DCIT, Madurai v. Ramco Industries Limited, Rajapalayam

ITA 2163/CHNY/2015 | 2008-2009
Pronouncement Date: 26-10-2016

Appeal Details

RSA Number 216321714 RSA 2015
Assessee PAN AAACR5284J
Bench Chennai
Appeal Number ITA 2163/CHNY/2015
Duration Of Justice 11 month(s) 7 day(s)
Appellant DCIT, Madurai
Respondent Ramco Industries Limited, Rajapalayam
Appeal Type Income Tax Appeal
Pronouncement Date 26-10-2016
Appeal Filed By Department
Bench Allotted A
Assessment Year 2008-2009
Appeal Filed On 18-11-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . . . ' #$ % &' ( [ BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI D. S. SUNDER SINGH ACCOUNTANT MEMBER ] ./ I.T.A.NOS. 2148 & 2163/MDS/2015 / ASSESSMENT YEARS : 2007-08 AND 2008-09 THE DY. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 2 MADURAI VS. M/S RAMCO INDUSTRIES LTD NO.47 PSK NAGAR RAJAPALAYAM [PAN AAACR 5284 J ] ( )* / APPELLANT) ( + )* /RESPONDENT) / APPELLANT BY : SHRI SHIVA SRINIVAS JCIT /RESPONDENT BY : SHRI V. JAGADISAN CA / DATE OF HEARING : 26 - 0 9 - 2016 ! / DATE OF PRONOUNCEMENT : 26 - 10 - 2016 / O R D E R PER D.S. SUNDER SINGH ACCOUNTANT MEMBER THESE APPEALS OF THE REVENUE ARE DIRECTED AGAINS T THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS)-1 MADURAI DATED 25.8.2015 FOR ASSESSMENT YEARS 2007- 08 AND 2008-09. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS WE DISPOSE OF THE SAME BY THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE AND BREVITY. ITA NO.2148 &2163/15 :- 2 -: 2. ALL THE GROUNDS OF APPEAL ARE RELATED TO THE SUBSID Y RECEIVED IN THE FORM OF SALES TAX REFUND. THE LEAD YEAR IN THIS CASE IS 2006-07 AND THE FACTS EXTRACTED AND DISCUSSED FROM THE RECO RDS OF THE A.Y.2006-07. THE ASSESSEE FILED THE REVISED RETURN OF INCOME AFTER THE ORIGINAL RETURN OF INCOME WAS PROCESSED U/S143(1) A ND IN THE REVISED RETURN OF INCOME THE ASSESSEE REDUCED A SUM OF ` 6 15 47 032/- AS A CAPITAL SUBSIDY NOT TAXABLE. THE ASSESSEE IN THEIR LETTER ADDRESSED TO THE A.O STATED THAT IT COLLECTED A SUM OF RS.361525 68/- AS SALES TAX IN RESPECT OF BHUJ UNIT IN KUTCH DISTRICT GUJARAT AND ` 2 53 94 464/- BEING SUBSIDY RECEIVED IN RESPECT OF KHARAGPUR UNIT WEST BENGAL AGGREGATING TO A TOTAL AMOUNT OF ` 6 15 47 032/-. THE ASSESSEE CONSIDERED IT AS CAPITAL RECEIPT AND THE ASSESSING OFFICER ASSESSED THE SAME AS REVENUE RECEIPT. THE ASSESSEE WENT IN APP EAL BEFORE THE CIT(A) AND THE CIT(A) ALLOWED THE ASSESSEES APPEA L HOLDING THE RECEIPTS AS CAPITAL RECEIPTS. HENCE THE REVENUE IS IN APPEAL BEFORE US. 3. DURING THE APPEAL THE LD. DR SUBMITTED THAT THE A SSESSEE HAS COLLECTED SALES TAX ALONG WITH SALES ADMITTED AS INCOME IN THE ORIGINAL RETURN AND SUBSEQUENTLY MADE A CLAIM AS CA PITAL RECEIPT. IN BOTH THE CASES BHUJ UNIT AND KHARAGPUR UNIT THE INC ENTIVE WAS RECEIVED/PAID AFTER SETTING UP OF THE INDUSTRY OR U NIT AND AFTER COMMENCEMENT OF PRODUCTION. THEREFORE THE SUBSIDY W AS FOR CARRYING ITA NO.2148 &2163/15 :- 3 -: ON THE BUSINESS THE SAME SHOULD BE ASSESSED AS REVE NUE RECEIPT BUT NOT THE CAPITAL RECEIPT.THE LD. DR RELIED ON THE J UDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS SAHNEY STEEL & PRESS WORKS LTD VS CIT 228 ITR 253 WHEREIN THE HON'BLE A PEX COURT HELD THAT REFUND OF SALES TAX IS NOT A CAPITAL RECEIPT B UT ONLY PRODUCTION INCENTIVE THEREFORE IT IS A REVENUE RECEIPT. 4. ON THE OTHER HAND THE LD. AR RELIED ON THE CIT(A) S ORDER. AND SUBMITTED THAT THERE WAS DEVASTATING EARTHQUAK E IN THE STATE OF GUJARAT ON 26.1.2001 AND THE KUTCH REGION HAS BADLY AFFECTED DUE TO EARTH QUAKE AND WITH AN INTENTION IMPROVE THE ECONO MIC CONDITION AND TO CREATE NEW EMPLOYMENT OPPORTUNITIES IN KUTCH DIS TRICT GUJARAT GOVERNMENT OF GUJARAT HAS INTRODUCED A SCHEME FOR A TTRACTING INVESTMENTS AND NEW INDUSTRIES. BY THEN THE GOVER NMENT OF INDIA HAS ANNOUNCED EXCISE DUTY EXEMPTION AND THE STATE G OVERNMENT HAS ALSO DECIDED TO ANNOUNCE THE SCHEME OF SALES TAX IN CENTIVES TOWARDS ITS CONTRIBUTION TO REGIONAL DEVELOPMENT. THE SCHE ME WAS CONFINED ONLY TO THE KUTCH DISTRICT OF GUJARAT. THE ASSESS EE HAS PLACED COPY OF THE INCENTIVE SCHEME 2001 FOR ECONOMIC DEVELOPMENT OF K UTCH DISTRICT BEFORE US. AS PER THE SCHEME FORMULATED THE SALE S TAX INCENTIVES ARE APPLICABLE ONLY TO THE INDUSTRIAL UN ITS ESTABLISHED IN THE KUTCH DISTRICT ON THE BASIS OF CAPITAL INVESTMENT M ADE BY THE ASSESSEE. ITA NO.2148 &2163/15 :- 4 -: AS PER THE SCHEME ELIGIBLE UNITS WILL BE ABLE TO A VAIL OF THE BENEFITS OF SALES TAX EXEMPTION OR SALES TAX DEFERMENT SCHEME OR COMPOSITE SCHEME FOR UNITS HAVING CAPITAL INVESTMENT EXCEEDIN G ` 100 CRORES. THE A.R SUBMITTED THAT THE ASSESSEE HAS SET UP FIBR E CEMENT PLANT AT ANJAR BHUJ IN THE STATE OF GUJARAT WITH AN INVESTM ENT OF ` 25.28 CRORES IN FIXED ASSETS. THE INCENTIVE SCHEME IS AVAILABLE FOR 7 YEARS WHICH COVERS SALES TAX PAYABLE ON GOODS MANUFACTURED AND SOLD SUBJECT TO CAP OF 100% OF CAPITAL INVESTMENT IN FIXED ASSETS F OR INVESTMENT BETWEEN 10 CRORES AND 50 CRORES. ACCORDING TO THE A SSESSEE IT IS ELIGIBLE FOR SALES TAX INCENTIVE UP TO 28.00 CRORES . FURTHER THE A.R STATED THAT ON SALES UNIT HAS TO COLLECT VAT TAX @1 2.5% OF THE INVOICES AND NEED NOT REMIT THE SAME TO THE DEPARTMENT. SIMI LARLY ON PURCHASES THE SELLERS WILL CHARGE VAT TAX IN THE IN VOICES AND ASSESSEE IS ELIGIBLE FOR REFUND OF THE TAX PAID ON PURCHASES . 5. IN THE CASE OF WEST BENGAL GOVERNMENT THE ELIGIBL E UNIT IS ENTITLED FOR CAPITAL INVESTMENT SUBSIDY @15% OF THE FIXED CAPITAL INVESTMENT MADE IN THE APPROVED PROJECT SUBJECT TO A LIMIT OF ` 1.5 CRORES AND INDUSTRIAL PROMOTION ASSISTANCE(IPA) @100% OF FIXED CAPITAL INVESTMENT SUBJECT TO A MINIMUM INVESTMENT OF ` 25.00 CRORES TO BE RECOUPED BASED ON 75% EXEMPTION FROM SALES TA X PAID FOR 15 YEARS ON SALE OF FINISHED GOODS. THE ASSESSEE HAS S ET UP FIBRE CEMENT ITA NO.2148 &2163/15 :- 5 -: PLANT AND CLINKER GRINDING UNIT AT KHARAGPUR IN THE STATE OF WEST BENGAL. 6. DURING THE YEAR THE ASSESSEE HAS CREDITED THE THE F OLLOWING AMOUNTS RECEIVED AS INCENTIVES TO THE P&L ACCOUNT FO THE COMPANY. BHUJ UNIT ` .3 61 52 568/- KHARAGPUR UNIT ` .2 53 94 464/- TOTAL ` .6 15 47 032 THE A.R ARGUED THAT THE ABOVE INCENTIVES ARE RECEIV ED FOR THE PROMOTION OF INDUSTRIES IN THE RESPECTIVE STATES AN D HENCE THEY ARE IN THE NATURE OF CAPITAL RECEIPTS. 7. FURTHER THE LD. AR RELIED ON THE FOLLOWING JUDGM ENTS: (I) CIT VS RASOI LTD 335 ITR 438(CAL) (II) CIT VS PONNI SUGAR & CHEMICALS LTD 306 ITR 392(SC) (III) SAHNEY STEEL & PRESS WORKS LTD VS CIT 228 ITR 253(SC) (IV) CIT VS PJ CHEMICALS 210 ITR 830(SC) (V) CIT VS RELIANCE INDUSTRIES 339 ITR 632(BOM) 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL PLACED BEFORE US. AS PER THE PAPER BOOK SUBMITTED BY THE ASSESSEE BEFORE US IN THE CASE OF BHUJ UNIT IN KUTCH DISTRI CT OF GUJARAT INCENTIVES WERE GIVEN TO THE INDUSTRIES WITH AN INT ENTION TO CREATE NEW EMPLOYMENT OPPORTUNITIES ECONOMIC GROWTH AND TO AT TRACT NEW INVESTMENTS. THE SCHEME WAS OPERATIVE FROM 31.7.200 1 TO ITA NO.2148 &2163/15 :- 6 -: 31.10.2004. AS PER THE SCHEME THE ASSESSEE HAS TO COLLECT THE VAT TAX @12.5% BUT NEED NOT REMIT THE SAME TO THE DEPAR TMENT UP TO THE ELIGIBLE LIMIT. ON PURCHASES THE SELLERS WILL CHARG E VAT TAX ON INVOICES. THE ELIGIBLE UNITS CAN APPLY FOR REFUND ON PURCHASE S BY SUBMITTING THE REFUND APPLICATION ALONG WITH MONTHLY SALES TAX RET URNS TO THE CONCERNED SALES TAX AUTHORITIES IN TURN WHO WILL S ANCTION THE REFUND. THE ASSESSEE HAS INVESTED RS.28.00 CRORES AND ENTI TLED FOR 100% OF CAPITAL INVESTMENT FOR A PERIOD OF SEVEN YEARS IN THE CASE OF THE ASSESSEE. 9. IN THE CASE OF WEST BENGAL INCENTIVE SCHEME ALSO T HE SCHEME IS INTENDED FOR SETTING UP OF NEW INDUSTRIES AND ALSO FOR EXPANSION OF PROJECTS OF EXISTING UNIT. THE ASSES SEE HAS SET UP A NEW INDUSTRIAL UNIT AT KHARAGPUR DISTRICT IN WEST BENGA L AND RECEIVED THE CAPITAL INVESTMENT SUBSIDY AND THE INDUSTRIAL PROM OTION ASSISTANCE. IN THE CASE OF KHARAGPUR UNIT THE ASSESSEE RECEIV ED A CHEQUE FROM WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION BASE D ON A CERTIFICATE ISSUED BY THE COMMISSIONER OF SALES TAX WEST BENGA L REGARDING THE QUANTUM OF SALES TAX PAID. ACCORDINGLY THE SUBSID Y GRANTED BY THE SALES TAX DEPARTMENT WAS GRANTED BY THE WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION. AS PER THE SCHEME THE PU RPOSE WAS TO ITA NO.2148 &2163/15 :- 7 -: PROMOTE NEW INDUSTRIAL UNIT IN SOME DISTRICTS OF WE ST BENGAL INCLUDING KHARAGPUR. 10. FROM THE ABOVE FACTS IT IS CLEAR THAT EVEN THOUGH THE QUANTUM OF SUBSIDY WAS DETERMINED ON YEAR TO YEAR B ASIS BASED ON THE SALES TAX COLLECTED BY THE ASSESSEE THE PURPO SE WAS TO PROMOTE ESTABLISHMENT OF LARGE MEDIUM AND SMALL SCALE INDU STRIES AS EVIDENT FROM THE ABOVE SCHEMES IN THE CASE OF WEST BENGAL A ND IN THE CASE OF SCHEME FORMULATED BY THE GUJARAT GOVERNMENT IN KUTC H DISTRICT THE OBJECT WAS TO ATTRACT LARGE SCALE INVESTMENTS TO IM PROVE THE ECONOMIC DEVELOPMENT OF KUTCH DISTRICT. THE ASSESSEE HAS SA TISFIED ALL THE CONDITIONS LAID DOWN FOR THE RECEIPT OF THE SCHEME WHICH WAS NOT DISPUTED BY THE ASSESSING OFFICER. 11. IN BOTH THE CASES THE OBJECT OF THE SCHEMES WAS TO SET UP NEW INDUSTRIES OR TO EXPAND THE EXISTING UNITS AND THE ASSESSEE HAS SET UP NEW INDUSTRIAL UNITS IN BOTH THE PLACES. THE ASSESSEE RELIED ON HONBLE APEX COURT JUDGMENT IN THE CASE OF PONNI S UGAR & CHEMICALS LT AND THE THE HON'BLE CALCUTTA HIGH COURT DECISION IN THE CASE OF CIT VS RASOI LTD(SUPRA). IN BOTH THE ABOVE CASES THE HO NBLE COURTS HAVE HELD THAT IF THE OBJECT OF THE ASSISTANCE UNDER TH E SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT THE RECEIPT OF THE SUBSIDY IS ON CAPITAL ACCO UNT. ON THE OTHER ITA NO.2148 &2163/15 :- 8 -: HAND IF THE OBJECT OF THE SUBSIDY SCHEME IS TO EN ABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY THEN THE RECEIPT I S ON REVENUE ACCOUNT. THIS VIEW IS FURTHER FORTIFIED BY THE HON BLE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS SHREE BALAJI ALLOYS IN C.A.NO.10061 OF 2011 DATED 19.4.2016 AND THE DEPARTMENT HAS NOT MADE OUT CASE FOR REVENUE RECEIPT. RESPECTFULLY FOLLOWING THE RATIO L AID DOWN BY THE HON'BLE SUPREME COURT RELIED UPON BY THE LD. AR WE FIND THAT THE INDUSTRIAL PROMOTION ASSISTANCE AND SUBSIDY RECEIVE D BY THE ASSESSEE FROM THE WEST BENGAL GOVERNMENT AND GUJARAT GOVERNM ENT REPRESENT THE CAPITAL RECEIPT AND IT WOULD NOT CONSTITUTE AS A REVENUE RECEIPT. WE THEREFORE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE FOR BOTH THE ASSESSM ENT YEARS UNDER CONSIDERATION. 12. IN THE RESULT BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON 26 TH OCTOBER 2016 AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( . . ' #$ ) (D.S. SUNDER SINGH) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 26 TH OCTOBER 2016 RD ITA NO.2148 &2163/15 :- 9 -: &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ) - . / DR 3. +/' / CIT(A) 6. -01 / GF