The DCIT, Central Circle-2, RAJKOT-GUJARAT V. Meena Agency Pvt. Ltd., JAMNAGAR

ITSSA 24/RJT/2011

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0745 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 19-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt
• Section: 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE SHRI SHAILEND RA K UMAR YADAV, JUDICIAL MEMBER, AND SHRI N. S. SAINI , ACCOUNTANT MEMBER . IT (SS) A. NO S . 23, 24, 25 & 362 / RJT / 201 1 (ASSESSMENT YEAR S : 200 6 - 0 7, 07 - 08, 08 - 09 & 09 - 10 ) DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 2, RAJKOT APPELLANT VS. M/S. MEENA AGENCY PVT. LTD. KHUSHBOOWADI, NR. GURUDWARA, JAMNAGAR RESPONDENT & IT (SS) A. NO. 396 / RJT / 201 1 (ASSESSMENT YEAR: 200 9 - 1 0 ) M/S. MEENA AGENCY PVT. LTD. KHUSHBOOWADI, NR. GURUDWARA, JAMNAGAR APPELLANT VS. DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 2, RAJKOT RESPONDENT PAN: AABCM4325Q IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 2 / BY REVENUE : SHRI M. L. MEENA , D.R. / BY ASSESSEE : SHRI M. J. RANPURA, C.A. / DATE OF HEARING : 22 .0 5 .2015 / DATE OF PRONOUNCEMENT : 25 .0 5 .2015 ORDER PER BENCH ALL T HESE APPEALS PERTAIN TO SAME ASSESSEE , FOUR APPEALS FILED BY REVENUE AND ONE FILED BY ASSESSEE ARE ARISING OUT FROM THE CONSOLIDATED ORDER OF CIT(A) - IV, AHMEDABAD, DATED 26 TH JULY 2011 FOR ALL YEARS . SO, THEY ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ITA NO. 2 3 / RJT /20 1 1 FOR A.Y. 200 6 - 0 7 , REVENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUND: ( 1 ) T HE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE BY DIRECTING TO TREAT KUTCH INCENTIVE INCOME OF RS.3,08,197/ - AS CAPITAL IN NATURE. SIMILAR GROUNDS HAVE BEEN RAISED IN A.Y. 200 7 - 08 TO 200 9 - 10 . 3 . BRIEF FACTS OF THESE CASES ARE THAT ASSESSEE HAS SET UP AN INDUSTRIAL UNIT IN KUTCH DISTRICT IN PURSUANCE TO SCHEME OF GOVERNMENT OF GUJARAT AS WELL AS GOVERNMENT OF INDIA, WHEREIN CERTAIN INCENTIVES HAVE BEEN GRANTED. SUCH INCENTIVES BY WAY OF EXCISE DUTY INCENTIVE AND VALUE ADDED TAX INCENTIVE ON SALES/PURCHASES ARE GRANTED TO SUCH UNITS WHICH ARE SET UP IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 3 IN KUTCH DISTRICT AFTER THE EARTHQUAKE AND HAVE COMMENCED PRODUCTION ON OR BEFORE 31.12.2005. SUCH INCENTIVES RECEIVED BY ASSESSEE HAV E BEEN TREATED AS REVENUE RECEIPTS BY ASSESSING OFFICER AS PER DISCUSSION MADE IN ASSESSMENT ORDER WITH FOLLOWING CONCLUDING REMARKS: THEREFORE , FOL L OWING THE HON . SUPREME C O UR T ' S DE CI S I O N I N THE C ASE OF SAHNEY STEEL & P R ESS WORK S LTD VS . CIT (228 ITR 2 53) , THE CLAIM OF ASSESSEE I N T REAT I NG VAT INCENT I VE ON SA L ES , EXCISE DUTY I NCENT I VE ON VAT INCENTIVE ON PUR C HASES , WH I C H IS BE I NG D I SBU R SED WITH A SPECIF I C PURPOSE , EVERY YEA R , ON R EGU L A R BAS I S , T OWA R DS MEET I NG I TS R U N N IN G EX PE N SES AND OPE R AT I ONA L NEEDS , I S TR EATED AS REVENUE IN NATURE AND THE SAME IS THEREFO R E D I SA LL OWED AND ADDED TO T HE TOTAL IN COME OF THE ASSESSEE . ' 3.1 MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED BY WAY OF WRITTEN SUBMISSION. THE RELEV ANT PORT I ON OF THE WR I TTEN S U BMISS I ON FURNISHED BY THE APPEL L ANT I S REPRODUCED AS UNDER : - ' THE LEARNED AO HAS ERRED I N F ACTS AND O N L AW BY T REAT I NG THE KUTCH INCE N T I VE I NCOME AS REVENUE - RECE I PT AND ADDED THE SAME IN THE TOTAL I NCOME OF T HE APPE L LAN T . HERE IN TH I S CONNECTION , THE APPELLANT WOULD LIKE TO STATE THAT THE ' COMPANY HAD COMMENCED ITS PLANT FOR M ANUFACTURING REFRACTOR I ES AT V I LL . SAMAKHIAL I , TAL . BHACAHU , DIST . KUTCH . THE SAID AREA WAS CLASS I FIED AS AN EARTHQUAKE AFFECTED AREA BECAUSE OF THE DEVA STATED EARTHQUAKE TOOK PLACE ON 26 . 01 . 200 1 AND ACCORD I NGLY GOVERNMENT OF GU J ARAT AS WELL AS GOVERNMENT OF INDIA HAD DECLARED CERTA I N I NCENT I VE SCHEMES TO THE UN I TS TO BE S I TUATED AT KUTCH AFTE R THE EARTHQUAKE AND THE UN I T WHICH CAN COMMENCE PRODUCTION ON OR BEFORE 31 . 12 . 2005 . THUS , THE UN I TS COMMENCED THE IR I NDUSTR I A L ACTIV I TIES AFTER THE EARTHQUAKE A N D COMMENCED T HE IR COMMERC I A L IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 4 OPERAT I ON BEFO R E T H E F I NAL DATE OF THE NOT I F I CAT I O N SHAL L BE ENT I TLED FO R E X C I SE R EFUND AND VAT R EF U ND FO R A PER I OD OF 5 YEARS . THE SA I D R EFUND IS BECAUSE OF THE GEOGRAPH I CAL D I STRESS/DISADVANTAGES (DUE TO E ARTHQUAKE) FOR WH I CH THE UN I T HAS TAKE N PA I N FOR COMMENCING I TS INDUSTR I A L UNDERTAKING AT EARTHQUAKE AFFECTED AREA . THE CENTRA L GOVERNMENT AS WE LL AS THE GOVE R NMENT OF GUJARAT HAS FO R MU L ATED I NCEN TI VE SCHEMES FOR THE PURPOSE OF INDUSTR I AL DEVELOPMENT OF KUTCH D I STRICT AND TO GENERATE EMPLOYMENT AFTE R THE DEVASTAT I NG EARTHQUAKE OF 26 . 1 . 2001 WHEREBY THE I NDUSTR I ES THAT SET UP I N KUTCH D I STR I CT ARE ENT I TLED TO CER T A I N I NCEN TI VES . THE ASSESSEE COMPANY HAS SET UP AN INDUSTRIAL UNIT IN THE KUTCH DISTRICT IN ACCORDANCE WITH THE SCHEME FORMULATED BY THE GOVERNMENT. IT IS SUBMITTED THAT THIS INCENTIVE R E C E I V E D FROM TH E GOV E RNMENT UNDER E S CH E M E , THE OBJECTIVE OF WH I CH I S TO A CC E L E R A T E TH E D E V E L OP M E NT OF KUTCH DISTR I CT A ND GE N E R A T I NG E MPLOYM E NT B Y E NCOUR A GING SE TTIN G UP O F IN D U S TRI ES I N TH E R E G I ON , I S I N TH E NATURE OF C A P I T A L R E C E I P T. THI S INC E NT IV E I S QU A NTI F I ED A N D D I S BU R S ED IN THE FORM O F R E F UND OF E XC I SE DUTY E QU I VALE NT TO TH E A MOUNT O F D UTY P A I D BY T H E COMPANY OT H E R TH A N TH E AMOUNT OF DU T Y PA I D BY UTILI ZAT I ON O F C ENVA T . IT I S S U BM I T TED THAT I NCE N T I V E G I VE N BY THE GOVE RN ME NT T O TH E ASSESSEE FO R SE T T I N G U P I N DUSTR I ES IN NOT I F I ED AREA I . E . K UTC H D I S TRI C T I N THE FO RM O F REF UND O F EXC I SE DUTY EQ UI VA L E NT TO T HE AMOUNT OF DUTY PA I D BY THE C OMPA N Y O THE R T HAN T HE AMO UNT O F DUTY PA I D B Y U T I L I ZAT I ON OF CENVAT WITH A V I EW TO BRING ABOU T NE C ESSA RY I N F RAST RUC T U RE A N D GENERATE EMPLOYMENT IN THE AREA AF T E R THE DEVASTAT I NG EA RT HQUAKE IS A C AP IT A L RE C EIPT NO T C HARGEAB L E T O TAX . IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 5 REL I ANCE IS PLACED ON THE DEC I S I ON OF ITA T , MUMBA I , SPEC I AL B ENCH I N THE CASE OF D CIT VS . RE LI ANCE INDUSTRIES LTD . REPORTED IN 88 ITD . 2 7 3 (MUMBA I) ( S B ) . AND CIT (APPEALS) IV , AHMEDABAD I N CASE OF A J A N TA MANUFACT U RING LIM I TED . THE ECONOMIC ACTIVIT I ES CA M E TO STANDST I L L IN THE D I STR I C T OF KUTCH WH I CH HAD SUFFERED HUGE L OSS OF L I FE AND DESTRUCT I O N O N ACCOUNT OF DEVASTAT I NG EARTH Q U AKE WH I CH T OO K PLA C E ON 26 TH JANUA R Y , 2001 . THE GOVERNMENT OF IND I A AND THE STATE GOVERNMENT O F GUJA R A T R EA L IZED THAT NEW EMPLOY M E NT OPPO RTU N ITI ES CO U LD BE CR EA T ED I F N EW I NVEST M E N T TAKES PLACE . ACCO R D I NGLY , GOVE R NME N T C OMMITTED ITSE L F TO A T T R A CT IN DUS T R I ES I N THE K U T C H DISTRI CT TO MAKE THE INDUSTRIAL A ND ECONOM I C ENV I RONMENT LI VE . THE GOVE R NMEN T O F IND I A ANNOUNCED EXCISE DUTY E X EMPT I ON FOR NEW IN DUS T RIES TO P R OMOTE LA R GE SCALE INVESTMENT I N THE DISTRICT ALONG WITH WH ICH THE S T A TE GOVERNMENT ALSO D E CI DED TO A NN OU N CE T HE SCHEME OF SALES TAX INCENT I VES . THE BASIS ON WHICH IT IS BEING CONTENDED THA T THE OBJ ECT I VE O F THE SCHEMES WAS TO ACCELERATE THE ECONOM I C DEVELOPMENT OF KUTCH D I STRICT AND GENERAT I NG EMPLOYMENT BY SETTING UP OF INDUSTR I ES IN THE REG I ON . AS PER NOTIFICAT I ON OF G ENERAL EXEMPTION BEAR I NG REFERENCE NO 38 . IT MAY PLEASE BE OBSERVED FR OM THE PREAMBLE THAT THE NOT I FICATION APPL I ES TO GOODS CLEARED FROM A UNIT . L OCATED IN . KUTCH D I STR I CT OF GU J ARA T FROM THE EXCISE DUTY . IT MAY FURTHER BE OBSERVED FROM PARA 3 OF THE AFORESAID NOTIF I CATION NO . 38 THAT THE COND I T I ONS PRESCRIBED FOR AVAIL I N G THE BENEF I T OF T HE SCHEME ARE A S U N DE R : THE NOTIF I CATION GIV I NG EXEMPTION APPL I ES ONLY TO NEW I NDUSTR I AL UN I T SET UP ON OR AFTE R THE DATE OF NOTIFICATION BUT NOT LA T E R THAN 3 1 ST DAY OF D E C E M BER , 2005 . IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 6 T HE MANUFACTURER IS REQ UI RED TO PRODUCE A C ERT I FI C ATE F ROM A C OMM I TTEE CONS I ST I NG OF THE CH I EF COMM I SS I ONER O F CE N TRAL E X CISE : AHMEDABAD AND THE PR I NC I PAL SECRETA R Y OF THE GOVERNMENT OF GUJA R AT , DEPARTMENT OF INDUSTRY STATING THAT THE UN I T IS A NEW UN I T AND HAS BEEN SET UP DUR I NG THE T I ME PER I OD SPEC I FIED IN COND I T I ON (I) ABOVE . FROM THE CERTIFICATE ISSUED TO THE ASSESSEE BY THE COMM I TTEE DULY S I GNED BY THE CHIEF COMMISSIONER OF CENTRAL EXCISE & CUSTOMS , AHMEDABAD ZONE AND BY ADDITIONAL CHIEF SECRETARY, INDUSTRIES & M I NES DEPARTMENT , GOVERNMENT OF GU JARAT THAT THE UNIT HAS COMPLIED WITH THE ABOVE COND I T I ON . THE SA I D ' CERT I F I CATE STATES THAT THE ASSESSEE HAS SET UP A UN I T AT SAMAKH I AL I , TAL U KA BHACAHU , D I ST . KUTCH IS A NEW UNIT AND HAS BEEN SET UP DURING THE PE RI OD STARTING FROM 31 ST JULY , 2001 AND BE FORE ENDING ON 31 S T DECEMBER , 2005 IN TERMS OF NOT I FICAT I ON NO . 39/2001 - CE DATED 3 1 . 07 . 2001 (AS AMENDED BY NO TI F I CATION NO . 5 5/ 2 004 - CE DATED 09 . 11 . 2004 ) . THE MANUFACTURER IS ALSO REQUI R ED TO SUBMIT A DEC L ARATION AS WELL AS A CERTIFICATE FRO M THE A FORESAID COMMITTEE REGARDING THE ORIG I NAL VALUE OF INVESTMENT IN PLANT & MACH I NERY I NSTAL L ED I N THE FACTO RY AS ON THE DATE OF COMMENCEMENT OF COMMERC I A L PRODUCT I ON . THE CE R TIF I CATE STATES T HE O RI G I NA L VALUE OF I N V ES T MENT MADE I N THE PLA N T & MACH I NERY I N T HE AFORESAID FA CT O RY OF THE ASSESSEE COMPANY . T HE C ERT I F I CATE IS I SS U ED I N TERM S OF PARA 3 (IV) OF NOT I FI C A TI ON NO . 3 9200 1 - CE DATED 31 . 0 7 . 2 001 FOR THE PU R POSE O F AVA I L I N G T HE E XEM P TI O N UN DE R T HE SA I D N OT I F I CATION . I T IS RESPECTFUL L Y SUBMITTE D THAT TH E AB OVE DOCUMENTS CLEARL Y ESTAB LI SH THAT INCENT I VES DISBURSED IN THE FORM OF REFUND O F EXCISE DUTY & SALES TAX UNDER THE SCHEME FOR ECONOMIC DEVELOPMENT OF KUTCH DISTRICT ARE FOR IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 7 ATTRACTING FRESH CAPITAL INVESTMENT . THE OB J ECTIVE OF THE INCENTIVES HAS PR I MA C Y OVER THE MODE IN WHICH I T IS DISBURSED . AS EXPLAINED WITH REFERENCE TO THE GOVERNMENT RESOLUTIONS , NOT I F I CAT I ONS AND CERT I FI C ATES I SSUED BY THE AUTHOR I TIES , THE OBJECT I VE IS TO ATTRACT CAPITAL I NVESTMENT I N NEW INDUSTRIAL UNIT IN DISTRICT OF KUTCH FOR ITS ECONOM I C DEVELOPMENT AFTE R THE DEVASTATING EARTHQUAKE . IN THIS CONNECTION IT IS TO BE STATED THAT THE DECISION OF HON ' BLE IT AT IN WH I CH AFTER GIVING DUE CONSIDERATION TO THE DECISION OF HON ' BLE SUPREME COURT IN THE C ASE OF SAHNEY STEEL & PRESS WORKS LTD. (228 ITR 253)(SC) , THE HON ' BLE I TAT HAS NOTED THA T IF THE OBJECTIVE OF GIVING SUBS I DY IS TO PROMOTE SETT I NG UP THE INDUST R Y , S U C H RECEIPT OF I NCENTIVE I S CAP I TAL RECEIPT . THE HON ' BLE SUPREME COURT HAS I N PARA 8 OF T HE J UDGMEN T I N THE CASE OF SAHNEY STEEL HELD THAT ' IF ANY SUBSIDY IS G I VEN , THE CHARACTER OF SUBS I DY I N THE HANDS OF THE RECIP I ENT - WHETHE R REVENUE OR CAP I TAL - WI L L HAVE TO BE DETE R MINE D B Y HAVING REGARD TO THE P U RPOSE FO R WHICH THE SUBS I D Y I S G I VEN . IF I T I S G I VEN B Y WAY OF ASS I STANCE TO THE ASSESSEE IN CA R RY I NG ON O F H I S T R ADE O R BUS I NESS , I T HAS T O BE TR EATE D AS TR AD I NG RECE I PT --- - FO R E . G . IF THE SCHEME WAS THA T THE ASSESSEE W IL L BE G I VEN RE F U N D OF SALES TAX ON PURCHASE OF MACHINERY AS WE LL AS RAW MATERIAL TO ENABLE THE ASSESSEE TO ACQU I R E NEW PLANT & MACHINERIES FOR FURTHER EXPANS I ON OF I TS MANUFACTUR I NG ACTIV I TY IN A BACKWARD AREA, THE ENTIRE SUBSIDY MUST BE HELD TO BE A CAP I TAL RECEIPT IN THE HANDS O F THE ASSESSEE . IT WILL NOT BE OPEN TO THE REVENUE TO CONTEND THAT THE REFUND OF SALES T A X PAID O N R AW MATER I ALS OR FINISHED PRODUCTS MUST BE TREATED AS REVENUE RE C E I PT IN THE HANDS OF THE ASSESSEE --- - . IF THE PURPOSE IS TO HELP THE ASSESSEE TO SET UP ITS BUSINESS OR C OMP L ETE A PROJECT AS IN SAEHAM HARBOUR DOCK CO ' S CASE (SUPRA) , THE MONIES MUST BE TREATED AS TO HAVE BEEN GIVEN FOR CAPITAL PURPOSE ' . IT IS SUBMITTED THAT AS EMPHASIZED EARL I E R THE I NCENT I VE SCHEME I N THE CASE OF THE ASSESSEE IS FOR ATTRACT I NG FRESH CAP I TAL INVESTMENT I N NEW I NDUSTRIAL UN I TS I N DISTRICT OF KUTCH BADLY AFFECTED B Y DEVASTAT I NG EARTHQUAKE . ' IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 8 3.2 IN APPEAL, ASSESSEE MADE VARIOUS SUBMISSIONS AND PLACED RELIANCE UPON THE DECISION OF CIT(A) IV, AHMEDABAD IN CASE OF AJANTA MANUFACTURING LIMITED AS WELL AS THE DECISION OF ITAT, RAJKOT IN CASE OF AJANTA MANUFACTURING LIMI TED FOR A.Y. 2006 - 07. 3.3 HAVING CONSIDERED SUBMISSIONS ON BEHALF OF ASSESSEE AS WELL AS DECISIONS, CIT(A) OBSERVED THAT SCHEME ITSELF EXCISE AND VAT INCENTIVES ON SALES/PURCHASES WERE GIVEN TO ASSESSEE FOR PROMOTING INVESTMENT OF CAPITAL FOR INDUSTRIAL DEVELOPMENT AND TO GENERATE EMPLOYMENT IN KUTCH DISTRICT WHICH WAS AFFECTED BY DEVASTATING EARTHQUAKE. INCENTIVES WERE NOT GIVEN FOR CARRYING OUT THE DAY - TO - DAY BUSINESS OPERATIONS. OBJECT OF SUCH INCENTIVES WAS TO ENCOURAGE LARGE SCALE INVESTMENT FOR I NDUSTRIAL DEVELOPMENT IN NOTIFIED AREA OF KUTCH DISTRICT. SCHEMES FRAMED BY THE GOVERNMENT WAS LIMITED TO SUCH INDUSTRIAL UNITS WHICH WERE SET UP IN KUTCH DISTRICT BEFORE SPECIFIED DATE AS PER THE SCHEME OF INCENTIVE. ITAT, RAJKOT IN CASE OF M/S. AJANTA MANUFACTURING LIMITED, MORBI (A.Y. 2006 - 07) VIDE ITS ORDER DATED 23.09.2010 HAS DECIDED TO TREAT SUCH INCENTIVES AS CAPITAL RECEIPTS. THE RELEVANT PARA OF THE SAME IS REPRODUCED AS UNDER: 16. WE ALSO FIND FROM THE NOTIFICATIONS BY WHICH THE SCHEMES HAV E BEEN NO TIFIED THAT THE PURPOSE OF THE CENTRAL GOVE RN MENT & GOVE RN MENT OF GUJARAT BY GIVING THE INCE NTIVES IS T O PROM OTE INVESTMENT OF CAPITAL AND THEREBY INDUSTRIAL DEVELOPMENT AND TO GENERATE EM PLOYMENT IN THE KUTCH DISTRICT WHICH WAS AFFECTED BY EARTHQ UAKE, THUS ON APP LICATION OF TH E PURPOSE TEST IT IS IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 9 QUITE CLEAR THAT THE PURPOSE OF THE INCENTIVE SCHEMES IS NOT TO ASS IST IN THE CARRYING ON OF THE ASSESSEE'S TRADE OR BUSINESS. THE PURPOSE IS CLEARLY FOR PROMOTI NG CAPITAL INVESTMENT AND THEREBY INDUSTRIA L DEVELOPMENT IN THE EARTHQUAK E AFFECTED DISTRICT . THE PURPOSE IS TO GENERATE EMPLOYMENT IN THE SAID DISTRICT. 1 7. THE HON'BLE SUPREME COURT IN THE CASE OF SAHNEY STEEL AND PONNY SUGAR HAS LAID DOWN THE PRINCIPLE THAT THE CHARACTER OF THE SUBSIDY WHETHER REVENUE OR CAPITAL IN THE HANDS OF THE RECIPIENT WILL HAVE TO BE DETERMINED BY HAVING REGARD TO THE PURPOSE FOR WHICH SUBSIDY IS GIVEN. THUS, THE SAID DECISION THOUGH RELIED BY THE REVENUE, ACTUALLY SUPPORTS T H E CASE OF THE ASSESSEE. ITAT FURTHER IN ITS PARA IN M/S. AJANTA MANUFACTURING LIMITED (SUPRA) FURTHER HELD AS UNDER: ' 21 . WE FIND THA T THE PROPOSITIONS MADE BY THE L D . A . R . ARE FULLY SUPPORTED BY THE FACTS OF THE CASE INCLUDING THE SCHEMES OF INCENTIVE AND BY THE CASE LAWS CITED BEFORE US . EVEN TH E DECISION OF SAHNEY STEEL CITED . BY T H E R EVENUE BEFORE US EF F EC T IVELY SUPPO R TS THE CASE OF THE ASSESSEE . WE WERE ALSO INFORMED BY THE ID . A . R . SHR I MAHESH SARDA BY SUBM I TT I NG COPY OF THE DECISION DTD . 15 - 4 - 2 00 9 OF HIGH COURT OF BOMBAY BY WHI CH , THE HON' BLE HIGH COURT HAS AFFIRMED THE SPEC I AL BENCH DE CI SION IN THE CASE OF RELIANCE INDUST RI ES LTD . OUR SPEC I FIC ATTENTION WAS INV I TE TO PARA 4 OF THE ORDER . ' SO FAR AS QUESTION (B) IS CONCERNED , THE TR I BUNAL RELIED UPON THE ITA T MUMBAI BENCH 'J ' (SPECIAL BEN CH) DECIS I O N I N THE CASE OF ASSESSEE ITSELF IN DEPUTY COMMISSIONER OF I NCOME - TAX V , RE LI ANCE I NDUSTRIES LTD = (2003 TI OL - 1 4 ' AT - MUM - SB) WE MAY GAINFULLY REPRODUCE THE/ALLOWING PORTION : ' THE SCHEME FRAMED BY THE GOVE R NMENT O F MAHARASHTRA I N 1979 AND FORMU L ATED BY ITS RESOLUTION D I D . 5 - 1 - 1980 HAS BEEN ANAYLSED IN DETA I L BY THE TR I BUNAL IN I TS ORDER IN RIL FOR , THE ASSESSMENT YEAR IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 10 1985 - 86 WHICH WE HAVE ALREADY REFERRED TO IN EXTENSOR . ON AN ANALYSIS OF THE SCHEME, THE TR I BUNA L HAS COME TO THE CONCLUSIO N THAT THE THRUST OF THE SCHEME IS THAT THE ASSESSEE WOULD BECOME ENT I TLED FO R THE SALES TAX INCENTIVE EVEN BEFORE THE COMMENCEMENT OF THE PRODUCT I ON , WHICH IMPLIES THAT THE OBJECT OF THE INCENTIVE IS TO FUND A PART OF THE COST OF THE SETTING UP ON THE FAC TORY IN THE NOTIFIED BACKWARD AREA . THE TRIBUNAL HAS , AT MORE THA N ONE PLACE , STATED THAT THE THRUST OF THE MAHARASHTRA SCHEME : WAS THE INDUSTR I AL DEVELOPMENT OF THE BACKWARD DISTR I CTS AS WELL AS GENETATION OF EMPLOYMENT THUS ESTABLISH I NG A D I RECT NEXUS W ITH THE INVESTMENT IN THE FIXED CAP I TAL ASSETS . IT HAS BEEN FOUND THAT THE ENTITLEMENT OF THE INDUSTRIAL UNIT 10 CLAIM E L IGIBILITY FOR THE INCENTIVE AROSE EVEN WH I LE THE INDUSTRY WAS IN PROCESS OF 'BE I NG SET UP . ACCORDING TO THE TRIBUNAL , THE SCHEME WAS OR IENTED TOWARDS AND WAS SUBSERV I EN T TO THE I NVESTMENT IN FIXED CAP I TA L ASSETS . THE SALES TAX IN CENT I VE WAS ENVISAGED ONLY AS AN ALTERNAT I VE TO THE CASH D I SBURSEMENT AND BY ITS VERY NATURE WAS TO BE AVAILABLE ONLY AFTER PRODUCT I ON COMMENCED . THUS , IN EFFECT , I T WAS HELD BY THE TR IBUNA L THAT THE SUBS I DY I N THE FORM O F SA L ES TAX I NCENTIVE WAS NOT G I VE N TO THE ASSESSEE FOR A SS I ST I NG I T I N CARRY I NG OU T T HE BUS I NESS OPERATIONS . THE OB J ECT OF THE SUBSIDY WAS TO ENCOURAGE THE SETTING UP OF INDUSTRIES IN THE BACKWARD ARE A. THUS , IT CAN CLEARLY BE SEEN THAT A FI ND I NG HAS BEE N R EC OR DED THAT T HE OB J E CT OF TH E SU BS I DY WAS TO ENCO UR AGE THE SETT I NG UP O F I NDUSTR I ES I N T H E BA CKW A R D A R E A B Y GENE R AT I NG EMPLOYMENT T HERE I N . IN OUR OPINION , I N ANSWE RI NG THE I SS U E , THE T ES T AS LA ID D OWN BY THE SUPREME COU R T I N COMMISSIONE R OF IN COM E - T A X V . P O N NI SU GA R & CHEMICALS LTD . (2008) 3 06 ITR (SC) = TIOL - 174 - SC - I T) W I L L HAVE TO B E CONS I DERED . THE SUPREME COUR T HAS HELD T HA T T HE TES T OF THE C HA R A CT E R O F T H E R E C E IPT OF A SUBSIDY IN THE HANDS OF THE ASSESSEE U N DE R A SCHEM E HA S TO BE DETE RMIN E D W I T H R ESPECT TO THE PURPOSE FOR WH I CH T HE S U BS I DY I S G R A NT E D . T HE C OU RT FU RT HE R OBSE R VED THA T IN SUCH CASE S , WHAT T O BE IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 11 APP LI ED I S T HE PU R P O SE TES T . THE P OINT O F TI ME AT WH I CH T HE SUB SI D Y I S PA I D I S N O T R E L E V ANT . T HE S OURCE IS I MMA T E RI AL . F ORM OF SU BS IDY IS MA T E RI AL . COURT T HE N P ROC EEDE D T O O BSER V E AS UNDER : - T HE M A I N ELIG I BILITY C OND I T I ON I N THE SCHEME W I T H WH I C H W E A RE C ON C E R NED I N T HIS CASE I S THA T THE I N C ENT IV E MUS T BE U T I LIZED FO R R EPAY MENT OF 1 0ARL S TAKE N BY THE ASSESSEE TO SET UP NEW UNITS OR FO R S U BSTANT I A L EXPANSI ON OF EXISTING UN I TS . ON T HI S, ASPECT T HERE IS NO DISPUTE . IF THE OBJECT OF T HE SUBSID Y SCHEME WAS TO ENABLE THE ASSESSEE TO RUN THE BUS I NESS MORE PROFITABLY T HEN T HE RE C E I P T I S ON REVENUE A C CO U NT . ON THE OTHE R HAND , IF THE OB J E CT O F T HE ASS I STAN C E UNDE R T HE SUBS I DY S CHE M E WA S TO ENAB L E ' THE ASSESSEE TO SE T UN IT OR TO EXPAN D T HE EX I S TI NG . U N IT THE N T HE R ECE I PT O F THE S U BS I DY WAS IN CAP I TA L AC C OU N T . THEREFORE , LET US APPLY THE P U R POSE TEST BASED ON THE F IN D I NG S RECORDED BY THE SPECIAL BENCH . THE OBJECT OF THE SUBS I DY WA S TO SE T U P A N EW UN IT IN A BA C KWARD AREA TO GENERATE EMPLOYMENT . IN OU R OP I N I O N , THE SUB SI D Y I S CL EA R L Y O N C APITAL ACCOUNT . IN THAT V I EW OF T HE MA TT E R , QUEST ION . ( D) AS FRAME D W O U L D ALSO N O T A RI SE . ' 22. ON CAREFUL CONSIDERATION OF THE FACT OF THE CASE AND IN VIEW OF THE CASE LAWS CITED BEFORE US, WE UPHOLD THE ORDER OF THE CIT(A) BY WHICH THE RECEIPTS HAVE BEEN HELD TO BE CAPITAL IN NATURE. THUS, ITAT IN M/S. AJ ANTA MANUFACTURING LIMITED (SUPRA) HAS CONSIDERED EACH ASPECT OF THE ISSUE INVOLVED AFTER ANAYLSING THE RELEVANT DECISIONS. IN VIEW OF ABOVE, CIT(A) FOLLOWING SAID ITAT DECISION HELD THAT KUTCH INCENTIVE INCOME RECEIVED BY ASSESSEE FOR THESE YEARS OF RS.3 ,08,197/ - , RS.4,76,37,596/ - , RS.8,70,27,216/ - AND RS.6,22,13,045/ - FOR A.YS. 2006 - 07, 07 - 08, 08 - 09 AND 09 - 10 RESPECTIVELY WERE TREATED AS CAPITAL IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 12 RECEIPTS AND NOT CHARGEABLE TO TAX. THUS, THE ADDITION MADE ON THIS ACCOUNT, WAS DELETED. AS STATED ABOVE, T HIS REASONED FINDING OF CIT(A) WHICH IS FORTIFIED BY THE DECISION OF M/S. AJANTA MANUFACTURING LIMITED (SUPRA), NEEDS NO INTERFERENCE FROM OUR SIDE. FURTHER THE SAME VIEW HAS BEEN TAKEN IN CASE OF CIT V. BIRLA VXL LTD. ( 2013 ) 215 TAXMAN 117 (GUJ.). ACCORD INGLY, SAME IS UPHELD. THIS TAKES CARE OF ALL REVENUE S APPEALS. 4. NEXT ISSUE RAISED IN ITA NO.396/RJT/2011 FOR A.Y. 2009 - 10 IN ASSESSEE S APPEAL IS REGARDING ADDITION ON ACCOUNT OF STOCK DISCREPANCY OF RS.7,27,048/ - . DURING SEARCH, IT WAS FOUND THAT A PPEAL HAS BEEN FILED BY ASSESSEE WHICH IS BARRED BY LIMITATION. SO, SAME IS DISMISSED ON THAT ACCOUNT OF LIMITATION. SO, WITHOUT PREJUDICE TO THE MERIT OF THE CASE, ASSESSEE S APPEAL IS DISMISSED FOR THE REASONS DISCUSSED ABOVE. 5 . IN THE RESULT, REVENU E S APPEALS AS WELL AS ASSESSEE S APPEAL ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 25 TH DAY OF MA Y , 201 5 . SD/ - SD/ - (N. S. SAINI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIA L MEMBER RAJKOT : DATED 25 /0 5 /2015 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO: - 1. THE ASSESSEE . IT (SS) A NO S . 2 3,24,25,362 & 396 /RJT/1 1 FOR A.YS. 0 6 - 0 7 TO 09 - 10 [ DC IT VS. M/S. MEENA AGENCY PVT. LTD. ) PAGE 13 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, RAJKOT 6. GUARD FILE. BY ORDER DEPUTY/ ASSTT.REGISTRAR ITAT, RAJKOT