M/S GREENCONE ENVIRONS PVT. LTD., CHANDIGARH vs. DCIT, C-1(1), CHANDIGARH

आदेश/Order

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against the order dated 29.09.2017 of the Commissioner of Income Tax (Appeals)- 1, Chandigarh [hereinafter referred to as ‘CIT(A)’].

ITA No. 1602-Chd/2017- M/s Greencone Environs Pvt Ltd., Chandigarh 2 That the order passed dated 29.9.2017 under 1. section 250(6) of the Income Tax Act, 1961 by the Ld. CIT(A)-1 Chandigarh in appeal No.583/10-11 is contrary to law and facts of the case.

subsidy received by the assessee vide letter No. 1-3/2205-CT dated

26.3.2008, whereby the Ministry of Finance has granted a subsidy of

Rs. 2,50,00,000/- to the assessee for setting up a Legnin Precipitation

System (LPS) Technology Project for a total cost of Rs. 11,50,00,000/-.

The contention of the Revenue is that the same is a Revenue receipt,

whereas, the contention of the assessee is that it is a capital receipt as it

has been received by the assessee as an incentive from the Government

for establishment and setting up a Legnin Precipitation System (LPS)

Technology Project.

However, before us, the respective notification of the Government

has not been furnished from which the nature of subsidy can be

ascertained. The issue, as to the grants / subsidies of which nature are

to be treated as Revenue receipt, and which type of grants / subsidies

ITA No. 1602-Chd/2017- M/s Greencone Environs Pvt Ltd., Chandigarh 3 are capital receipt, otherwise, has been settled by the Hon'ble Supreme

Court in the case of ‘CIT-I Vs. M/s Chaphalkar Brothers, Pune’ and

Others in Civil Appeal Nos. 6513-6514 of 2012 order dated

7.12.2017 . The Hon'ble Supreme Court while deliberating on the

other decisions of the Supreme Court in the cases of ‘Sahney Steel &

Press Works Ltd. Hyderabad Vs. CIT, A.P.-1, Hyderabad Vs. 1997

(7) SCC 765, ‘CIT, Madras Vs. Pooni Sugars and Chemicals Limited’

2009 (9) SCC 337 and further of the Hon'ble J&K High Court in the

case of ‘Shri Balaji Alloys Vs. CIT’ (2011) 333 ITR 335, has held

that to gather any of the receipts as to the same are capital or

Revenue in nature, ‘purpose test’ is to be applied. If the purpose is

for the setting up of new industry, then the receipts are to be

considered as capital in nature. However, if the receipts are in the

nature of facilitation / helping hand of the trade, the same is

construed Revenue in nature. What is Important, is the object for

which the subsidy / incentive is granted. That the object is carried

out in a particular manner is irrelevant. Once the object of the

subsidy was to industrialize the State and to generate employment in

the State, the fact that a subsidy took a particular form and that it

was granted only after commencing of production, would not make

any difference. The Hon'ble Supreme Court made reference to the

decision of the Hon'ble J&K High Court in the case of ‘Shri Balaji

Alloys v CIT’ (supra), wherein, the Hon'ble High Court has held,

ITA No. 1602-Chd/2017- M/s Greencone Environs Pvt Ltd., Chandigarh 4 while considering the scheme of refund of excise duty and interest

subsidy, has held that the scheme was capital in nature despite the

fact that the incentives were not available until and unless the

commercial production has started and justified the fact that these

incentives were not given to the assessee expressly for the purpose

of capital assets.

issue is required to be restored to the file of the CIT(A) to look into the

nature of the subsidy received in the light of the notification of the

Government as well as in the light of the decision of the Hon'ble

Supreme Court in the case of ‘CIT-I Vs. M/s Chaphalkar Brothers,

Pune’ and Others (supra). Accordingly, the impugned order of the

CIT(A) is hereby set aside and the matter is restored to the file of the

CIT(A) for decision afresh as per the observations made above.

The appeal of the assessee is treated as allowed for statistical

purposes.

Order dictated and pronounced in the Open Court immediately on

completion of hearing on 28.11.2019.

Sd/- Sd/- (अ�नपूणा� गु�ता / ANNAPURNA GUPTA) (संजय गग� / SANJAY GARG) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member Dated : 28.11.2019 “आर.के.”

ITA No. 1602-Chd/2017- M/s Greencone Environs Pvt Ltd., Chandigarh 5

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar