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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)’].
The assessee in this appeal has taken following effective grounds of appeal:-
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.
That in the facts and circumstances of the case and in law, the Ld. CIT(A) gravely erred in upholding the order of the Ld. DCIT, Circle 1(1) Chandigarh under which the capital subsidy was treated as Revenue receipt and made an addition of Rs. 2,50,00,000/- which is against the settled law.
The sole issue raised in this appeal is regarding the nature of
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.
Both the Ld. Representatives of the parties submitted that the
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