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High Court to decide whether sales-tax subsidy is a capital receipt
The assessee received sales-tax incentive for setting up a new industrial undertaking in Patalganga. The assessee claimed that the said subsidy was a capital receipt. The Special Bench (DCIT vs. Reliance Industries Ltd 88 ITD 273) upheld the assessee’s claim. On appeal by the department (for a subsequent year), the Bombay High Court held (order enclosed) that as a finding had been recorded by the Special Bench that the object of the subsidy was to encourage the setting up of industries in the backward area by generating employment therein, the subsidy was, applying the “purposive test” in Ponni Sugars and Chemicals Ltd 306 ITR 392 (SC), a capital receipt and held that a substantial question of law did not arise. The department filed an appeal to challenge the judgement of the High Court. HELD allowing the appeal:
Having heard learned counsel on both sides, we are of the view that the High Court ought not to have dismissed the appeals without considering the following questions, which, according to us, did arise for consideration. They are formulated as under … (C) Whether on the facts and circumstances of the case and in law the Hon’ble Tribunal was right in holding that sales tax incentive is a Capital Receipt?” Accordingly, the civil appeals are allowed, impugned orders are set aside and the cases are remitted to the High Court to decide the questions, formulated above, in accordance with law.”
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- Mepco Industries vs. CIT (Supreme Court)
The case was a classic one of change of opinion. The question whether a subsidy is capital or revenue depends on the facts of the case. S. 154 can only apply to a “mistake apparent from the record”. A “rectifiable mistake” is a mistake which is obvious and not…
- CIT vs. Ponni Sugars (Supreme Court)
Where the Government formulated a scheme of subsidy to encourage the setting up of sugar factories and to make them viable under which new sugar factories were entitled to a subsidy in the form of enhancement of free sale sugar quota and excise duty rebate thereon which could only…
- CIT vs. Reliance Petroproducts (Supreme Court)
The argument of the revenue that “submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income” is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim,…
