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Income Tax Appellate Tribunal, SMC BENCH, PUNE
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the assessee against the order of CIT(A)-4, Pune, dated 25-04-2016 for the Assessment Year 2012-13.
Grounds raised by the assessee are extracted as under :
“1. The Ld.CIT(A) erred in law and on facts in confirming addition of Rs.16,00,000/- on account of Special Capital incentive under the Scheme of Government of Maharashtra under Package Scheme which is a capital receipt not liable to tax. 2. Ld.CIT(A) failed to appreciate that exemption from electricity charges was not connection with Capital Incentive Scheme but was in addition to the Special Capital Incentive. 3. The appellant craves to add, alter, modify or substitute any ground of appeal at the time of hearing.”
Briefly stated relevant facts are that the assessee is an individual
and is a reseller of Industrial Compressed Gas in the name of M/s. Bharat
Distributors. Assessee filed the return of income on 26-09-2012 declaring
total income of Rs.3,08,490/-. In the scrutiny assessment, AO analysed
the issues relating to the subsidy of Rs.16 lakhs received by the assessee
during the year under consideration and treated the same as ‘income of
the assessee’. Under the ‘Special Capital Incentive’ of Government of
Maharashtra, there is an approval of grant of Rs. 20 lakhs of incentive to
the assessee in addition to the provision for exemption of electricity duty
for 15 years from 01-04-2007 onwards. As part of it, the assessee received
the said subsidy of Rs.16 lakhs and, however, AO assumed that it was
provided towards meeting the electricity charges and the contents of Para 3
of the assessment order are relevant. AO treated the same as financial
assistance for the purpose of running his business. Accordingly, AO relied
on the judgment of Supreme Court in the case of Rajaram Maize Products
119 Taxman 492 (SC) which holds that the Electricity subsidy receipts
received by the assessee constitutes a revenue receipt. Eventually, the
sum of Rs.16 lakhs received on account of electricity charges is added to
the total income of the assessee. Eventually, the assessed income is
determined at Rs.23,29,200/-. CIT(A) confirmed the said addition in the
First Appellate proceedings as per the discussion given in Para No.5 of his
order. According to the CIT(A), the issue of power subsidy constitutes
taxable income of the assessee.
Aggrieved with the same, assessee is in appeal before us with the
grounds extracted above.
At the outset, Ld. Counsel for the assessee brought our attention to
the Eligibility Certificate for grant of Special Capital Incentive under PSI
2001 Scheme dated 24-01-2011 (Page 3 of the paper book) and submitted
that the subsidy granted to assessee constitutes two segments in the
Special Capital Incentive ( in short ‘SCI’) and approved by the
Maharashtra Government. Referring to page 4 of the paper book, Ld.
Counsel for the assessee submitted that the actual admissible investment
on this account of ‘SCI’ is Rs.20 lakhs. Out of it, assessee received only
Rs.16 lakhs in this year. Further, referring to the written submissions
made by the assessee before the CIT(A) dated 26-04-2016, Ld. Counsel
submitted that, in granting the subsidy to the industries, the Maharashtra
Government’s motto is to promote industries in the backward area of the
State. For this, granting electricity subsidy to the assessee is part of it
and hence, it constitutes a capital subsidy aimed at generation of
employment in the backward areas of the State. Therefore, the same
constitute a Capital Receipt which is not a taxable receipt. Further, relying
on the jurisdictional High Court in the case of CIT Vs. Reliance Industries
Ltd. 339 ITR 632 (Bom.), Ld. Counsel for the assessee submitted that the
issue under consideration stands covered in favour of the assessee.
Further also, Ld. Counsel submitted that there is some confusion in
appreciation of facts by the income-tax authorities with regard to the facts,
figures and the purpose of subsidy. Referring to the cited jurisdictional
High Court judgment in the case of Reliance Industries Ltd. (supra), Ld.
Counsel for the assessee submitted that the case of the assessee is similar
to that of one examined by the said Hon’ble Bombay High Court. Ld.
Counsel also mentioned that there are various schemes of subsidy granted
by the Maharashtra Government since 2001 and the 2001 Scheme stands
amended by the 2007 scheme. As per the Ld. Counsel, in the mind of the
AO, there is some confusion in the matters with regard to the applicable
scheme as well as the subsidy/incentive granted to the assessee under
consideration. She also referred to clauses 5.1 and 5.4 of the PSI 2001
Scheme and submitted that the amount of Rs.16 lakhs received is a capital
receipt. She also submitted that there is no issue with reference to the
granting of electricity duty received by the assessee. Referring all these
facts, Ld. Counsel for the assessee submitted that the AO totally erred in
understanding the facts of the scheme as well as the benefits granted to
the assessee and therefore, Ld. Counsel submitted that the matter may be
remanded to the file of AO for removal of the confusion and bringing clarity
into the facts.
On the other hand, Ld. DR for the Revenue relied heavily on the
orders of the AO and the CIT(A) and submitted that addition of Rs.16 lakhs
of subsidy constitutes a receive receipt.
We heard both the parties and perused the orders of the Revenue
and the documents placed before us for consideration. The undisputed
facts include that the assessee received Rs.16 lakhs out of the total benefit
of Rs. 20 lakhs of subsidy. The same is duly accounted in the books of
account of the assessee. It is the claim of the assessee that the same was
utilised for the fixed assets and therefore, the same constitutes a Capital
Receipt. However, per contra, the Department is of the view that the same
constitutes a Revenue Receipt as it was given towards the electricity
charges. On perusal of the eligibility certificate issued under PSI 2001
Scheme, we find that there is a reference to the figure of Rs.20 lakhs under
‘Special Capital Incentive’ granted to the assessee. In addition, assessee is
also eligible for exemption of electricity duty as per Clause 5.4 of the
amended PSI 2001 Scheme from 01-04-2007 to 31-03-2023. Assessee
received Rs.16 lakhs in this year and the same is said to have been utilised
for fixed assets. As such, AO misunderstood the whole scheme of subsidy,
and, is of the opinion that the subsidy is towards the electricity charges
and not for fixed assets of the business. AO did not examine the
object/purpose of grant of the said subsidy as well as the manner of
utilization of the said Rs.16 lakhs qua the objects of the scheme.
Therefore, in our view, there is a requirement of examining the
purpose/objects for which the said subsidy is granted to the assessee. The
binding judgment of Hon’ble Bombay High Court in the case of Reliance
Industries Ltd. (supra) is also to be considered while re-examining the
issue. It is the request of the Ld. Counsel for the assessee that the matter
may be remanded to the file of AO for want of clarity of facts in the mind of
AO on the issue. We find merit in the same. Considering the same, we are
of the opinion that the whole issue, relating to addition of Rs.16 lakhs
received by the assessee under ‘Special Capital Incentive’ by the
Maharashtra Government, is remanded to the file of AO for fresh
examination into the facts. It goes without saying that the AO shall grant
reasonable opportunity of being heard to the assessee. AO shall note that
the subsidy of Rs.16 lakhs is different from the additional benefit relating
to subsidy of exemption of electricity duty. Further, the AO shall
scrutinise the documents on the applicable scheme of incentive on one side
and the manner of utilization of Rs.16 lakhs qua the objects/purpose of
the said incentive/subsidy before characterising the nature of the subsidy.
AO shall note that it is a settled legal proposition that the subsidy for
encouraging the set up of industries in backward areas for generating the
employment, constitute the capital receipt as held by the jurisdictional
High Court in the case of Reliance Industries Ltd. (supra). Thus, AO shall
pass a speaking order after considering the judgment of Hon’ble
Jurisdictional High Court in the case of Reliance Industries Ltd. (supra)
cited by the Ld. Counsel for the assessee before us. Accordingly, the
grounds raised by the assessee are allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical
purposes.
Order pronounced on this 14th day of May, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 14th May, 2018. Satish
आदेश क� आदेश क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : आदेश आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-4, Pune 3. आयकर आयु� / The CIT-4, Pune 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “एक सद�य 5. एक सद�य एक सद�य” / एक सद�य DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार
P स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune