DCIT Vs Ambuja Cements Limited (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad dismissed the Revenue’s appeal and upheld the order of the Commissioner of Income Tax (Appeals) allowing the assessee to exclude sales tax incentive/subsidy of ₹1,28,25,66,755 from computation of total income under the normal provisions of the Income Tax Act and from computation of book profits. The Tribunal held that the sales tax subsidy constituted a capital receipt and was therefore not taxable.
The Revenue contended that the Assessing Officer had treated the sales tax incentive as taxable because similar additions had been made in earlier and subsequent assessment years. Although the Department acknowledged that coordinate benches of the Tribunal had consistently decided the issue in favour of the assessee, it submitted that the present appeal had been filed because those decisions had been challenged before the High Court.
The assessee argued that the issue had already been decided in its favour for Assessment Years 2005-06 to 2012-13 by the Mumbai Bench of the Tribunal and that the Ahmedabad Bench had also taken the same view in the case of Nirma Limited.
The Tribunal observed that the issue was recurring and had consistently been decided in favour of the assessee in earlier years. It relied extensively on the Mumbai Tribunal’s decision for Assessment Year 2005-06, which had examined various State Government sales tax incentive schemes. That decision applied the “purpose test” to determine whether a subsidy was capital or revenue in nature. According to the Tribunal, the purpose for which the subsidy is granted is decisive, while the timing, source and form of the subsidy are not.
