The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has recently held that the industrial Promotion Assistance (IPA) received by the assessee-Company from the West Bengal Government pursuant to the West Bengal Industrial Promotion Assistance Scheme 2000 is a capital receipt in the form of subsidy and not subject to income tax.
The West Bengal Government granted a subsidy by way of IPA for setting up of large/medium/small scale eligible unit which is prescribed in the WBIS 2000 and the unit has to be set up in either group B or C areas prescribed in the said scheme. The assessee had set up a new unit in the Bankura District of West Bengal area which falls in the group C area of the Scheme WBIS 2000 and received the subsidy from the Government.
During the relevant assessment year, the Assessing Officer held that the same is subject to income tax. However, on the first appeal, the CIT(A) held that the same is not taxable and granted relief to the assessee.
The Tribunal noted that the subsidy/financial assistance was for the promotion of the industry and for setting up of large/medium/small scale eligible unit in the places prescribed at group B and C in the scheme WBIS 2000.
“Since the assessee fulfills the eligibility conditions prescribed by the Scheme 2000 it was entitled to industrial Promotion Assistance equivalent up to @75% of the sales tax paid in the previous year which sales of finished goods subject to a maximum of 100% of the fixed capital investment for a maximum period of 15 years. Accordingly, the assessee in the year under consideration has received an amount of Rs.1,96,77,000/- from the West Bengal under the WBIS 200 scheme. Since the object of the financial assistance as per the subsidy scheme was to enable the assessee to set up a new unit in the areas as specified group B or C as the WBIS 2000, we are of the opinion that the subsidy was on capital account,” the Tribunal concluded.
“Merely because the amount of subsidy was equivalent to 75% of the sales tax paid by the beneficiary does not imply that the same was in the form of a refund of sales tax paid. Therefore, since the subsidy was for setting up of large/medium/small scale eligible unit in group B and C areas in the State of West Bengal and the competent authority has issued the eligibility certificate (West Bengal Industrial Development Corporation Ltd.) to the assessee and since the assessee fulfills all the conditions as laid in the WBIS 2000 scheme, the industrial promotion assistance it received was on capital account,” the bench added.
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