John Deere Equipment Pvt. Ltd. (Now ... vs Assessee

M/s. John Deere Equipment Pvt. Ltd., Asst. CIT, Circle-11(1), (Now merged with John Deere India Pune Pvt. Ltd.), Vs. Tower IV, Cybercity, Magarpatta City, Hadapsar, Pune-411028 (Appellant) (Respondent) PAN No. AAACJ4233B

Revenue By: Smt. S. Praveena Assessee By: Shri Nikhil Pathak

ORDER

PER R.S. PADVEKAR, JM:-

This appeal is filed by the assessee challenging the impugned

orders of the Ld. CIT(A)-I, Pune dated 12-10-2012 for the A.Y. 2008-09.

The assessee has taken the following effective ground:

1. The learned CIT(A) erred in holding the sale tax / purchase tax subsidy of Rs.114,965,973/- received by the assessee from SICOM as a revenue receipt on the ground that the subsidy given was for increasing the profitability of the assessee.

2. The facts which revealed from the record are as under. The

assessee company was established in 1998 and has set up it's unit at

Sanaswadi near Pune. The assessee has filed the return of income for

the A.Y. 2008-09 declaring NIL total income. The Assessing Officer has

completed the assessment by determining the total income at

Rs.108,89,27,770/-. The Govt. of Maharashtra had introduced "1993

Package Scheme of Incentives". This scheme was introduced for giving

incentive to the units for setting up units in notified backward areas. As 2 ITA No. 02/PN/2013, M/s. John Deere Equipment Pvt. Ltd., Pune

per the said scheme, the assessee company was eligible for either sales

tax and purchase tax exemption or deferment of the sales tax and

purchase tax collected for a period of 15 years. Initially, the assessee

opted for deferral scheme as per which, the assessee was authorized for

collection of sales tax but payment was to be made after 15 years. Later

on, in September, 2001, the assessee shifted from Deferral Scheme to

Exemption Scheme. Accordingly, the assessee was entitled to the

exemption from sales tax and purchase tax. Thus, the assessee by opting

for exemption option was exempted from its sales tax and purchase tax

liability. The assessee has treated the sales tax and purchase tax

subsidy of Rs.11,49,65,973/- as a capital receipt in its return of income

for A.Y 2008-09. Accordingly, the assessee submitted that the said

subsidy was given by Govt. of Maharashtra for setting up of the new unit

in the backward area. The assessee had submitted that as per the

Scheme of Govt. of Maharashtra, the subsidy is granted in order to

encourage setting up of a unit in backward area. The subsidy was given

in order to encourage setting up of units in backward area. It is not a

case that this incentive was available to any industry. It was available

only to certain industries depending upon the fulfillment of the

conditions. The Assessing Officer has noted that the subsidy was

granted in order to increase the profitability of the assessee company

and to run the business more profitably. He has observed that the

incentive was granted to the assessee to assist the company in carrying

out the business operations in the backward area. Even though the

Assessing Officer has accepted that the subsidy is granted for setting up

a unit in backward area, but still he has harped on the issue that the

benefit is granted to assist in the business operations and not to help in

setting up of the business. The Assessing Officer has also emphasized

that the subsidy is calculated on the basis of the capital employed. The

assessee has submitted that the form or the mechanism through which

the subsidy is given is immaterial. The assessee also referred to the 3 ITA No. 02/PN/2013, M/s. John Deere Equipment Pvt. Ltd., Pune

judgment of Supreme Court in the case of Ponni Sugars and Chemicals

Ltd. to support its contention. The assessee also relied on the decision

in the case of Reliance Industries Ltd. 88 ITD 273 (SB) wherein the

Special Bench has accepted the contention raised by the assesses and

held that if the subsidy is given for setting up a new unit or expansion of

the industry, it would be a capital receipt irrespective of modality or

source of funds through or from which it was given. It was also

submitted that the Scheme for subsidy in the case of Reliance Industries

Ltd. (supra) is similar/identical to the Scheme under which the assessee

company has received the subsidy.

3. The only issue is in respect of the treatment of the sales

tax/purchase tax subsidy received by the assessee under the 1993

Package Scheme of Incentives promulgated by the Govt. of Maharashtra.

The only difference in this year is this issue is rooted through the Ld.

CIT(A). We have already adjudicated identical issue in the preceding two

years i.e. A.Ys. 2006-07 and 2007-08 in the assessee's own case being

ITA Nos. 1476/PN/2010 and 1686/PN/2011. As the facts are identical

in this year, hence, to avoid repetitions, we adopt our reasoning given in

the A.Y. 2006-07 for holding that the sales tax/purchase tax subsidy

received by the assessee under the "1993 Package Scheme of Incentive"

is a capital in nature and cannot be taxed. In this year also the issue is

decided in favour of the assessee. Accordingly, the relevant ground is

allowed.

4. In the result, the assessee's appeal is allowed.

Pronounced in the open Court on 20-02-2015

Sd/- Sd/- (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER

Pune, Dated: 20th February, 2015 RK/PS 4 ITA No. 02/PN/2013, M/s. John Deere Equipment Pvt. Ltd., Pune

Copy to

1 Assessee 2 Department 3 The CIT(A)-I, Pune 4 The CIT-I, Pune 5 The DR, ITAT, "B" Bench, Pune. 6 Guard file.

//True Copy//

By Order

Assistant Registrar, Income Tax Appellate Tribunal, Pune