CIT v. Birla VXL Ltd. - Taxpublishers.in

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The Tax Publishers2013 TaxPub(DT) 1577 (Guj-HC) : (2013) 052 (I) ITCL 0127 : (2013) 215 TAXMAN 0117 : (2013) 090 DTR 0376 Income Tax Act, 1961 --Income Chargeability Incentive in form of sales tax waiver/deferment--Assessee had received incentives under the scheme of Government in the form of Sales Tax Waiver/Deferment scheme. Such incentives, according to assessee, were in the nature of capital receipts. Assessing officer, however, did not accept such contention and held that the same was revenue in nature. Commissioner (Appeals) held that the purpose of incentives was clearly for promoting capital investment and thereby to achieve industrial development and therefore, incentive was in the nature of capital receipt. *Held :* Incentive in the form of sales tax waiver/deferment was not meant to give any benefit on day-to-day functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by assessee in undertaking special modernization of its existing industry. Thus, it was a capital receipt. Income Tax Act, 1961, Section 2(24) IN THE Gujarat High Court Akil Kureshi & Sonia Gokani, J.J. CIT v. Birla VXL Ltd. Tax Appeal Nos. 316 To 318 of 2012 12 February, 2013 Appellant by : Pranav G. Desai ORDER *Akil Kureshi, J.* These Tax Appeals filed by the Revenue arise out of the common background. We may notice facts as arising in Tax Appeal No. 316 of 2012. 2. For the assessment year 1991-92, Revenue challenged the judgment and order of the Income Tax Appellate Tribunal dated 4-11-2011. Following question has been presented for our consideration : 'Whether in the circumstances and the facts of the case and in law, the Appellate Tribunal has erred in holding that the Sales Tax exemption of Rs. 30940235 granted to the assessee company by the State Government was in the nature of Capital Receipt not chargeable to tax ?' 3. The respondent-assessee had received incentives under the scheme framed by the Government of Gujarat under resolution dated 2-1-1991 in the form of Sales Tax Waiver/Deferment scheme. For the assessment year 1991-92, the assessee had received sales tax exemption of Rs. 3,09,40,235, Similar sales tax exemptions of varying amounts were received for the subsequent assessment years i.e., assessment year 1992-93 and 1993-94 also. Such incentives, according to the assessee, were in the nature of capital receipts. The assessing officer, however, did not accent such contention and held that the same was revenue in nature. The assessee carried the matter in appeal. Commissioner (Appeals) by his order dated 28-3-2011, reversed the view of the assessing officer. He held that the purpose of incentives was clearly for promoting capital investment and thereby to achieve industrial development and therefore, incentive was in the nature of capital receipt. He relied on the decision of the Apex Court in case of CIT v. Ponni Sugars & Chemicals Ltd. 2008 TaxPub(DT) 2302 (SC) : (2008) 306 ITR 392. 4. Revenue carried the matter in appeal before the Tribunal. The Tribunal, dismissed the Revenues appeal by judgment dated 4-11-2011. The Tribunal relied on the decision in case of Ajanta Mfg. Ltd. v. CIT (ITA No. 793/RJT/2010). The Revenue is thereupon before us in the present Tax Appeals. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1577 (Guj-HC) : (2013) 052 (I) ITCL 0127 : (2013) 215 TAXMAN 0117 : (2013) 090 DTR 0376

Income Tax Act, 1961

--Income Chargeability Incentive in form of sales tax waiver/deferment--Assessee had received incentives under the scheme of Government in the form of Sales Tax Waiver/Deferment scheme. Such incentives, according to assessee, were in the nature of capital receipts. Assessing officer, however, did not accept such contention and held that the same was revenue in nature. Commissioner (Appeals) held that the purpose of incentives was clearly for promoting capital investment and thereby to achieve industrial development and therefore, incentive was in the nature of capital receipt. Held : Incentive in the form of sales tax waiver/deferment was not meant to give any benefit on day-to-day functioning of the business, or for making the industry more profitable. The principle aim of the scheme was to cover the capital outlay already made by assessee in undertaking special modernization of its existing industry. Thus, it was a capital receipt.

Income Tax Act, 1961, Section 2(24)

IN THE Gujarat High Court

Akil Kureshi & Sonia Gokani, J.J.

CIT v. Birla VXL Ltd.

Tax Appeal Nos. 316 To 318 of 2012

12 February, 2013

Appellant by : Pranav G. Desai

ORDER

Akil Kureshi, J.

These Tax Appeals filed by the Revenue arise out of the common background. We may notice facts as arising in Tax Appeal No. 316 of 2012.

2. For the assessment year 1991-92, Revenue challenged the judgment and order of the Income Tax Appellate Tribunal dated 4-11-2011. Following question has been presented for our consideration :

'Whether in the circumstances and the facts of the case and in law, the Appellate Tribunal has erred in holding that the Sales Tax exemption of Rs. 30940235 granted to the assessee company by the State Government was in the nature of Capital Receipt not chargeable to tax ?'

3. The respondent-assessee had received incentives under the scheme framed by the Government of Gujarat under resolution dated 2-1-1991 in the form of Sales Tax Waiver/Deferment scheme. For the assessment year 1991-92, the assessee had received sales tax exemption of Rs. 3,09,40,235, Similar sales tax exemptions of varying amounts were received for the subsequent assessment years i.e., assessment year 1992-93 and 1993-94 also. Such incentives, according to the assessee, were in the nature of capital receipts. The assessing officer, however, did not accent such contention and held that the same was revenue in nature. The assessee carried the matter in appeal. Commissioner (Appeals) by his order dated 28-3-2011, reversed the view of the assessing officer. He held that the purpose of incentives was clearly for promoting capital investment and thereby to achieve industrial development and therefore, incentive was in the nature of capital receipt. He relied on the decision of the Apex Court in case of CIT v. Ponni Sugars & Chemicals Ltd. 2008 TaxPub(DT) 2302 (SC) : (2008) 306 ITR 392.

4. Revenue carried the matter in appeal before the Tribunal. The Tribunal, dismissed the Revenues appeal by judgment dated 4-11-2011. The Tribunal relied on the decision in case of Ajanta Mfg. Ltd. v. CIT (ITA No. 793/RJT/2010). The Revenue is thereupon before us in the present Tax Appeals.