Case Law Details
DCIT Vs SovaIspat Limited (ITAT Kolkata)
The issue under consideration is whether industrial Promotion Assistance (IPA) received by the assessee-Company from the West Bengal Government is taxable under income tax?
In the present case, the West Bengal Government granted a subsidy by way of IPA for setting up of large/medium/small scale eligible unit which is prescribed in the WBIS 2000 and the unit has to be set up in either group B or C areas prescribed in the said scheme. The assessee had set up a new unit in the Bankura District of West Bengal area which falls in the group C area of the Scheme WBIS 2000 and received the subsidy from the Government. During the relevant assessment year, the Assessing Officer held that the same is subject to income tax.
ITAT states that the object of the subsidy in this case in was for setting up of unit in group B or C areas as spelled out in the WBIS scheme 2000 and since the object of the assistance under the subsidy scheme was to enable the assessee to set up unit, the receipt of subsidy was on capital account. Further, ITAT note that the Hon’ble Supreme Court in the subsequent decision after considering the Sahaney Steel & Press Works Pvt. Ltd. (Supra) in the case of CIT Vs. Pony Sugars & Chemicals Ltd. (supra) has made it clear that for determining the nature of the incentive/ subsidy, the object for which the subsidy/assistance given will be the deciding factor and the form or the method of the payment through which the subsidy is given is irrelevant. Merely because the amount of subsidy was equivalent to 75% of the sales tax paid by the beneficiary does not imply that the same was in the form of refund of sales tax paid. Therefore, since the subsidy was for setting up of large/medium/small scale eligible unit in group B and C areas in the State of West Bengal and the competent authority has issued the eligibility certificate to the assessee and since the assessee fulfills all the conditions as laid in the WBIS 2000 scheme, the industrial promotion assistance it received was on capital account. Therefore, the subsidy received is not taxable under Income Tax.
FULL TEXT OF THE ITAT JUDGEMENT
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