DCIT, Circle - 12, Kolkata, Kolkata v. M/s. Teesta Agro Industries Ltd., Kolkata

ITA 1237/KOL/2010 | 2003-2004
Pronouncement Date: 07-01-2011

Appeal Details

RSA Number 123723514 RSA 2010
Assessee PAN AABCT1252D
Bench Kolkata
Appeal Number ITA 1237/KOL/2010
Duration Of Justice 6 month(s) 22 day(s)
Appellant DCIT, Circle - 12, Kolkata, Kolkata
Respondent M/s. Teesta Agro Industries Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Department
Bench Allotted A
Tribunal Order Date 07-01-2011
Assessment Year 2003-2004
Appeal Filed On 15-06-2010
Judgment Text
A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA () BEFORE . . . . . . . . !' !' !' !' /AND . .. . . .. .! !! ! # [BEFORE HONBLE SRI D. K. TYAGI JM & HONBLE SRI C. D. RAO AM] '$ '$ '$ '$ / ITA NO. 1237 /KOL/2010 %&' !() %&' !() %&' !() %&' !()/ // / ASSESSMENT YEAR : 2003-04 & '$ '$ '$ '$ / ITA NO. 1053 /KOL/2010 %&' !() %&' !() %&' !() %&' !()/ // / ASSESSMENT YEAR : 2006-07 & '$ '$ '$ '$ / ITA NO. 1753 /KOL/2010 %&' !() %&' !() %&' !() %&' !()/ // / ASSESSMENT YEAR : 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX -VS- M/S. TEEST A AGRO INDUSTRIES LTD. CIRCLE-12 KOLKATA. (PA NO.AABCT 1252 D) (+ / APPELLANT ) (-+ / RESPONDENT ) FOR THE APPELLANT: : ./ SRI R. MUKHERJEE FOR THE RESPONDENT : . S / SRI S. P. CHOUDHURY & D. K. SONOWAL / / ORDER PER SHRI C. D. RAO AM/ . .. . . .. .! !! ! # # # # ALL THESE APPEALS PREFERRED BY THE REVENUE ARE DIRE CTED AGAINST THE SEPARATE ORDERS OF THE LD. CIT(A) KOLKATA FOR THE ASSESSME NT YEARS 2003-04 2006-07 AND 2007-08 RESPECTIVELY. SINCE GROUNDS ARE COMMON AND FACTS ARE IDENTICAL WE DISPOSE OF ALL THE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ALL THESE APPEALS THE ONLY ISSUE IS RELATING TO THE DELETION OF ADDITION ON ACCOUNT OF REMISSION OF SALES TAX RECEIVED. WHILE D ISPOSING OF ALL THESE APPEALS WE TAKE INTO ACCOUNT THE FACTS RELATING TO ASSESSMENT YEAR 2003-04. BRIEFLY STATED FACTS OF THE CASE AS STATED BY THE ASSESSING OFFICER ARE THAT TH E ASSESSEE CLAIMED THAT THE INCENTIVE IN THE FORM OF SALES TAX REMISSION AS ENJOYED BY IT UN DER THE WEST BENGAL INCENTIVE SCHEME 1999 IN THE AGGREGATE SUM OF RS.1 04 69 262 /- WAS A CAPITAL RECEIPT NOT CHARGEABLE TO INCOME TAX. THE SAID SUM OF RS.1 04 69 262/- WAS INITIALLY REFLECTED BY IT UNDER THE HEADING DEFERRED SALES TAX IN ITS BALAN CE SHEET DRAWN AS AT 31.03.2003 UNDER THE GROUP HEADING UNSECURED LOANS. IN NOTE (1) UNDER PARAGRAPH 2 OF THE 2 NOTES FORMING PART OF THE AUDITED ACCOUNTS FOR TH E YEAR ENDING 31.03.2003 IT WAS CLEARLY STATED THAT THE APPELLANT COMPANY HAS ALREA DY MOVED THE STATE GOVERNMENT OF WEST BENGAL FOR REMISSION OF TAX FOR A PERIOD OF NI NE (9) YEARS FROM 01.01.2001 AND THAT THE FINAL SANCTION YET TO BE RECEIVED FROM THE STATE GOVERNMENT. THE ENTIRETY OF THE SAID SUM OF RS.1 04 69 262 WAS TRANSFERRED BY THE A SSESSEE COMPANY TO THE CAPITAL RESERVE ACCOUNT IN THE FINANCIAL YEAR ENDING ON 31. 03.2006 CORRESPONDING TO THE ASSESSMENT YEAR 2006-07. THE A.O. WHILE DISALLOWING THE SAME OBSERVED THAT THE DEFERRED SALES TAX OF RS.1 04 69 000/- EXCLUSIVELY RELATE TO THE YEAR UNDER APPEAL AS AGAINST WHICH THE ASSESSEE COMPANY HAD DEPOSITED IN THE GOVERNMENT TREASURY ONLY A SUM OF RS.43 00 000/-. ALLEGING THE SALES TAX TO BE TRADING RECEIPT THE AO OBSERVED THAT THE UNPAID SUM OF RS.61 69 000/- WAS NOT INCLUDED I N THE INCOME OF THE ASSESSEE COMPANY AND THE SAME WAS NOT ALLOWABLE UNDER SECTI ON 43B OF THE SAID ACT. THE RELEVANT EXTRACT FROM THE ASSESSMENT ORDER IS REPRO DUCED AS UNDER: SUCH AMOUNT RELATES TO DEFERRED SALES TAX RECEIVED BY THE ASSESSEE COMPANY VIDE ORDER OF KOLKATA HIGH COURT IN WRIT PETITION NO. 2031 OF 2003. FURTHER THE ASSESSEE SUBMITTED THAT PURSUANT TO SUCH ORDER OF KOLKATA HI GH COURT THE GOVT. OF WEST BENGAL PASSED AN ORDER DT. 29.07.2004 AND FURTHER COMMERCE & INDUSTRIES DEPARTMENT OF GOVT. OF WEST BENGAL GRANTED SALES TAX DEFERMENT. T HE ASSESSEE ALSO SUBMITTED A COPY OF CERTIFICATE OF ELIGIBILITY OF REMISSION OF TAX D UE BY THE ASST. COMMISSIONER OF SALES TAX WEST BENGAL. IT WAS OBSERVED THAT THE FIRST DA TE OF COMMENCEMENT OF PRODUCTION WAS 10.12.1991 .THE ASSESSEE S CONTENTION FOR TREA TING SUCH AMOUNT AS CAPITAL RECEIPTS DOES NOT WITHSTAND THE TEST OF LAW. THE ASSESSEE HA S RECEIVED SUCH ASSISTANCE FROM THE GOVT. NOT FOR ANY CAPITAL EXPANSION OR CREATION OF NEW ASSET OR SETTING UP ANY NEW PROJECT. THE ASSISTANCE HAS BEEN RECEIVED FROM THE GOVT. OF WEST BENGAL AS PER THE DIRECTIVE OF HIGH COURT TO OVERCOME THE FINANCIAL C RISIS WHICH IT WAS UNDERGOING. THE ASSESSEE MAY HAVE PURCHASED NEW ASSETS OR EXPANDED ITS CAPACITY ON ITS OWN HOWEVER THAT HAS NO RELATION WITH THE SOLES TAX DEFERMENT S CHEME AS GRANTED BY THE GOVT. AND AS SUCH THE ASSESSEE S CONTENTION FOR TREATING SUC H SUM AS CAPITAL RECEIPTS FALLS FLAT AND SUCH AMOUNT IS TREATED AS REVENUE RECEIPTS ONLY. TH IS IS SUPPORTED BY THE APEX COURTS DECISION IN SAHNEY STEEL & PRESS WORKS LTD. VS. CIT 228 ITR 253 (SC) WHEREIN IT WAS HELD THAT INCOME-CAPITAL OR REVENUE RECEIPT-SUBSIDY-SUBSIDY FROM PUBLIC FUNDS GRANTED BY GOVERNMENT BY WAY OF REFUND OF SALES TAX ETC. ON PURCHASE OF MACHINERY ETC. AFTER COMMENCEMENT OF PRODUCTION TO ENABLE THE ASSE SSEE TO RUN THE BUSINESS MORE PROFITABLY AND NOT FOR SETTING UP OF THE INDU STRY IS OPERATIONAL SUBSIDY AND HENCE A REVENUE RECEIPT WHAT IS MATERIAL IS TH E PURPOSE FOR WHICH IT IS GRANTED AND NOT THE SOURCE OF GRANT-IF THE PURPOSE IS TO HELP THE ASSESSEE TO SET UP ITS BUSINESS OR COMPLETE A PROJECT THE MONIES M UST BE TREATED AS TO HAVE BEEN 3 RECEIVED FOR CAPITAL PURPOSE BUT IF MONIES ARE GIVE N TO THE ASSESSEE FOR ASSISTING HIM IN CARRYING OUT THE BUSINESS OPERATION AND THE MONEY IS GIVEN ONLY AFTER AND CONDITIONAL UPON COMMENCEMENT OF PRODUCTION SU CH SUBSIDIES MUST BE TREATED AS ASSISTANCE FOR THE PURPOSE OF THE TRADE AND REVENUE IN NATURE. EVEN OTHERWISE SUCH ASSISTANCE IS GIVEN BY THE GOVT . LONG AFTER THE COMMENCEMENT OF THE PRODUCTION AND HENCE SUCH ASSISTANCE IN THE FOR M OF SALES TAX DEFERMENT CANNOT BE TREATED AS CAPITAL RECEIPTS AND THIS IS ALSO SUPPOR TED BY JUDICIAL DECISIONS AS FOLLOWS :- A. COMMISSIONER OF INCOME TAX V. PONNI SUGARS AND C HEMICALS LTD. HIGH COURT OF MADRAS (2003) 179 CTR (MAD) 477 : (2003) 260 I TR 605 (MAD) : (2003) 127 TAXMAN 188 : INCOME-CAPITAL OR REVENUE RECEIPT-INCENTIVES TO SU GAR MANUFACTURER- INCENTIVES CONFERRED UNDER A SCHEME IN FORM OF HIGH ER FREE SALE SUGAR QUOTA AND EXCISE DUTY CONCESSION TO SUGAR MANUFACTU RERS ESTABLISHING NEW SUGAR MILLS OR EXPANDING THE EXISTING ONES TO E NABLE THEM TO DISCHARGE THE LOANS TAKEN FROM PUBLIC FINANCIAL INS TITUTIONS-SCHEME WHOLLY INTENDED TO MEET THE CAPITAL COST INCURRED B Y SUCH ASSESSEES IN SETTING UP THE UNITS WHICH THEY HAD MET BY SECURING LOANS FROM PUBLIC FINANCIAL INSTITUTIONS-FACT THAT THE INCENTIVE IS G IVEN SUBSEQUENT TO THE COMMENCEMENT OF PRODUCTION CANNOT MAKE IT A TRADING RECEIPT. THUS THE INCENTIVES IN FORM OF HIGHER FREE SALE QUOTA OF SUG ARS AND EXCISE DUTY CONCESSION IS A CAPITAL RECEIPT-HOWEVER THE CONCES SION OF PURCHASE-TAX WAS IN NO WAY LINKED TO THE EXPENDITURE IN SETTING UP THE INDUSTRY-IT WAS A CONCESSION GIVEN TO MEET THE COST OF RUNNING THE BUSINESS AFTER IT HAD GONE INTO PRODUCTION-THUS SUCH INCENTIVE WAS A REV ENUE RECEIPT. B. MERINO PLY AND CHEMICALS LTD. V. COMMISSIONER OF INCOME TAX HIGH COURT OF CALCUTTA 209 ITR 508 (CAL) INCOME-CAPITAL OR REVENUE RECEIPT-TRANSPORT SUBSID Y RECEIVED FROM STATE GOVT.- WHERE SUBSIDY IS A RECURRENT RECOUPMEN T OF PROFIT INSUFFICIENCY IT HAS TO BE TREATED AS A PAYMENT FOR AUGMENTATION OF REVENUE AND WILL FORM PART OF PROFIT-TAXING SUCH SU PPORTING REVENUE WILL NOT RESULT IN ENQUIRY AS THE SUPPORT IS INTENDED TO MAINTAIN RETURN TO THE ENTREPRENEUR YEAR BY YEAR-TRANSPORT SUBSIDY IN THE INSTANT CASE WENT TO MAKE UP PROFITS AND GAINS OF ASSESSEE IN SO FAR AS IT RECOUPS THE EXPENDITURE OR TRANSPORT-SCHEME IS AVAILABLE NOT ON LY TO A NEW UNIT BUT ALSO TO EXISTING UNITS-SCHEME IS RELATED NOT ONLY T O TRANSPORT CHARGES BUT INDIRECTLY ALSO TO CONSUMPTION OF RAW MATERIAL AND ULTIMATE OUTPUT OF FINAL PRODUCT-MODE OF MEASURING DOES NOT DECIDE THE CHARACTER OF WHAT IS MEASURED-FURTHER TRANSPORT SUBSIDIES WERE INSEP ARABLY CONNECTED WITH ASSESSEES BUSINESS-ASSESSEE HAS A UNIT IN BAC KWARD AREA AND THE TRANSPORT EXPENDITURE IS AN INCIDENTAL EXPENDITURE WHICH THE SUBSIDY RECOUPS-SUBSIDY THEREFORE A REVENUE RECEIPTS. 4 C. COMMISSIONER OF INCOME TAX V. TIRUMALA BRICKS & TILES FACTORY HIGH COURT OF ANDHRA PRADESH(1996) 131 CTR (AP) 211 [1996) 21 7 ITR 547 (AP) : (1996) 85 TAXMAN 143. INCOME-CAPITAL OR REVENUE RECEIPT-INVESTMENT SUBSI DY GRANTED BY GOVT. FOR SETTING UP/EXPANSION OF PLANT IN BACKWARD AREA TO BE QUALIFIED AT A PERCENTAGE OF FIXED CAPITAL IS CAPITAL RECEIPT-THE FACT THAT THE AMOUNT OF SUBSIDY WOULD BE DISBURSED ON PROOF OF RELEVANT EXP ENDITURE INCURRED/TAXES PAID DOES NOT INDICATE THAT THE AMOU NT PAID AS SUBSIDY IS A REVENUE RECEIPT. IN VIEW OF THE ABOVE THE ASSESSING OFFICER TREATED THE SAID AMOUNT AS REVENUE RECEIPT ONLY. HE ALSO STATED THAT EVEN OTHERWISE THE SALES TAX COLLECTED BY THE ASSESEE HAS NOT BEEN PAID WITHIN THE DUE DATE OF FILING OF RETURN A ND HENCE AS PER THE PROVISION OF SECTION 43B THE AMOUNT NEEDS TO BE ADDED BACK TO TH E INCOME FOR THE YEAR. HENCE HE DISMISSED THE ASSESSEES CONTENTION AND THE AMOUNT OF THE DEFERRED SALES TAX BEING THE ASSISTANCE RECEIVED WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. IN APPEAL THE LD. CIT(A) WAS OF THE OPINION THAT THE ASSISTANCE GIVEN BY WAY OF SALES TAX REMISSION IS IN THE NATURE OF CAPITAL RECEIPT AND ACCORDINGLY HE D IRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION. AGGRIEVED BY THE SAID ORDER NOW THE REVENUE IS IN APPEALS BEFORE US. 3. AT THE TIME OF HEARING BEFORE US THE LD. DR REL IED ON THE ORDER OF THE ASSESSING OFFICER AND URGED BEFORE THE BENCH TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 4. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE WHILE RELYING ON THE ORDER OF THE LD. CIT(A) REITERATED HIS SAME SUBMISSIONS AS S UBMITTED BEFORE THE LOWER AUTHORITIES AND FURTHER SUBMITTED THROUGH HIS WRITT EN SUBMISSIONS AS UNDER : 2. THE LD. CIT(A) CORRECTLY ANALYSED THE FACTS OF THE CASE AND RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGAR AND CHEMICALS LTD. 306 ITR 392 AND CERTAIN OTHER JUDGM ENTS RIGHTLY DELETED THE ADDITION OF RS.61 69 000/- MADE BY THE ASSESSING OF FICER BY MAKING DISALLOWANCE UNDER SECTION 43B OF THE INCOME-TAX AC T. 5 6 7 8 9 10 11 5. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE CASE LAWS CITED BY THE LD. COUNSEL. WE FIND THAT THE ASSESSEE CLAIMED THAT THE INCENTIVE IN THE FORM OF SALES TAX REMISSION AS ENJ OYED BY IT UNDER THE WEST BENGAL INCENTIVE SCHEME 1999 IN THE AGGREGATE SUM OF RS.1 04 69 262/- WAS A CAPITAL RECEIPT NOT CHARGEABLE TO INCOME TAX FOR THE ASSESSMENT YEA R 2003-04. THE ASSESSEE INITIALLY REFLECTED THE SAID SUM UNDER THE HEAD DEFERRED SA LES TAX IN THE BALANCE SHEET AS AT 31.3.2003 UNDER THE GROUP HEADING UNSECURED LOANS . IN NOTE (1) UNDER PARA 2 OF THE NOTES FORMING PART OF THE AUDITED ACCOUNTS THE ASSE SSEE STATED THAT IT ALREADY MOVED THE STATE GOVT. FOR REMISSION OF TAX FOR A PERIOD OF N INE YEARS FROM 1.1.2001 AND THE FINAL SANCTION YET TO BE RECEIVED FROM THE STATE GOVT. H ENCE THE ENTIRE SUM WAS TRANSFERRED BY THE ASSESEE TO THE CAPITAL RESERVE ACCOUNT IN TH E FY 31.3.2006 CORRESPONDING TO THE ASSESSMENT YEAR 2006-07. THE ASSESSING OFFICER WHI LE DISALLOWING THE SAME STATED THAT THE DEFERRED SALES TAX OF RS.1 04 69 000/- EXC LUSIVELY RELATE TO THE YEAR UNDER APPEAL AS AGAINST WHICH THE ASSESEE COMPANY HAD DE POSITED IN THE GOVT. TREASURY ONLY A SUM OF RS.43 00 000/-. BY STATING THE SALES TAX TO BE TRADING RECEIPT THE ASSESSING OFFICER OBSERVED THAT THE UNPAID SUM OF RS.61 69 00 0/- WAS NOT INCLUDED IN THE INCOME OF THE ASSESEE AND THE SAME WAS NOT ALLOWABLE UNDER SECTION 43B OF THE SAID ACT AND ADDED THE SAID SUM OF RS.61 69 000/- TO THE INCOME OF THE ASSESSEE AS REVENUE RECEIPT. THE LD. CIT(A) HAS DELETED THE ADDITION BY OBSERVIN G AS UNDER : 12 I HAVE DULY CONSIDERED THE A.O.S RELIANCE PLACED ON THE JUDICIAL DECISIONS AND REASONS FOR TREATING THE SAID SUBSIDY AS A REVENUE RECEIPT. THE COUNTER SUBMISSIONS MADE BY THE APPELLANT HAVE ALSO BEEN CAREFULLY EXAM INED AND CONSIDERED. I HAVE ALSO PERSUED THE RELEVANT DOCUMENTS RELATED TO THE SUBSI DY SCHEME. THE ISSUE THAT IS TO BE DECIDED IS WHETHER THE SUBSIDY IS A REVENUE OR A CA PITAL RECEIPT. THE AO HAS RELIED UPON THE FOLLOWING CASE LAWS: SAWHNEY STEEL AND PRESS WORKS LTD. V. CIT (1997) 22 8 ITR 253 (SC) CIT V. PONNI SUGARS AND CHEMICALS LTD. (2003) 260 I TR 605 (MAD) MERINO PLY AND CHEMICALS LTD. V. CIT (1994) 209 ITR 508 (CAL) CIT V. TIRUMALA BRICKS AND TILES FACTORY (1996) 217 ITR 547 (AP) THE APPELLANT PLACED RELIANCE ON THE FOLLOWING CASE LAWS: CIT VS. PONNI SUGARS & CHEMICALS LTD. (SC) CIT VS. KISAN SAHKARI CHINI MILLS LTD. (2009) 317 I TR 322 (ALL) DCIT VS. RELIANCE INDUSTRIES LTD. (2004) 88 ITD 273 (MUM)(SB) KLAR SAHEN P. LTD. VS. ITO (ITA NOS. 2069 OF 2071 ( KOL) OF 2004) CIT VS. KIAR SEHEN P. LTD. (ITA NO. 315 OF 2008) THE A.O. HAS PRIMARILY RELIED ON THE HONBLE SUPREM E COURT DECISION IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. (SUPRA.). THE A.O . IN HIS ORDER SIMPLY QUOTED THE CASE DECISION AND HELD THAT THE REMISSION OF SALES TAX WAS A REVENUE RECEIPT. A.O. HAS NOT ANALYSED THE FACTS NOR COMPARED THE FACTS WITH THE FACTS OF THE SUPREME COURT CASE (SAHENY STEEL & PRESS WORKS LTD. (SUPRA). ON THE OT HER HAND THE SUPREME COURT IN THE CASE OF CIT VS. PONNI SUGARS & CHEMICALS LTD. (SC) HELD THAT THE SUBSIDY RECEIVED FROM THE STATE GOVERNMENT IS A CAPITAL RECEIPT IF T HE OBJECT OF THE ASSISTANCE IS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND AN E XISTING UNIT. BEFORE I PROCEED TO DISCUSS THE SUPREME COURT ORDER IN THE CASE OF PONN I SUGARS WHICH IS IN FAVOUR OF THE APPELLANT I WOULD FIRST PREFER TO EXAMINE THE FACT S OF SAHENY STEEL & PRESS WORKS LTD. (SUPRA) WHEREIN THE APEX COURT TREATED THE SUBSIDY AS REVENUE IN NATURE. IT NOTICED THE FOLLOWING CONDITIONS TO BE FULFILLED FOR GETTIN G INCENTIVES : - INCENTIVE IS CONDITIONAL UPON COMMENCEMENT OF PRO DUCTION - INCENTIVE IS LIMITED TO 5 YEARS FROM THE DATE OF COMMENCEMENT OF PRODUCTION - INCENTIVES ARE TO BE GIVEN BY WAY OF REFUND OF SA LES TAX AND ALSO SUBSIDY AS POWER CONSUMED AND OTHER EXEMPTIONS. THE APEX COURT HELD AS FOLLOWS: THE PAYMENTS WERE MADE TO ASSIST THE NEW INDUSTRIE S AT THE COMMENCEMENT OF BUSINESS . THE ASSESSEE WAS FREE TO USE THE MONEY IN ITS BUSINESS ENTIRELY AS IT LIKED AND WAS NOT OBLIGED TO SPEND THE MONEY FOR A PARTICULAR PURPOSE . THE SUBSIDIES WERE GRANTED ONLY AFTER THE SETTING U P OF THE NEW INDUSTRY AND COMMENCEMENT OF PRODUCTION .. THE SUBSIDIES WERE OF REVENUE NATURE. 13 THE FACTS OF THE PRESENT CASE ARE DIFFERENT AND ARE VERY SIMILAR TO THE CASE LAWS RELIED ON BY THE APPELLANT ESPECIALLY THE CASE DECIDED BY THE APEX COURT IN THE MATTER OF CIT VS. PONNI SUGARS & CHEMICALS LTD. THE APEX COURT HE LD AS FOLLOWS : IF THE OBJECT OF THE SUBSIDY IS TO ENABLE THE ASSE SSEE TO RUN THE BUSINESS MORE PROFITABLY THEN THE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND IF THE OBJECT OF ASSISTANCE UNDER THE SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND AN EXISTING UNIT OR TO MAKE THE REPAYMENT OF LOANS TAKEN BY THE ASSESSEE TO SET UP NEW UNITS/ SUBSTANTIAL EX PANSION OF AN EXISTING UNIT THEN THE RECEIPT OF THE SUBSIDY WOULD BE ON CAPITAL ACCOUNT. THEREFORE IT IS THE OBJECT FOR WHICH THE SUBSIDY/ASSISTANCE IS GIVEN WH ICH DETERMINES THE NATURE OF THE INCENTIVE/SUBSIDY. THE FORM OF MECHANISM THROUG H WHICH THE SUBSIDY IS GIVEN ARE IRRELEVANT. IN THE PRESENT CASE THE SUBSIDY IN THE FORM OF REM ISSION OF SALES TAX WAS GIVEN TO THE APPELLANT SUBJECT TO THE CONDITION THAT THE ENTIRE AMOUNT OF REMISSION SHALL BE UTILIZED BY THE APPELLANT FOR THE PURPOSE OF MAKING FIXED CA PITAL INVESTMENT AND TO REPAY LOANS. ACCORDINGLY THE APPELLANT HAS EXPANDED ITS INSTALL ED CAPACITY OF SSP & SA FROM 1 32 000 TPA AND 49 500 TPA TO 1 65 000 TPA AND 66 000 TPA RESPECTIVELY IN 2003- 04. THE APPELLANT HAS ALSO MADE A SUBSTANTIAL FIXED CAPITAL INVESTMENT AND HAS REPAID THE LOANS ALSO. IN THE MATTER OF CIT VS. KISHAN SAHKARI CHINI MILLS LTD. AS RELIED UPON BY THE APPELLANT THE ALLAHABAD HIGH COURT HAS ALSO FOLLOW ED THE APEX COURTS DECISION IN THE CASE OF PONNI SUGAR & CHEMICALS LTD. ACCORDINGLY IT HELD AS IF THE INCENTIVE GRANTED BY THE GOVERNMENT IS UTILIZED FOR REPAYMENT OF LOAN S TAKEN BY THE ASSESSEE FOR SUBSTANTIAL EXPANSION OF ITS EXISTING UNIT THE SUB SIDY RECEIVED BY THE ASSESSEE WAS A CAPITAL RECEIPT. IT IS ALSO RELEVANT TO REPRODUCE THE RELEVANT EXTRACT FROM THE ITAT (KOL.) ORDER IN THE CASE OF KLAR SEHEN PVT. LTD. VS . AO AS RELIED UPON BY THE APPELLANT WHICH WAS AFFIRMED BY THE CALCUTTA HIGH COURT ALSO: WHEN FINANCIAL CRISES IS FACED BY SOME BUSINESS P UMPING IN OF FRESH CAPITAL IS REQUIRED TO HELP THE BUSINESS TO TIDE OVER SUCH FIN ANCIAL CRISES. THE FINANCIAL HELP IN THIS REGARD HAS THEREFORE GOT TO BE CONS IDERED AS HAVING AN ENDURING EFFECT OF DRAGGING IN THE BUSINESS OUT OF POOR FINA NCIAL CONDITIONS BEING FACED BY THE INDUSTRIES. THE SCHEME OF WEST BENGAL GOVT. DOE S NOT AT ALL ENVISAGE GIVING ANY SUBSIDY IN RESPECT OF SPECIFIC ITEMS OF EXPENSE S LIKE SALES TAX POWER WATER ETC. AND HENCE THE SAME CAN NOT BE REGARDED TO BE O F REVENUE NATURE. THE DECISION OF HONBLE MADRAS HIGH COURT IN PONNI SUGARS CASE AS REFERRED BY THE AO WAS AFFIRMED BY THE HONBLE SUPREME COURT IN FA VOUR OF THE APPELLANT. THE AO HAS ALSO RELIED UPON THE DECISION OF THE CAL CUTTA HIGH COURT IN THE CASE OF MERINO PLY AND CHEMICALS LTD. VS. CIT WHICH DEALS W ITH THE ASSISTANCE BY THE STATE IN THE FORM OF RE-IMBURSEMENT OF 50% OF THE ACTUAL TRA NSPORT CHARGES INCURRED AND THEREFORE THIS CASE IS NOT RELEVANT ON TH FACTS AN D CIRCUMSTANCES OF THE INSTANT CASE. THE AO HAS ALSO RELIED UPON THE DECISION OF THE AND HRA PRADESH HIGH COURT IN THE CASE OF CIT VS. TIRUMALA BRICKS AND TILES FACTORY. IN TH E SAID CASE IT WAS HELD THAT THE 14 INCENTIVE GRANTED BY THE ANDHRA PRADESH GOVERNMENT WAS FOR THE PURPOSE OF SETTING UP NEW INDUSTRIAL UNITS AND/OR EFFECTING SUBSTANTIAL E XPANSION OF THE EXISTING UNITS IN BACKWARD AREAS. THE QUANTUM OF SUBSIDY OFFERED WAS 10 PER CENT OF THE FIXED CAPITAL SUBJECT TO A MAXIMUM OF 10 IAKH. THE INCENTIVE GRAN TED BY THE STATE WAS A CAPITAL RECEIPT IN THE HANDS OF THE ASSESSEE. IN THE INSTAN T CASE ALSO THE SUBSIDY WAS GRANTED TO THE EXTENT OF THE GROSS VALUE OF FIXED CAPITAL ASSE TS/ADDITIONAL FIXED ASSETS OR RS. 50 CRORES WHICHEVER IS LESS. THEREFORE THE DECISION O F THE ANDHRA PRADESH HIGH COURT ACTUALLY SUPPORTS THE APPELLANTS CASE. FURTHER FROM THE SUBMISSIONS OF THE LD. AR THE FO LLOWING FACTS EMERGE: - THAT THE INCENTIVE IN THE FORM OF SALES TAX REMIS SION WAS GIVEN TO THE APPELLANT UNDER THE WEST BENGAL INCENTIVE SCHEME 1999. - THAT THE APPELLANT COMPANY EXPANDED ITS INSTALLED CAPACITY OF SSP & SA TO 1 32 000 TPA AND 49 500 TPA RESPECTIVELY IN 1996-97 AND 1998-99 RESPECTIVELY AND FURTHER EXPANDED ITS INSTALLED CAPACITY OF SSP AND SA TO 1 65 000 AND 66 000 TPA IN 2003-04. - THAT THE REMISSION OF SALES TAX WAS GRANTED SUBJE CT TO THE CONDITION THAT THE ENTIRE AMOUNT OF REMISSION SHALL BE UTILIZED BY IT FOR THE PURPOSE OF MAKING FIXED CAPITAL INVESTMENT AND TO REPAY LOANS. - THAT THE APPELLANT HAS UTILIZED THE SAID REMISSIO N BY WAY OF MAKING ADDITIONS TO LAND & BUILDING PLANT & MACHINERY AND OTHER FIXED ASSETS AND HAS ALSO REPAID LOANS. IN HIS ORDER THE AO HAS ALSO INVOKED THE PROVISION OF SECTION 43B OF THE I. T. ACT WHEREIN HE OBSERVED AS UNDER: IN VIEW OF THE ABOVE THE AMOUNT IS TREATED AS REVE NUE RECEIPT ONLY. EVEN OTHERWISE THE SALES TAX COLLECTED BY THE ASSESSEE H AS NOT BEEN PAID WITHIN THE DUE DATE OF FILING OF RETURN AND HENCE AS PER THE P ROVISION OF SECTION 43B THE AMOUNT NEEDS TO BE ADDED BACK TO THE INCOME OF THE ASSESSEE. ON THE OTHER HAND THE APPELLANT COMPANY CONTENDED THAT THE PROVISION OF SECTION 43B OF THE SAID ACT HAS NO APPLICATION IN THE INSTANT C ASE SINCE NO PORTION OF THE SALES TAX WAS DEBITED BY IT TO ITS PROFIT & LOSS ACCOUNT AND/ OR CLAIMED BY IT AS A DEDUCTIBLE BUSINESS EXPENDITURE IN THE YEAR UNDER APPEAL. HE H AS RELIED UPON THE DECISIONS OF CALCUTTA HIGH COURT IN THE MATTER OF A.W. FIGGIES & CO. LTD. VS. CIT (2002) 175 CTR 203 (CAL) DECISION OF GAUHATI HIGH COURT IN INDIA CARBON LTD. VS. IAC (1993) 200 ITR 759 AS WELL AS THE DECISIONS OF PUNE AND CHENNAI BE NCHES OF THE LEARNED TRIBUNALS. A SIMILAR ISSUE IN THE APPELLANTS OWN CASE FOR A.Y . 2006-07 HAS BEEN DECIDED IN APPELLANTS FAVOUR BY ME IN ITA NO. 566/XLL/CIR-1 2 /08-09. IN VIEW OF THE DISCUSSION ABOVE. I AM OF THE OPINIO N THAT THE ASSISTANCE GIVEN BY WAY OF SALES TAX REMISSION IS IN THE NATURE OF CAPITAL REC EIPT. ACCORDINGLY I DIRECT THE A.O. TO DELETE THE ADDITION. 15 IN THIS VIEW OF THE MATTER AND IN THE ABSENCE OF AN Y CONTRARY MATERIAL BROUGHT ON RECORD BY THE REVENUE AT THE TIME OF HEARING BEFORE US WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND THE SAME IS HEREBY UPHELD. T HEREFORE THE APPEALS OF REVENUE FOR ALL THE YEARS ARE DISMISSED. 6. IN THE RESULT THE APPEALS OF THE REVENUE ARE DI SMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 7.1.2011 SD/- SD/- . . . . . . . . . .. . . .. .! !! ! # (D. K. TYAGI) (C. D. RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (# # # #) )) ) DATED : 7TH JANUARY 2011 !01 %&23 %4! JD.(SR.P.S.) / 5 -%%6 76(8- COPY OF THE ORDER FORWARDED TO: 1 . + /APPELLANT - DCIT CIRCLE-12 KOLKATA. 2 -+ /RESPONDENT M/S. TEESTA AGRO INDUSTRIES LTD. 63/ 1/2 SARAT BOSE ROAD KOLKATA-700 025 3 . %/& / THE CIT KOLKATA 4 . %/& ( )/ THE CIT(A) KOLKATA. 5 . !?% -%& / DR KOLKATA BENCHES KOLKATA 6 -%/ TRUE COPY /&@/ BY ORDER A '3 / DEPUTY REGISTRAR .