DCIT Vs John Deere India Pvt. Ltd. (ITAT Pune Bench)
Sales-Tax Subsidy Keeps Its Capital Colour—Past ITAT Orders Trump Revenue’s Repaint Job; TP Grounds Fade Away After MAP
Two disputes, one Revenue appeal
The Revenue challenged the CIT(A)’s order in the case of John Deere India Pvt. Ltd. for AY 2012-13. Although thirteen grounds were raised, the controversy essentially involved two issues: the taxability of sales-tax incentives of Rs.36,47,53,030 & certain transfer-pricing adjustments u/s 92CA.
The assessee was engaged in the manufacture of tractors, agricultural equipment & spare parts. It claimed the sales-tax subsidy received under the Maharashtra Government’s incentive scheme as an exempt capital receipt. The AO treated the subsidy as a revenue receipt & added it to the assessee’s total income.
The CIT(A), following earlier orders of the Pune ITAT in the assessee’s own case, deleted the addition. The Revenue therefore carried the dispute to the Tribunal, while separately challenging the CIT(A)’s conclusions concerning selection of comparables, functional analysis, segmental data & allocation of expenses in the transfer-pricing proceedings.
Revenue says subsidy followed production
The Revenue contended that the sales-tax benefit became available only after the industrial unit had been established in a backward area & commenced production. According to it, the incentive therefore operated to improve the profitability of the existing business rather than assist in establishing or completing the project.
