The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) granted relief to M/s Vinati Organics Ltd, the assessee and confirmed treating sale tax subsidy received as capital receipt.
The return of income declaring total income of Rs.71 crores was filed and the case was subject to scrutiny assessment and notice under Section 143(2) of the Income Tax Act was issued.
During the financial year relevant to the assessment year under consideration the assessee has raised additional ground of appeal before the CIT(A) that assessing officer be directed to exclude the sale tax subsidy amounting to Rs. 1 crore as capital receipt while computing the total income under the provisions of the Income Tax Act.
In the additional ground of appeal filed before the CIT(A) the assessee submitted that the said subsidy has been granted with an object to intensify and accelerate the process of dispersal of industries from the developed area and for development of underdeveloped region of the state.
The object for granting incentive is for development of industries and generation of employment in specified area. In terms of the scheme assessee has set up manufacturing unit at lote and Mahad in the state of Maharashtra.
The lote unit was eligible for sale tax subsidy as per Government resolution, industries energy and labour No. IDL – 1093/[8889]/IND-8 dated 07.05.1993. It was further submitted that as per the aforesaid policy incentive in the form of sale tax is granted for development of underdeveloped area.
Therefore, it was claimed that sale tax subsidy was of the nature of capital receipt. The CIT(A) after considering the remand report and terms and conditions of the scheme treated the subsidy received by the assessee and capital received.
Dismissing the appeal filed by the Revenue a Bench comprising Amit Shukla, Judicial Member and Amarjit Singh, Accountant Member observed that during the course of appellate proceedings the Counsel also submitted that in subsequent year assessment year 2013- 14 the CIT(A) allowed the appeal of the assessee treating sale tax subsidy as capital receipt and department has not raised any ground before the ITAT. It is also submitted that in assessment year 2015-16 the assessee has treated the sale tax subsidy received as capital receipt and same has been accepted by the A.O in the assessment order.
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