.19,77,730/ - (19,64,805+12,925). FURTHERMORE THE ASSESSEE HAS CLAIMED THE ENTIRE OUTPUT TAX OF RS.19,77,730/ - AS REMISSION OF TAX U/S 41 OF GUJ ARAT VALUE ADDED TAX ACT,2003. THUS THE ASSESSEE HAVE CLAIMED THE ENTIRE OUTPUT TAX UNDER REMISSION OF TAX. 2 8 . FROM THE RECORD WE ALSO FOUND THAT IN SUPPORT OF THE ASSESSEES CLAIM OF REMISSION, THE COMMERCIAL TAX DEPARTMENT OF GUJARAT ALSO PASSED THE ASS ES SMENT ORDERS FOR THE FINANCIAL Y EAR 2008 - 09, 2009 - 10 & 2010 - 11 ACCEPTING THE FACT THAT THE VAT AND CST AMOUNT COLLECTED UNDER REMISSION SCHEME IS AS PER ELIGIBILITY CERTIFICATE ISSUED TO THE ASSESSEE. WE HAD ALSO VERIFIED ASSESSMENT ORDER IN FORM - 304, WH EREIN, IN PART V OF THE SAID ORDER THE ASST. COMMISSIONER OF COMMERCIAL TAX HAS DETERMINED THE AMOUNT OF REMISSION UNDER SECTION 41 AT RS.595,86,725/ - FOR VAT. ALSO IN FORM - VII(B) THE SAME OFFICER HAS PASSED ORDER FOR REMISSION UNDER SECTION 9(2) OF RS.842 ,81,411/ - UNDER CST. WE HAD ALSO VERIFIED THE REMISSION ORDER PASSED FOR FY 2008 - 09 (AY 2009 - 100 WHEREIN THE VAT AND CST REMISSION IS DETERMINED AND ACCEPTED BY THE COMMERCIAL OFFICER. 2 9 . FURTHERMORE THE TAX EXEMPTION AND DEFERMENT GRANTED TO THE INDUST RIAL UNITS BY THE STATE GOVERNMENT UNDER THE EARLIER LAW AND CONTINUED AS SUCH UNDER THE GOVERNMENT NOTIFICATION, FINANCE DEPARTMENT NO (GHN - 43) VAT - 2006/S.5(2)(2) - TH, DATED THE 1 ST APRIL,2006. SUCH INDUSTRIAL UNITS SHALL BE ENTITLED TO TAX INCENTIVES ONLY FOR THE BALANCE AMOUNT AND FOR THE BALANCE PERIOD OF TAX 27 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT INCENTIVE AS ON THE APPOINTED DAY ON THE BASIS OF THE CERTIFICATE FOR ENTITLEMENT ISSUED UNDER THIS CHAPTER. 30 . AS PER RULE18(B) THE ELIGIBLE UNIT SHALL BE ENTITLED FOR EMISSION OF THE CENTRAL SALE S TAX PAYABLE UNDER THE PROVISIONS OF THE CENTRAL SALES TAX ACT,1956 ON THE SALES EFFECTED BY HIM IN THE COURSE OF INTER - STATE TRADE AND COMMERCE. WE HAD ALSO VERIFIED FINAL ELIGIBILITY CERTIFICATE ISSUED BY DEPUTY COMMISSIONER WARD25, GANDHIDHAM (KUTCH) D ATED 29.09.2008, .. TO WHICH TAX EXEMPTION/ TAX REMISSION AMOUNT TO RS.148,13, 4000/ - WAS SANCTIONED. 3 1 . IN VIEW OF THE ABOVE DOCUMENTARY EVIDENCE THERE IS NO MERIT IN THE OBSERVATION OF THE CIT(A) THAT ASSESSEE WAS NOT ELIGIB LE FOR ANY AMOUNT OF SALES T AX EXEMPTION. 3 2 . WE HAD GONE THROUGH VARIOUS CLASS OF INCENTIVE SCHEME SO LAUNCHED BY GOVERNMENT OF INDIA AND FOUND THAT ASSESSEE HAS SET UP NEW UNIT IN ACCORD ANCE WITH THE SCHEME AND WAS IN RECEIPT OF VARIOUS TYPES OF INCENTIVE IN THE FORM OF SALES TAX EXEMPTION/ DEFERMENT , EXEMPTION OF WEIGHT AND EXCISE DUTY REFUND AS PER THE JUDICIAL PRONOUNCEMENTS LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS AND CHEMICALS LTD. (SUPRA) WE HAVE TO APPLY PURPOSE TEST FOR JUDGING NATURE OF SUBSIDY RECEIV ED BY ASSESSEE. AS THE OBJECT OF THE SUBSIDY SCHEME AS DISCUSSED ABOVE WAS TO ENABLE THE ASSESSEE TO SET UP NEW UNIT OR TO EXPAND EXISTING UNIT, THE RECEIPT OF SUBSIDY IS TO BE TAKEN ON CAPITAL ACCOUNT . FORM OR MECHANISM THROUGH WHICH SUBSIDY IS GIVEN IS I RRELEVANT . A S PER THE 28 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT PROVISIONS OF INCENTIVE SCHEME AS DISCUSSED ABOVE, BENEFIT WAS AVAILABLE ONLY TO NEW OR SUBS TANTIALLY EXPANDED UNITS . 3 3 . IN SOME AND SUBSTANCE RECEIPT IN HAND S OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO PURPOSE FOR WHICH T HE SUBSIDY IS GIVEN. ONE HAS TO APPLY THE PURPOSE TEST. HOWEVER, LOWER AUTHORITIES MISDIRECTED IN HOLDING THAT SINCE SUBSIDY WAS TO BE RECEIVE D ONLY AFTER COMMENCEMENT OF COMMERCIAL PRODUCTION, THE SAME WAS REVENUE IN NATURE. HONBLE SUPREME COURT IN THE CASE OF PONNI SUGAR & CHEMICALS LTD.(SUPRA) HAD CLEARLY HELD THAT CHARACTER OF RECEIPT IN THE HANDS OF THE ASSESSEE HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FOR WHICH THE SUBSIDY IS GIVEN. MERELY BECAUSE SUBSIDY WAS TO BE PAID AFTER COMMENCEMENT OF PRO DUCTION WILL NOT ALTER THE NATURE OF RECEIPT, INSOFAR AS THE POINT OF TIME AT WHICH THE SUBSIDY PAID OR THE SOURCE FROM WHICH THE SUBSIDY IS PAID IS IMMATERIAL, EVEN THE FORM IN WHICH SUBSIDY IS PAID IS ALSO IMMATERIAL AS OBSERVED BY THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD.(SUPRA). APPLYING THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE SUPREME COURT IN VARIOUS JUDICIAL PRONOUNCEMENTS AS DISCUSSED ABOVE AS WELL AS VARIOUS HIGH COURT AND TRIBUNAL WE HAVE NO HESITATION TO HOLD THAT VARIOUS INCENTIVES RECEIVED BY ASSESSEE WAS IN NATURE OF CAPITAL RECEIPT AND THE SAME WAS MEANT FOR ESTABLISHING NEW UNIT. ACCORDINGLY, WE SET ASIDE ORDERS OF LOWER AUTHORITIES AND DIRECT THE AO TO TREAT VARIOUS INCENTIVES RECEIVED BY ASSESSEE AS CAPITAL RECEIPTS NOT L IABLE TO TAX. 29 I TA NO. 6696,6697 &6698/M/14 (A.Y. 2009 - 12) M/S. MAN INDUSTRIES INDIA. LTD. VS. ACIT 3 4 . I N THE RESULT, ALL THE THREE APPEAL S OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED I N THE OPEN COURT ON 13 TH JULY , 201 6 SD/ - SD/ - (RAM LAL NEG I ) (R.C. SHARMA) / JUD I C I AL MEMBER / ACCOUNTANT MEMBER MUMBA I ; DATED : 13 . 0 7 .201 6 PS. ASHW I N I / COPY OF THE ORDER FORWA RDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE C I T(A) 4. / C I T - CONCERNED 5. , , / DR, I TAT, MUMBA I 6. / GUARD F I LE / BY ORDER, / (DY./ASSTT. REG I STRAR) , / I TAT, MUMBA I .