| The Tax Publishers2019 TaxPub(DT) 5189 (Cal-HC) : (2019) 416 ITR 0591 : (2019) 311 CTR 0369 : (2019) 266 TAXMAN 0237 INCOME TAX ACT, 1961
Section 4 Section 2(24)(xviii)
As nature of 'interest subsidy and power' depends on the purpose for which it was given, hence, in assessee's case it was 'capital' in nature not liable to tax because the entire reason behind receiving the subsidy was setting up of plant in the backward region of West Bengal, namely, Bankura.
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Income - Capital or revenue receipt - Interest and power subsidy to set up plant in backward region of W.B. -
Assessee company was a Public Limited Company and was engaged in the manufacturing of Sponge Iron; Ingots & Billets, Steel Items and Ferro Alloys. It also had a captive power generating plant. Assessee had received interest and power subsidy from West Bangal State on letting up plant in backward Area, namely, Bankura (West Bengal). AO, however, treated the interest subsidy and power subsidy as a revenue receipt and brought the same to tax. The Tribunal on consideration of factual and legal position and scope of the schemes in question, had held the 'interest subsidy' and 'power subsides' as capital receipts. Held: The law is settled that the nature of incentives/subsidies granted by the Government under any Scheme to any enterprise would totally depend upon the salient features of the said Scheme. The mode of giving incentive is re-imbursement of energy charges. The nature of subsidy depends on the purpose for which it is given. The entire reason behind receiving the subsidy is setting up of plant in the backward region of West Bengal, namely, Bankura. Accordingly incentive subsidies were 'capital receipts' and was not an 'income' liable to be taxed in relevant assessment year 2010-11 on the basis of discussion made above and further taking into consideration the definition of income under section 2(24) where sub-clause (xviii) had been inserted including 'subsidy' for the first time by Finance Act, 2015 with effect from April, 2016, i.e., assessment year 2016-17. The amendment had prospective effect and had no effect on the law on the subject discussed above applicable to the subject assessment years.
Followed:Sahney Steel & Press Works Ltd. v. CIT (1997) 228 ITR 253 (SC) : 1997 TaxPub(DT) 1342 (Sc) and CIT v. Ponni Sugars and Chemicals Ltd. (2008) 306 ITR 392 (SC) : 2008 TaxPub(DT) 2302 (SC). Relied:CIT v. Shree Balaji Alloys, (2017) 80 Taxmann.com 239 (SC) : 2016 TaxPub(DT) 3528 (SC), Shree Balaji Alloys v. CIT & Anr. (2011) 333 ITR 335 (J&H), CIT v. Chaphalkar Brothers, (2018) 400 ITR 279 (SC) : 2017 TaxPub(DT) 5218 (SC), CIT v. Rasoi Ltd., (2011) 335 ITR 438 (Cal.) : 2012 TaxPub(DT) 715 (Cal-HC), Pr. CIT v. Shyam Steel Industries Ltd., (2018) 93 Taxmann.com 495 (Cal) : 2018 TaxPub(DT) 2552 (Cal-HC), CIT v. Keventer Agro Ltd., (2019) 416 ITR 482 (Cal) : 2018 TaxPub(DT) 4049 (Cal-HC) and CIT v. Gloster Jute Mills Ltd. (2018) 96 Taxmann.com 303 (Cal) : 2018 TaxPub(DT) 5370 (Cal-HC).
REFERRED :
FAVOUR : In assessee's fvour.
A.Y. : 2010-11
INCOME TAX ACT, 1961
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