Johnson Matthey India (P) Ltd., New Delhi V. Addl CIT, New Delhi

ITA 952/DEL/2011

• Counselvise Citation: 95220114 RSA 2011
• Duration Of Justice: 3 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-05-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 18-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N BHATIA
• Keywords: Capital asset; Capital receipt; Revised return
• Section: 234B; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D: NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA NO. 952/DEL/2011 ASSESSMENT YEAR: 2006- 2007 JOHNSON MATTHEY INDIA (P) LTD. VS. ADDL. CIT, C/O LUTHRA & LUTHRA LAW OFFICES RANGE -4 103, ASHOKA ESTATEM NE W DELHI, BARAKHAMBA ROAD, NEW DELHI. 110 001. PAN AAACJ2919A (APPELLANT) (RESP ONDENT) APPELLANT BY : VIKAS SRIVASTAVA, ADVOCAT E, SUMIT MANGAL, CA PARAG MOHANTY, ADVO CATE, M. S VARCHA BHATTACHARYA RESPONDENT BY : SHRI S.N. BHATIA, DR ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE ASSESSEE HAS IMPUGNED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS :- 1. THE ORDER PASSED BY THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) XX (HEREINAFTER REFERRED AS CIT (A) UNDER SECTION 250 OF THE ACT IS BAD IN LAW AND ON T HE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT(A) AS WELL AS LEARNED ASSESSING OFFICER (HEREINAFTER REFERRED THE AO) HAVE ERRED IN LAW AND ON THE FACTS ITA NO.952/DEL/2011 2 AND CIRCUMSTANCES OF THE CASE BY HOLDING THAT THE SALES TAX SUBSIDY, AMOUNTING TO RS. 2,00, 64,000 RECEIVED BY THE APPELLANT DURING THE RELEVANT PERIOD IS A REVENUE RECEIPT UNDER SECTION 28 (IV) OF THE ACT WHICH SHO ULD BE CHARGED TO TAX. 3. THE LEARNED CIT(A) AS WELL AS LEARNED AO HAVE ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF TH E CASE BY IMPOSING INTEREST UNDER SECTION 234B AND SECTION 234D. 4. THE ABOVE GROUNDS OF APPEAL ARE INDEPE NDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 2. THE ISSUE INVOLVED IS AS TO WHETHER THE SUM OF RS. 2,00,64,000/- RECEIVED ON ACCOUNT OF SALES TAX SUBSIDY IS REVENUE RECEIPT OR CAPITAL RECEIPT. 3. THE FACTS IN BRIEF ARE THAT DURING THE YEAR THE ASSESSEE HAD RECEIVED SALES TAX SUBSIDY TO THE EXTENT OF RS. 2,00,64,000/ -. THE ASSESEE CHARGES SALES TAX SEPARATELY WHICH IS OVER AND ABOVE THE SA LE PRICE OF GOODS SOLD TO THE CUSTOMER. WHILE RECORDING THE SALE TRANSACTION IN THE BOOKS OF ACCOUNTS, THE ASSESSEE RECOGNIZED IT AS A DEBTOR IN ITS BOOKS OF ACCOUNTS WITH THE TOTAL AMOUNT OF (SALES INCLUDING SALES TAX) AS MENTIONED IN THE INVOICE RAISED TO THE CUSTOMERS. SINCE THE ASSESSEE IS ENTITLED TO 50 % SALES TAX EXEMPTION, IT TRANSFERS 50% OF THE AMOUNT OF SALES TAX TO THE SAL ES TAX PAYABLE ACCOUNT AND REMAINING 50% TO THE CREDIT SIDE OF PROFIT AND LOSS ACCOUNT AS OTHER INCOME. THE AMOUNT OF SALES TAX RECOGNIZED IN SALE S TAX PAYABLE ACCOUNT IS FINALLY DEPOSITED BY THE ASSESSE TO THE GOVT. TREA SURY. THE ISSUE TO BE ITA NO.952/DEL/2011 3 DECIDED IS AS TO WHETHER THE 50% SALES TAX EXEMPTI ON OR SALES TAX SUBSIDY WAS OF CAPITAL NATURE OR OF REVENUE NATURE. THE AO DID NOT AGREE WITH THE SUBMISSION OF THE ASSESSEE AND TREATED THE SALES TA X SUBSIDY RECEIPT AS REVENUE IN NATURE U/S 28(IV) OF THE ACT. THE LD. CI T(A) HAS ALSO UPHELD THE SAME. 4. AT THE OUTSET OF HEARING THE LD. AR POINTED OUT THAT THE ISSUE RAISED IS NOW FULLY COVERED BY THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MARUTI SUZUKI INDIA LTD. VS. ACIT, ITA NO. 1927/D/2010 AND OTHERS (ASSTT. YEAR 2005-06) ORDER DATED 19.8.2011. HE SUB MITTED THAT SIMILAR SCHEME OF THE GOVT. OF HARYANA WAS INVOLVED IN THE CASE OF MARUTI SUZUKI INDIA LIMITED (SUPRA).THE LD. AR ALSO REFERRED PAGE NO. 3 TO 12 OF THE FIRST APPELLATE ORDER WHEREIN THE POLICY OF THE GOVT. OF HARYANA REGARDING THE SALES TAX SUBSIDY AND THE SCHEME FRAMED THERE UNDER HAS BEEN REFERRED TO. HE SUBMITTED THAT THE APPELLANT HAD FILED APPLICATI ON FOR GRANT FOR TAX CONCESSION IN ACCORDANCE WITH RULE 28 C. IN THE AP PLICATION IT HAD BEEN MENTIONED THAT THE ASSESSEE IS A NEW INDUSTRIAL UNI T WHICH HAS MADE FIXED CAPITAL INVESTMENT AND SHALL BE ALLOWED A TAX CONCE SSION. THE ASSESSEE ALSO DISCLOSED THE AMOUNT OF TAX LIKELY TO BE CONVERTED INTO CAPITAL SUBSIDY. THE PURPOSE AND INTENT FOR GRANT OF SUBSIDY IS TO ENCOU RAGE INVESTMENT IN CERTAIN AREAS OF HARYANA. ONLY ON FULFILLMENT OF TH E PRESCRIBED CONDITIONS, AN ENTITY IS ENTITLED TO CLAIM THE TAX CONCESSION. RULE 28 C ITSELF RECOGNIZES ITA NO.952/DEL/2011 4 THAT THE SAID EXEMPTION IS IN THE NATURE OF CAPITAL SUBSIDY WHICH IS CLEARLY EVIDENT THEREFROM. HE SUBMITTED THAT SUBJECT TO OTH ER PROVISIONS OF RULE 28C, AN ELIGIBLE INDUSTRIAL UNIT HOLDING A VALID EN TITLED CERTIFICATE SHALL BE ENTITLED TO THE CONCESSION OF DEFERMENT OF PAYMENT OF SALES TAX INCLUDING CENTRAL SALES TAX AND CONCESSION OF THE SAME TO CAP ITAL SUBSIDY COMPUTED ON THE SALE OF GOODS (INCLUDING BY PRODUCTS AND WAS TES) MENTIONED BY THE UNIT OR ARISING FROM THE PROCESS OF MANUFACTURE AND DECLARED IN THE SALES TAX RETURNS FILED BY THE UNIT. LD. AR ALSO REFERRED SECTION 25A DEALING WITH DEFERMENT OF TAX WHICH PROVIDES THAT THE STATE GOVE RNMENT MAY DEFER PAYMENT OF TAX BY SPECIFIED CLASS OF INDUSTRIES IN THE INTEREST OF INDUSTRIAL GROWTH OF THE STATE. HE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS :- 1. PONNI SUGARS & CHEMICALS LTD. 273 ITR 392 (S C) 2. SADICHHA CHITRA VS. COMMISSIONER OF INCOME T AX [(1991 (189) ITR 774 BCM] 3. COMMISSIONER OF INCOME TAX VS. P.J. CHEMICAL S LTD. [1994 (210) ITR 830 SC] 4. M/S. SAHNEY STEEL & PRESS WORKS LTD. VS. COM MISSIONER OF INCOME TAX [ 1997 (228) ITR 253 SC] 5. MARUTI UDYOG LTD. VS. CCE [2004 (166) ELT 360 DEL] 6. DEPUTY COMMISSIONER OF INCOME TAX VS. RELIAN CE INDUSTRIES LTD. MUMBAI [2005 (273) ITR 16 MUM] 7. DEPUTY COMMISSIONER OF COMMISSIONER OF INCOM E TAX VS. PONNI SUGARS & CHEMICALS LTD. [2008 (273) ITR 392 SC] 8. DEPUTY COMMISSIONER OF ZENITH FIBRES LTD. VS . INCOME TAX AND ANOTHER [2009 (319) ITR 208 SC] ITA NO.952/DEL/2011 5 9. M/S. MEPCO INDUSTRIES LTD. VS. COMMISSIONER OF INCOME TAX AND ANOTHER [2009 (319) ITR 208 SC) 10. COMMISSIONER OF INCOME TAX VS. SIYA RAM GARG HUF [ITA NO. 679 OF 2010] 11. SHREE BALAJI ALLOYS AND OTHERS VS. COMMISSI ONER OF INCOME TAX AND OTHERS (2011 (239) CTR 70 J & K) 12. COMMISSIONER OF INCOME TAX VS. RASOI LTD. (ITA NO.258 OF 2011) 13. SASISRI EXTRACTIONS LIMITED VS. ACIT (2010 ) 122 ITD 428 (VISAKHAPATNAM) 5. THE LD. DR ON THE OTHER HAND TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW ESPECIALLY THE CONTENTS OF PARA 3 .1 OF THE FIRST APPELLATE ORDER. HE SUBMITTED THAT THE LD. CIT(A) AFTER HAVIN G DISCUSSING THE FACTS OF THE CASE AND CITED DECISIONS HAVE COME TO THE CONCL USION THAT THE SUBSIDY IN QUESTION WAS GIVEN TO THE ASSESSEE FOR CARRYING OUT BUSINESS OPERATIONS AFTER COMMENCEMENT OF THE PRODUCTION HENCE IT WAS A SSISTANCE FOR THE PURPOSE OF TRADE. THUS IT WAS RIGHTLY HELD AS REVE NUE RECEIPT. HE CITED FOLLOWING DECISIONS IN SUPPORT :- 1. CIT VS. RELIANCE INDUSTRIES LTD. CIVIL APPEAL NO. 7769 OF 2011 (SC) 2. CIT VS. ABHISHAK INDUSTRIES LTD. 2006 156 TAXM AN 257 (P & H) 3. M/S. MEPCO INDUSTRIES LTD. VS. COMMISSIONER OF INCOME TAX (2009) 185 TAXMAN 405 (SC) 4. L.G. ELECTRONICS INDIA PVT. LTD. VS. ACIT ITA NO. 1404 DELHI 2007, ASSTT. YEAR 2002-03 ORDER DATED 26.2.2010 5. M/S. JOHNSON MATTHEY INDIA PVT. LTD. VS. STAT E OF HARYANA AND OTHERS CWP NO. 12075 OF 2007 DECISION DATED 27 TH NOVEMBER, 2007 (P&H) ITA NO.952/DEL/2011 6 6. IN THE REJOINDER LD. AR SUBMITTED THAT THE HONBLE SUPREME COURT IN THE CASE OF PONNI SHUGAR AND CHEMICALS LTD. (SUPRA) WHILE DISCUSSING THE NATURE OF THE CONCERNED SUBSIDY SCHEME HAS OBSERVED ONE MORE ASPECT NEEDS TO BE MENTIONED THAT IN SAHNEY STEEL & PRESS WORKS LTD. THE HONBLE SUPREME COURT FOUND THAT THE ASSESSEE WAS FREE TO U SE THE MONEY IN ITS BUSINESS ENTIRELY AS IT LIKED. IT WAS NOT OBLIGED TO SPEND THE MONEY FOR A PARTICULAR PURPOSE. IN THE CASE OF SEAHAM HARBOUR D OCK CO. THE ASSESSEE WAS OBLIGED TO SPEND THE MONEY FOR EXTENSION OF ITS DOCKS. THIS ASPECT IS VERY IMPORTANT. IN THE PRESENT CASE ALSO RECEIPT OF THE SUBSIDY WAS CAPITAL IN NATURE AS THE ASSESEE WAS OBLIGED TO UTILIZE THE SUBSIDY ONLY FOR REPAYMENT OF TERM LOANS UNDERTAKEN BY THE ASSESSEE FOR SETTING UP NEW UNITS / EXPANSION OF EXISTING BUSINESS. AS PER THE LD. AR THE ABOVE OBSERVATIONS OF THE HONBLE SUPREME COURT HAD TO TH E BELIEF THAT A RESTRICTION OF UTILIZATION OF SUBSIDY FUNDS IS ESSE NTIAL TO DETERMINE THAT THE SUBSIDY IS CAPITAL IN NATURE. WHILE CITING THIS BR OAD PROPOSITION, LD. AR SUBMITTED THAT THIS IS NOT A NECESSARY PRE CONDITI ON FOR DETERMINING THAT A SUBSIDY IS CAPITAL IN NATURE. HIS SUBMISSION IS FIR MLY GROUNDED IN THE OBSERVATIONS OF THE HONBLE SUPREME COURT IN PONNI SUGARS & CHEMICALS LTD. ITSELF. HE SUBMITTED THAT THE HONBLE SUPREME COURT IN PONNI SUGARS & CHEMICALS LTD. HAS LAID STRESS ON THE PURPOSE TEST AND AT THE SAME TIME HAS DISTINGUISHED THE FACTS OF SAHNEY STEEL & PRESS WOR KS LTD. . IT IS NOT ENOUGH TO STATE THAT THE PURPOSE OF THE SUBSIDY WAS FOR CAPITAL PURPOSES. ITA NO.952/DEL/2011 7 THIS HAS TO BE PROVED TAKING INTO ACCOUNT THE NATU RE OF THE SCHEME AND ATTENDANT CIRCUMSTANCES. HE SUBMITTED THAT IN THE C ASE OF PONNI SUGARS & CHEMICALS LTD. THE HONBLE COURT LATCHED ON THE F ACT THAT THE SUBSIDY WAS GRANTED TO REPAY TERMS LOAN WHICH WAS TAKEN FOR ACQ UIRING CAPITAL ASSETS. THIS VIEW OF HONBLE SUPREME COURT WAS MATERIAL F OR DETERMINING THE CHARACTER OF THE SUBSIDY. THE HONBLE COURT HAS NOW HERE SAID THAT THIS IS A SINE QUA NON FOR DETERMINING WHETHER A PARTICULAR S UBSIDY IS CAPITAL OR REVENUE IN NATURE. CLARIFYING THE DECISION THE HON BLE SUPREME COURT HAS OBSERVED FURTHER THAT IF THE OBJECT OF THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY THEN T HE RECEIPT IS OF REVENUE IN NATURE. ON THE OTHER HAND IF THE OBJECT OF THE A SSISTANCE UNDER THE SUBSIDY SCHEME WAS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT, THEN THE RECEIPT OF THE S UBSIDY WAS OF CAPITAL ACCOUNT. THEREFORE, IT IS THE OBJECT FOR WHICH THE SUBSIDY / ASSISTANCE IS GIVEN WHICH DETERMINES THE NATURE OF THE INCENTIVE SUBSIDY. 7. THE LD. AR SUBMITTED THAT SUBSIDY IN CAS E OF THE PRESENT ASSESSEE WAS GRANTED FOR A SPECIFIC PURPOSE I.E. INCENTIVIZI NG SETTING UP OF INDUSTRIES IN HARYANA FOR SPEEDY INDUSTRIAL DEVELOPMENT AS WE LL AS CONSOLIDATION OF THIS DEVELOPMENT IN THE STATE. IT IS EVIDENT FROM T HE SCHEME AS WELL AS THE HARYANA STATE INDUSTRIAL POLICY OF 1999. ITA NO.952/DEL/2011 8 8. HAVING GONE THROUGH THE ORDERS OF THE AU THORITIES AND MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE WAS AWARDED AN ENTITLEMENT CERTIFICATE UNDER RULE 28C OF THE HARYANA GENERAL S ALES TAX RULES, 1975. THIS CERTIFICATE ENTITLED THE ASSESSEE TO A TAX CON CESSION FOR A PERIOD OF TEN YEARS. THE SALES TAX SUBSIDY AS PER THE ASSESSEE WA S GRANTED BY HARYANA GOVERNMENT TO THE ASSESSEE UNDER THE INITIATIVE OF GOVERNMENT TO PROMOTE INVESTMENT IN CERTAIN AREAS OF HARYANA. THE ASSESSE E CLAIMED THAT SINCE IT HAD ESTABLISH ITS MANUFACTURING UNIT IN MANESAR (HA RYANA), IT BECAME ELIGIBLE FOR THE SAID INCENTIVE AS CAPITAL RECEIPT WHICH DURING THE YEAR WAS RS. 2,00,64,000/-. THE SALES TAX CONCESSION IS AVAI LABLE TO SUCH INDUSTRIAL UNIT WHICH DULY FULFILLS THE PRESCRIBED CONDITIONS SHOWN UNDER RULE 28C OF HARYANA GENERAL SALES TAX RULES , 1975 SECTION 25A OF THE HARYANA GENERAL SALES TAX ACT DEALS WITH DEFERMENT OF TAX A ND PROVIDES THAT THE STATE GOVERNMENT MAY DEFER PAYMENT OF TAX BY SPECIF IED CLASS OF INDUSTRIES IN THE INTEREST OF INDUSTRIAL DEVELOPMENT OF THE ST ATE.. FROM THE DECISIONS RELIED UPON, WE FIND THAT THE DELHI BENCH OF THE TR IBUNAL IN THE CASE OF MARUTI SUZUKI INDIA LTD. VS. ACIT (SUPRA) HAS OCCAS ION TO EXAMINE THE OBJECTIVE OF THE GRANT OF SIMILAR SUBSIDY BY THE IN DUSTRIAL POLICY 1999 ISSUED BY THE DEPARTMENT OF INDUSTRIES, GOVT. OF HARYANA A S WELL AS THE RELATED RULES OF HARYANA GENERAL SALES TAX RULES 1975 AND THE DECISION OF HIGH POWERED COMMITTEE AT ITS MEETING ON 14.6.2001 GRANT ING SALES TAX ON CONCESSION, WHEREBY THE ASSESSEE WAS REQUIRED TO P AY 50% OF THE TAX ITA NO.952/DEL/2011 9 COLLECTED AND RETAIN 50%. THE DELHI BENCH HAS ALSO EXAMINED ENTITLEMENT CERTIFICATE ISSUED TO THE ASSESSEE UNDER RULE 28 C OF THE HARYANA GENERAL SALES TAX RULES 1975 TO AVAIL THE SALES TAX CONCESS ION TO BE ALLOWED. THE DELHI BENCH OF THE TRIBUNAL HAS ALSO DISCUSSED SEVE RAL DECISIONS CITED BEFORE IT INCLUDING DECISION OF HONBLE SUPREME COURT IN T HE CASES OF PONNI SUGARS AND CHEMICAL LTD. (SUPRA) AND IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. (SUPRA). THE BENCH HAS ALSO DISCUSSED THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF SEAHAM HARBOUR DOCK CO. VS. C ROOK (1931) 16 TC 333. FOR A READY REFERENCE PARA 47 TO 48 OF THE SA ID DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MARUTI SUZUKI INDIA LTD. (SUPRA) ARE BEING REPRODUCED HEREUNDER :- 47. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONT ENTIONS AND GONE THROUGH THE RECORD INCLUDING THE SCHEME UNDER WHICH THE IMPUGNED SUBSIDY WAS RECEIVED BY THE ASSESSEE. THE CIT(A) WAS RIGHT IN HAVING COME TO THE CONCLUSION T HAT WHEN THE ASSESSEE SIGNED A LETTER DATED 1.12.2008 BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHEREIN IT WAS CLAIMED THAT THE DISPUTED RECEIPT BE EXCLUDED FROM THE TOTAL INCOME, WAS REQUIRED TO BE ADJUDICATED BY THE AO. M ERELY BECAUSE THE ASSESSEE WRONGLY INCLUDED THE INCOME IN THE RETURN OF INCOME, IT CANNOT BE BY ITSELF TAX THAT I NCOME IN THAT YEAR EVEN THOUGH LEGALLY SUCH INCOME DID NOT P ERTAIN TO THAT YEAR. THIS WAS HELD BY DELHI HIGH COURT IN THE CASE OF CIT VS. BHARAT GENERAL REINSURANCE CO. LTD. (1971) 81 ITR 303. AGAIN, THE DELHI TRIBUNAL IN THE CASE OF ACIT VS. TECHNOFAB ENGG. RELYING UPON THE CBDT CIRCULAR NO. 1 4 DATED 11.4. 1955, HAS EXPRESSED THE VIEW THAT OFFIC ERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DUTIE S TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN T HE MATTER OF CLAIMING AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INITIATIVE IN GUIDING A TAXPAYER WH ERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICA TE THAT ITA NO.952/DEL/2011 10 SOME REFUND/RELIEF IS DUE TO HIM. THE AO SHOULD HAV E THEREFORE ADJUDICATED UPON THE CLAIM OF THE ASSESSE E THAT WAS MADE DURING THE ASSESSMENT PROCEEDINGS, NOTWITHSTANDING THE FACT THAT THERE WAS NO REVISED RETURN FORTHCOMING FROM THE ASSESSEE. IN FACT WHEN THE CLA IM OF THE ASSESEE WAS BASED ON THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF PONNI SUGARS, THE AO SHOULD HA VE DISCUSSED THE ISSUE AND DECIDED. THEREFORE, WE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) INSOFAR A S HE PROCEEDED TO DEAL WITH THE SAME AND MADE THESE OBSERVATIONS. NOW, COMING TO THE MERITS OF THE MATT ER, THE ASSESSEE HAS UNDERTAKEN AN EXPANSION IN TERMS OF RU LE 28C OF GENERAL SALES TAX RULES 1975. THE OBJECTIVE OF T HE GRANT OF SUBSIDY BY WAY OF SALES TAX CONCESSION WAS TO GI VE ASSISTANCE TO THE ASSESSEE FOR ESTABLISHING A NEW INDUSTRIAL UNIT OR FOR SUBSTANTIAL EXPANSION OF AN EXISTING IN DUSTRIAL UNIT. THE OBJECTIVE OF THE GRANT OF THE SAID SUBSIDY WAS AGAIN MADE CLEAR BY THE INDUSTRIAL POLICY 1999 ISSUED BY THE DEPARTMENT OF INDUSTRIES, GOVT. OF HARYANA SPECIFIC ALLY STATING THAT ONE OF THE OBJECTIVES OF THE POLICY IS TO ATTRACT NEW INVESTMENT AND GROWTH OF THE EXISTING INDUSTRIE S. THE HIGH POWERED COMMITTEE AT ITS MEETING ON 14.6.2001 GRANTED SALES TAX CONCESSION TO IT WHEREBY THE ASSE SEE WAS REQUIRED TO PAY 50% OF THE TAX COLLECTED AND RETAIN 50% BUT THE MAXIMUM BENEFIT PERMISSIBLE ON ACCOUNT OF FIRST EXPANSION I.E. RS. 564.35 CRORE WOULD REMAIN THE CE ILING. IN PURSUANCE THEREOF, THE ASSESSEE WAS ALSO ISSUED ENTI TLEMENT CERTIFICATE UNDER RULE 28C OF THE HARYANA GENERAL S ALES TAX RULES, 1975 TO AVAIL THE SALES TAX CONCESSION TO TH E EXTENT OF RS. 564.35 CRORES DURING THE PERIOD 1.8.2001 TO 31. 7.2015. THE SUPREME COURT IN THE CASE OF PUNNI SUGARS & CHE MICALS LTD. HAS LAID DOWN THE FOLLOWING PRINCIPLE AFTER EL ABORATELY DISCUSSING IMPORTANCE OF THE JUDGMENT OF THE SUPREM E COURT IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. AN D OTHERS VS. CIT 228 ITR 253 WHEREIN THEIR LORDSHIPS HAVE AG AIN STRESSED THE IMPORTANCE OF THE PURPOSE TEST. THEIR LORDSHIPS OF THE SUPREME COURT AGAIN ANALYSED THE CASE OF THE HOUSE OF LORDS IN THE CASE OF SEAHAM HARBOUR DOCK CO. VS. CROOK (1931) 16 TC 333:- IN THE DECISION OF THE HOUSE OF LORDS IN TH E CASE OF SEAHAM HARBOUR DOCK CO. VS. CROOK (1931) 16 TC 333, THE HARBOUR DOCK CO. HAD APPLIED FOR GRANTS FROM TH E UNEMPLOYMENT GRANTS COMMITTEE FROM FUNDS APPROPRIAT ED ITA NO.952/DEL/2011 11 BY PARLIAMENT. THE SAID GRANTS WERE PAID AS THE WOR K PROGRESSED THE PAYMENTS WERE MADE SEVERAL TIMES FOR SOME YEARS. THE DOCK CO. HAD UNDERTAKEN THE WORK OF EXTE NSION OF ITS DOCKS. THE EXTENDED DOCK WAS FOR RELIEVING T HE UNEMPLOYMENT. THE MAIN PURPOSE WAS RELIEF FROM UNEMPLOYMENT. THEREFORE, THE HOUSE OF LORDS HELD TH AT THE FINANCIAL ASSISTANCE GIVEN TO T EH COMPANY FOR DOCK EXTENSION CANNOT BE REGARDED AS A TRADE RECEIPT. IT WAS FOUND BY THE HOUSE OF LORDS THAT THE ASSISTANCE HAD NOTHING TO D O WITH THE TRADING OF THE COMPANY BECAUSE THE WORK UNDERTA KEN WAS DOCK EXTENSION. ACCORDING TO THE HOUSE OF LORDS , THE ASSISTANCE IN THE FORM OF A GRANT WAS MADE BY THE GOVERNMENT WITH THE OBJECT THAT BY ITS USE MEN MIGH T BE KEPT IN EMPLOYMENT AND, THEREFORE, ITS RECEIPT WAS CAPITAL IN NATURE. THE IMPORTANCE OF THE JUDGMENT LIES IN THE FACT THAT THE COMPANY HAD APPLIED FOR FINANCIAL ASSISTANCE FR OM TIME TOT TIME AS THE WORK PROGRESSED AND THE PAYMENTS WE RE EQUIVALENT TO HALF THE INTEREST FOR TWO YEARS ON AP PROVED EXPENDITURE MET OUT OF LOANS. EVEN THOUGH THE PAYMEN T WAS EQUIVALENT TO HALF THE INTEREST AMOUNT PAYABLE ON T HE LOAN (INTEREST SUBSIDY) STILL THE HOUSE OF LORDS, HELD T HAT MONEY RECEIVED BY THE COMPANY WAS NOT IN THE COURSE OF TR ADE BUT WAS OF CAPITAL NATURE. THE JUDGMENT OF THE HOUSE O F LORDS SHOWN THAT THE SOURCE OF PAYMENT OR THE FORM IN WHI CH THE SUBSIDY IS PAID OR THE MECHANISM THROUGH WHICH IT I S PAID IS IMMATERIAL AND THAT WHAT IS RELEVANT IS THE PURPOSE FOR PAYMENT OF ASSISTANCE. ORDINARILY, SUCH PAYMENTS WO ULD HAVE BEEN ON REVENUE ACCOUNT BUT SINCE THE PURPOSE OF THE PAYMENT WAS TO CURTAIL / BLITERATE UNEMPLOYMENT AND SINCE THE PURPOSE WAS DOCK EXTENSION THE HOUSE OF LORDS H ELD THAT THE PAYMENT MADE WAS OF CAPITAL NATURE. ONE MORE ASPECT NEEDS TO BE MENTIONED. IN SAHNE Y STEEL AND PRESS WORKS LTD. THIS COURT FOUND THAT THE ASSE SEE WAS FREE TO USE THE MONEY IN ITS BUSINESS ENTIRELY AS I T LIKED. IT WAS NOT OBLIGED TO SPEND THE MONEY FOR A PARTICULAR PURPOSE. IN THE CASE OF SEAHAM HARBOUR DOCK CO. THE ASSESEE WAS OBLIGED TO SPEND THE MONEY FOR EXTENSION OF ITS DOC KS. THIS ASPECT IS VERY IMPORTANT. IN THE PRESENT CASE ALSO, RECEIPT FO THE SUBSIDY WAS CAPITAL IN NATURE AS THE ASSESSEE W AS OBLIGED TO UTILIZE THE SUBSIDY ONLY FOR REPAYMENT O F TERM LOANS UNDERTAKEN BY THE ASSESEE FOR SETTING UP NEW UNITS/EXPANSION OF EXISTING BUSINESS. ITA NO.952/DEL/2011 12 APPLYING THE AFORESAID TEST LAID DOWN BY THE SUP REME COURT TO THE FACTS OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE CIT(A) WHO CORRECTLY CAME TOT EH CONCLUSION THAT THE SUBSIDY I N QUESTION VIEWED FROM THE ANGLE OF THE PROVISIONS OF SECTION 25A OF THE H ARYANA GENERAL SALES TAX ACT, 1973 READ WITH INDUSTRIAL POLICY 1999 OF THE G OVERNMENT OF HARYANA, THE SUBSIDY RECEIPT IN QUESTION ARE PART OF CAPITAL RECEIPT GIVEN BY THE STATE GOVERNMENT FOR THE PURPOSE OF MEETING THE OBJECTIVE S OF INDUSTRIAL POLICY 1999, VIZ TO ATTRACT NEW INVESTMENT AND TO ENSURE G ROWTH OF EXISTING INDUSTRIES SO THAT THEY CAN GENERATE EMPLOYMENT IN INDUSTRIAL AND ALLIED SECTOR BY 20%. THE ENTIRE PACKAGE OF INCENTIVES SHO ULD BE READ AS FOCUSING ON PROVIDING INCENTIVES FOR INVESTMENT OF INDUSTRIA L SECTOR TO ACHIEVE EFFECTIVE, MEANINGFUL AND SPEEDY DEVELOPMENT OF THE STATE. THEREFORE, THE ASSESSEES RETENTION OF RS. 16.04 CRORE OUT OF THE SALES TAX COLLECTED ON SALE OF FINISHED PRODUCTS FROM EXPANDED UNIT IS PART OF CAPITAL RECEIPT UNDER THE SUBSIDY SCHEME OF THE GOVT. OF HARYANA. IN THE LIG HT OF PRINCIPLE LAID DOWN BY THE APEX COURT IN THE CASE OF PONNI SUGARS AS AL SO THE DECISION OF THE RELIANCE INDUSTRIES OF THE BOMBAY HIGH COURT CITED SUPRA, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). 9. DISCUSSING THE ISSUE IN DETAIL THE DELHI BE NCH OF THE TRIBUNAL IN THE ABOVE CITED CASE OF MARUTI SUZUKI INDIA LTD. HAS DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE WITH THIS FINDING THAT THE SUBSIDY IN QUESTION VIEWED FROM THE ANGLE OF PROVISIONS OF SECTION 25A OF THE HARYA NA GENERAL SALES TAX ACT READ WITH INDUSTRIAL POLICY 1999 OF THE GOVT. OF HA RYANA, ARE PART OF CAPITAL RECEIPT GIVEN BY THE STATE GOVT. FOR THE PURPOSE OF MEETING THE OBJECTIVE OF INDUSTRIAL POLICY 1999 TO ATTRACT INVESTMENT AND T O ENSURE GROWTH OF THE EXISTING INDUSTRIES SO THAT THEY CAN GENERATE EMPL OYMENT IN INDUSTRIAL AND ALLIED SECTOR BY 20% IT WAS HELD THAT THE ENTIRE PA CKAGE OF INCENTIVE AND CONCESSION SHOULD BE READ AS FOCUSING AND PROVIDING INCENTIVE FOR INVESTMENT OF INDUSTRIAL SECTOR TO ACHIEVE EFFECTIV E, MEANINGFUL AND SPEEDY DEVELOPMENT OF THE STATE. ITA NO.952/DEL/2011 13 10. IN THE CASE OF MARUTI SUZUKI INDIA LTD. THE ASSESSEE HAD RECEIVED SALES TAX SUBSIDY OF RS. 16,04,04,733/- DURING THE ASSTT. YEAR 2005-06. ACCORDING TO THE ASSESEE THE SAID RECEIPT REPRESENT ED TO BE CAPITAL IN NATURE. THEREFORE IT SHOULD BE EXCLUDED FROM THE TA XABLE INCOME. BEFORE THE LD. CIT(A) THE SUBSEQUENT DECISION OF HONBLE SUPR EME COURT IN THE CASE OF CIT VS. PONNI SUGARS AND CHEMICAL LTD. (SUPRA) W AS CITED AND THE LD. CIT(A) FOLLOWING THE RATIO OF THE SAID DECISION OF HONBLE SUPREME COURT DECIDED THE ISSUE IN FAVOUR OF THE ASSESEE WHICH WA S QUESTIONED BY THE REVENUE BEFORE THE TRIBUNAL. IT WAS ARGUED THAT THE IR LORDSHIP OF HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS AND CHEMI CALS LTD. (SUPRA) HAVE AGAIN REITERATED THAT THE PURPOSE FOR WHICH TH E SUBSIDY IS GIVEN IS ONLY RELEVANT FOR DETERMINING ITS NATURE. THE PURPO SE OF SUBSIDY WAS TO PROMOTE INDUSTRIAL DEVELOPMENT IN THE STATE BY PROM OTING AN ESTABLISHMENT OF NEW INDUSTRIAL UNIT OR SUBSTANTIAL EXPANSION OF EXISTING INDUSTRIAL UNITS. ALMOST SIMILAR ARE THE FACTS IN THE PRESENT CASE BE FORE US AS WELL AS SIMILAR ARE THE INDUSTRIAL POLICY 1999 ISSUED BY THE DEPART MENT OF INDUSTRIES, GOVT. OF HARYANA AND THE RELEVANT RULE 28C OF GENERAL SAL ES TAX RULE 1975 AS APPLICABLE IN THE CASE OF PRESENT ASSESSEE, WHEREBY THE ASSESSEE WAS REQUIRED TO PAY 50% OF THE TAX COLLECTED AND RETAIN 50% SUBJECT TO OTHER CONDITIONS. SIMILARLY IN THE CASE OF PRESENT ASSESS EE WAS ISSUED ENTITLEMENT CERTIFICATE UNDER RULE 28C OF THE HARYANA SALES TAX RULE 1975 TO AVAIL THE ITA NO.952/DEL/2011 14 SALES TAX CONCESSION DURING THE PERIOD. THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICALS LTD. HAS LAID DOW N SOME PRINCIPLES AFTER ELABORATELY DISCUSSING ITS EARLIER JUDGMENT IN THE CASE OF M/S. SAHNEY STEEL & PRESS WORKS (SUPRA). IN VIEW OF THOSE PRINCIPLES THE TRIBUNAL IN THE CASE OF MARUTI SUZUKI HAS DECIDED AN IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE UNDER ALMOST SIMILAR FACTS OF THE CASE. FOLLOWING T HE SAID DECISION WE IN THE PRESENT CASE DECIDE THE ISSUE IN FAVOAUR OF THE ASS ESSEE WITH THIS DIRECTION TO THE AO TO ALLOW THE CLAIMED SALE TAX SUBSIDY REC EIPT AMOUNTING TO RS. 2,00,64,000/- RECEIVED BY THE ASSESSEE DURING THE Y EAR AS CAPITAL RECEIPT FOR THE ASSESSMENT. GROUND NO. 2 IS THUS ALLOWED. 11. GROUND NO. 1 IS GENERAL IN NATURE AND IN G ROUND NO. 3 THE FIRST APPELLATE ORDER FOR UPHOLDING THE CHARGING OF INTER EST U/S 234B AND 234D HAS BEEN QUESTIONED, WHICH IN OUR VIEW IS CONSEQU ENTIAL IN NATURE, HENCE DOES NOT NEED SEPARATE ADJUDICATION. GROUND NO. 4 I S ALSO GENERAL IN NATURE. HENCE DOES NOT NEED SEPARATE ADJUDICATION. 12. IN THE RESULT APPEAL IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST, 2014 SD/- SD/- (R.S. SYAL) ( I.C. SUDHIR ) ACCOUNTANT MEMEBER JUDICIAL MEMBER DATED 12 TH AUGUST, 2914 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT ITA NO.952/DEL/2011 15 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT