Dy. CIT v. Munjal Auto Industries Ltd.

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The Tax Publishers2013 TaxPub(DT) 2133 (Guj-HC) : (2013) 218 TAXMAN 0135 : (2013) 090 DTR 0369 Income Tax Act, 1961 --Income --Capital or revenue receipt Subsidy computed in terms of sales-tax deferment or waiver--Assessing officer contended that subsidy received by assessee under the scheme framed was in the nature of sales-tax deferment and an eligible unit would receive such subsidy only once when it went for production. He, therefore, submitted that subsidy was not for the purpose of covering capital outlay of an assessee and subsidy was in the nature of revenue receipt. Assessee, however, claimed that provisions contained in the said scheme were sufficiently clear and subsidy was though computed in terms of sales-tax liability, however the same was for the purpose of covering capital outlay. *Held:* Rightly so, as from the provisions of the said scheme, it clearly emerged that the subsidy, though computed in terms of sales tax deferment or waiver, in essence, it was meant for capital outlay expanded by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. It was undoubtedly true that such subsidy was computed in terms of sales-tax deferment and necessarily, therefore, would accrue to an industry only once the commercial production commences. However, this, by itself, would not be either a sole or concluding factor. Income Tax Act, 1961, Section 4 In the Gujarat High Court Akil Kureshi & Sonia Gokani, J.J. Dy. CIT v. Munjal Auto Industries Ltd. Tax Appeal Nos. 450 to 453 of 2012 28 January, 2013 Appellant by : K. M. Parikh Respondent by : Manish J. Shah JUDGMENT *Akil Kureshi, J.* Revenue is in appeal against the judgment of the Tribunal dated 21-12-2011. Following question is presented for our consideration : 'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sales-tax incentive is a capital receipt without considering the fact that subsidy in the form of sales-tax deferment was given by the Government of Haryana to the assessee company much after the commencement of business to augment the normal business running of Binola Unit and not for setting up of business and should, therefore, have been treated as a revenue receipt ?' 2. Issue is in narrow compass. Question is whether a certain subsidy received by the respondent assessee under the scheme framed by the Government of Haryana under Chapter IV-C of Haryana General Sales-tax Rules, 1975 should be treated as a capital receipt or a revenue receipt. The Tribunal in the impugned judgment relied on the decision of the Supreme Court in case of CIT v. Ponni Sugars & Chemicals Ltd. 2008 TaxPub(DT) 2302 (SC): (2008) 306 ITR 392 (SC) and ruled in favour of the assessee in the following manner : SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 2133 (Guj-HC) : (2013) 218 TAXMAN 0135 : (2013) 090 DTR 0369

Income Tax Act, 1961

--Income --Capital or revenue receipt Subsidy computed in terms of sales-tax deferment or waiver--Assessing officer contended that subsidy received by assessee under the scheme framed was in the nature of sales-tax deferment and an eligible unit would receive such subsidy only once when it went for production. He, therefore, submitted that subsidy was not for the purpose of covering capital outlay of an assessee and subsidy was in the nature of revenue receipt. Assessee, however, claimed that provisions contained in the said scheme were sufficiently clear and subsidy was though computed in terms of sales-tax liability, however the same was for the purpose of covering capital outlay. Held: Rightly so, as from the provisions of the said scheme, it clearly emerged that the subsidy, though computed in terms of sales tax deferment or waiver, in essence, it was meant for capital outlay expanded by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit. As noted, such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification. It was undoubtedly true that such subsidy was computed in terms of sales-tax deferment and necessarily, therefore, would accrue to an industry only once the commercial production commences. However, this, by itself, would not be either a sole or concluding factor.

Income Tax Act, 1961, Section 4

In the Gujarat High Court

Akil Kureshi & Sonia Gokani, J.J.

Dy. CIT v. Munjal Auto Industries Ltd.

Tax Appeal Nos. 450 to 453 of 2012

28 January, 2013

Appellant by : K. M. Parikh

Respondent by : Manish J. Shah

JUDGMENT

Akil Kureshi, J.

Revenue is in appeal against the judgment of the Tribunal dated 21-12-2011. Following question is presented for our consideration :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the sales-tax incentive is a capital receipt without considering the fact that subsidy in the form of sales-tax deferment was given by the Government of Haryana to the assessee company much after the commencement of business to augment the normal business running of Binola Unit and not for setting up of business and should, therefore, have been treated as a revenue receipt ?'

2. Issue is in narrow compass. Question is whether a certain subsidy received by the respondent assessee under the scheme framed by the Government of Haryana under Chapter IV-C of Haryana General Sales-tax Rules, 1975 should be treated as a capital receipt or a revenue receipt. The Tribunal in the impugned judgment relied on the decision of the Supreme Court in case of CIT v. Ponni Sugars & Chemicals Ltd. 2008 TaxPub(DT) 2302 (SC): (2008) 306 ITR 392 (SC) and ruled in favour of the assessee in the following manner :