The Income Tax Appellate Tribunal (ITAT), Kolkata Bench granted relief to Birla Corporation Limited and held that Claim of interest subsidy from State Government is capital receipt.
The Department’s appeal relates to the assessee’s, Birla Corporation Limited claim that interest subsidy, since renamed “Capital Investment Subsidy”, of Rupees three crores received under the amended Rajasthan Investment Promotion Scheme, 2003 in respect of expansion undertaken at the assessee’s Chanderia Cement Works should be treated as a capital receipt.
The AO held that the subsidy was incidental to carrying on of the business of the assessee and treated the same as revenue receipt. On appeal, the CIT(A) held it to be a capital receipt by following the Tribunal’s decision in assessee’s own case.
The Tribunal in the assessee’s own case after considering the provisions of the 2003 Scheme held that the assistance granted under the scheme was to enable the setting up of a new unit or expansion of an existing unit and was a capital receipt and hence the interest subsidy is to be treated only as a capital receipt.
The said decision was rendered after taking into consideration the judgment of the Supreme Court in CIT v. Ponni Sugar and Chemicals Limited and the decision for the assessment year 2007-08 was followed in the assessee’s own case for the assessment years 2008-09 and 2009-2010.
A Coram consisting of Rajpal Yadav, Vice President and Dr. Manish Borad, Accountant Member observed that “Since the issues raised before us are squarely covered by the decision of this Tribunal in assessee’s own case for preceding assessment year i.e. AY 2010-11and Revenue being unable to controvert this fact by placing any other binding precedence in its favour, we fail to find any infirmity in the finding of the CIT(A).”
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