Relief to Saint- Gobain India Pvt. Ltd: ITAT rules Excise Refund and Interest subsidy Received in pursuance to Incentive Announces and sanctioned are Capital Receipt [Read Order]

In a significant ruling, the Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) has granted relief to Saint-Gobain India Pvt. Ltd., ruling that the excise refund and interest subsidy received as part of announced and sanctioned incentives constitute capital receipts.

The counsel for the assessee Sreenivasan has argued that the average value of investments

Ought to have been computed by taking into account only those investments on which the assessee had received dividend income during the year for calculating the disallowance under Rule 8D (2)(ii)/(iii) of the Income Tax Act, 1961

The counsels for the respondent Vijayaragahavan and Saroj Kumar Parida has submitted that the subsidy received by the assessee depend upon the VAT amount paid and it is not a capital receipt and it is only revenue receipt, for which, he relied on the judgment of the Madras High Court in the case of Bakes India Limited v. JCIT

On the other hand, the Counsel for the assessee further pointed out that whether the subsidy received by the assessee was  revenue or not has to be decided based on the policy of the Government. The Government of Tamil Nadu was very clear that an industry set up anywhere in Tamil Nadu having an investment of ₹.300 crores and above will be eligible for sales tax waiver for up to 7 years. The investment of the assessee was more than ₹.300 crores and thus, the receipt should be capital receipt and not revenue receipt.

Taking in to consideration the point highlighted by the counsels, the tribunal of Manoj Kumar Agarwal ( Accountant member) and V. Durga Rao ( Judicial member) found that the Supreme Court in the case of Shree Balaji Alloys (supra), by considering its judgment in the case of CIT v. Ponni Sugars & Chemicals Ltd. (supra), dismissed the appeal of the revenue  and upheld the judgment of High Court of Jammu & Kashmir in the case of Shree Balaji Alloys & Others v. CIT, wherein, the High Court has held Excise refund and interest subsidy received by the assessee in pursuance to the incentives announced and sanctioned are capital receipts. 

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