IN THE ITAT DELHI BENCH ‘C’
Deputy Commissioner of Income-tax, Circle 11(1), New Delhi
v.
Indo Rama Textiles Ltd.
IT Appeal Nos. 678 & 679 (Delhi) of 2012
[Assessment years 2005-06 & 2006-07]
June 22, 2012
ORDER
Shamim Yahya, Accountant Member
These appeals by the Revenue are directed against the respective order of the Ld. Commissioner of Income Tax (Appeals) for assessment years 2005-06 & 2006-07.
2. The grounds raised in ITA No. 678/Del/2012 read as under:-
“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 5,77,95,190/- made on account of treatment of sales tax subsidy as revenue receipts.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO not to charge interest u/s. 234B.
3. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing.”
3. The grounds raised in ITA No. 679/Del/2012 read as under:-
“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,31,18,000/- made on account of treatment of sales tax subsidy as revenue receipts.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO not to charge interest u/s. 234B.
3. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing.”
4. In this case assessee has received a sales tax subsidy of Rs. 5,77,95,190/- for A.Y. 2005-06, Rs. 331,18,000/- for A.Y. 2006-07 from the Government of Maharastara as revenue receipt. In the return of income following decision of the Special Bench of the tribunal in the case of Dy. CIT v. Reliance Industries Ltd. [2004] 88 ITD 273 (Mum.) the receipt was shown as a capital receipt not liable to tax. However the AO did not agree with this proposition. The AO further relied upon the Hon’ble Apex Court decision in the case of Sahney Steel & Press Works Ltd. v. CIT [1997] 228 ITR 253 and Delhi High Court decision in case of CIT v. Steel Authority of India [2002] 257 ITR 241 and Calcutta High Court decision in the case of Kesoram Industries & Cotton Mills Ltd. v. CIT [1991] 191 ITR 518 and held that the receipt was capital in nature. Following were the broad reasons for holding the receipts as revenue in nature –
“On examining of the scheme, it has been observed that :-
(i) The subsidy was not intended to be a contribution towards capital outlay of the industrial unit.
(ii) It was given with the object of enabling the assessee to carry on its business, although the purpose behind it may be to encourage industrialization.
(iii) The incentive is available only after the industry has started functioning.
(iv) Sales tax is a part of the sales and in turn is revenue receipt.
(v) Also, it was well settled that where subsidies granted were given by the government to assist a trader in his business, they were generally speaking payments of a revenue nature.”
5. Upon assessee’s appeal, Ld. CIT(A) gave a finding that the issue in dispute stood covered by the Special Bench decision of the Tribunal in the case of Reliance Industries Ltd. (supra) which stood affirmed by the Mumbai High Court. Ld. CIT(A) further observed that the scheme applicable in the Reliance Industries was 1979 scheme, however in the 1993 scheme terms and conditions are of the same nature and intent as is evident from the following comparative chart filed by the ld. Counsel.
