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TAXAP/972/2006 3/ 3 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 972 of 2006
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COMMISSIONER
OF INCOME TAX - Appellant(s)
Versus
M/S.
LINCON POLYMERS PVT. LTD. - Opponent(s)
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Appearance :
MR
MANISH R BHATT for Appellant(s) : 1,
None for Opponent(s) :
1,
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CORAM
:
HONOURABLE
THE ACTING CHIEF JUSTICE Y.R.MEENA
and
HONOURABLE
MR.JUSTICE A.S.DAVE
Date
: 28/12/2006
ORAL
ORDER
The
following question has been proposed for the admission of this
appeal:-
?SWhether
the Appellate Tribunal is right in law and on facts in holding that
subsidy of Rs. 10,00,000/- received by the assessee was capital in
nature and accordingly deleting the addition made by the Assessing
Officer???
While
considering the factual aspect whether the amount was subsidy to run
the business or not, the Tribunal has considered this issue in
paragraph 4 of it’s order, which is reproduced below:-
?S4. We
have carefully considered the rival submissions. We have also gone
through the orders of the authorities below. In our opinion, the
only issue involved in this appeal relates to the nature of the
subsidy received by the assessee amounting to Rs. 10,00,000/-. The
nature of the subsidy will depend on the scheme under which the
subsidy has been granted to the assessee. For this, we have gone
through the Resolution No. INC/1095/2000(1)/1 dated 11th
September, 1995 issued by the Government of Gujarat, Industries &
Mines Department. From the preamble of the scheme, we find that the
scheme was to provide capital investment subsidy and sales-tax
incentives for attracting investments to generate greater employment
in less industrially developed areas. With a view to secure balanced
development of industries in Gujarat through dispersal of industries
in the most backward areas and backward areas, the Government of
Gujarat has approved a package of incentives. As a part of this
package, Government of Gujarat has introduced this scheme. In this
scheme, the assessee was entitled for both the incentives, capital
investment subsidy as well as sales-tax incentives. The issue before
us relates to the capital investment subsidy. The assessee has
expanded its existing industrial unit in the new backward area and
accordingly the assessee complied with the conditions as given in the
Resolution and got the subsidy amounting to Rs. 10,00,000/-. We have
also noted at page 17 of this scheme that the subsidy was with a view
to encourage pollution free and employment intensive industries in
certain backward areas. This scheme was to compensate the capital
investment made by the assessee. We have also gone through the
decision of Sahney Steel & Press Works Ltd. (supra). We find in
this case that the Hon’ble Supreme Court has clearly held that the
character of this subsidy in the hands of the recipient whether
revenue or capital will have to be determined having regard to the
purpose for which the subsidy is given. The source of the fund is
quite immaterial. However, if the purpose is to help the assessee to
set up its business or complete a project the monies must be treated
as having been received for capital purposes. But if monies are
given to the assessee for assisting him for carrying out the business
operations and the monies are given only after and conditional upon
commencement of production, such subsidies must be treated as
assistance for the purpose of the trade. In the case of the assessee
as we have already pointed out that the subsidy was given by the
State Government to set up the industry in the backward area,
therefore, we are of the view that the judgment of Hon’ble Supreme
Court in the case of Sahney Steel and Press Works Ltd. (supra) will
help the assessee and will not help the Revenue. We accordingly, in
view of the scheme and the decision of Sahney Steel and Press Works
Ltd. (supra), hold that the subsidy received by the assessee is
capital in nature and accordingly set aside the order of the
authorities below and direct the Assessing Officer to delete the
addition of Rs. 10,00,000/-. This appeal on this issue is allowed.
??
In
spite of time granted, learned counsel for the appellant has failed
to show that the subsidy was given to run the business. When the
subsidy was not given to run the business, we see no infirmity in the
order of the Tribunal.
No substantial question of law does arise. The appeal stands
dismissed.
(Y.R.
Meena, Actg.C.J.)
(Anant
S. Dave, J.)
*/Mohandas
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