PCIT Vs Jindal Saw Ltd. (Delhi High Court)
The Delhi High Court dismissed the Revenue’s appeal against the order of the Income Tax Appellate Tribunal dated 24.09.2024. The issue before the Court was whether the Tribunal was justified in holding that the excise duty refund of ₹59.68 crore received by the assessee under the Incentive Scheme 2001 for Economic Development of Kutch District was a capital receipt and not taxable under the Income Tax Act, 1961.
The subsidy was granted under a scheme issued by the Government of Gujarat following the earthquake in the Kutch area. The Tribunal had held that the subsidy, being linked to capital investment, was a capital receipt. The High Court noted that the issue was covered by the Supreme Court’s decision in Ponni Sugars & Chemicals Limited, wherein it was held that sales tax or excise duty refund linked to capital investment constitutes a capital receipt.
The Court also rejected the Revenue’s alternative contention that the subsidy should be reduced from the block of assets for depreciation purposes. It held that the subsidy was independent of the cost of any specific asset and merely reimbursed excise duty paid. As there was no direct nexus with the cost of any particular machine, it could not be reduced from the block of assets. The appeal was dismissed.
