Subsidies received from Government of Maharashtra under Package Scheme Incentive is Capital Receipt: ITAT deletes Addition [Read Order]

The Income Tax Appellate Tribunal (ITAT), Indore bench held that subsidies received from the government of Maharashtra under package scheme incentive is capital receipt.

The decision was based on the previous decision of assessee own case for the assessment year 2015-16 as well as for assessment year 2016-17.

Assessee is engaged in the business of Tyre and Allied Products manufacturing. The assessee has taken Radial Tyre Manufacturing Technology and use of Bridgestone brand of manufactured products for its entrepreneurial venture in India.

During the assessment proceedings the AO noted that the assessee has credited a sum of Rs.43,90,16,000/- on account of Maharashtra Industrial Promotion Subsidy but on computation of income the assessee has reduced its total income by Rs.45,75,39,588/.

The assessee contended before the AO that it has received the said amount against capital investment and hence the same is reduced from block of assets.

Thereafter, the department concluded  that the nature of exemption provided by State Government to the assessee it is clear that the said amount of subsidy is revenue in nature. Accordingly the AO issued a draft assessment order and proposed to make the addition of the entire amount of subsidy received by the assessee as revenue receipt.

Aggrieved by the order, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP has confirmed the draft assessment order and rejected objections filed by the assessee

Thereafter the assesee filed another appeal before tribunal against the order of DRP                 

Before the tribunal, Sukhsagar Syal, Counsel for assessee relied upon the assessee’s own case for A.Y.2016-17 and submitted that the  subsidy received by the assessee under subsidy scheme of 2007 Maharashtra and was not  treated as revenue in nature.

P.K. Mishra, Counsel for Revenue  submitted that the capital investment made under the scheme is only eligibility criteria but not the sole basis for the subsidy. Thus the subsidy has no connection with the capital investment made by the assessee.

Further, the counsel relied upon the decision of Supreme Court in case of Sahney Steel & Press Works Ltd. vs. CIT.

It was observed by the tribunal that the same issue was decided in favor of assessee for the assessment year 2015-16 as well as for assessment year 2016-17 by the Mumbai Bench of the Tribunal. It was held that the subsidy received by the assessee under PSI, 2007 is a capital receipt and thus non-taxable.

After reviewing the facts and submissions of the both parties, the two member tribunal bench of B.M. Biyani, (Accountant Member) and Vijay Pal Rao (Judicial Member) allowed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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