ITAT : Industrial promotion subsidy, though granted after commencement of production, a capital receipt

Mumbai ITAT rules that the Industrial Promotion Subsidy (IPS) received by assessee (a subsidiary of Mahindra & Mahindra Ltd.) during AY 2012-13 constitutes a non-taxable capital receipt; Noting that assessee had started commercial production in January, 2010, AO had held that the subsidy received was on revenue account as the object of the subsidy received after the commencement of production was to enable assessee to run the business more profitably in lieu of the industry/unit set up by it in a particular area; Rejecting Revenue's stand, ITAT refers to the object of the scheme under which assessee was granted subsidy, notes that the incentive was granted not for carrying on day-to-day business of the unit more profitably but to provide impetus to the process of dispersal of industries to backward areas; Furthermore clarifies that the sales tax payment is only a yardstick to determine the quantum of incentive and cannot be construed as to mitigate the operational cost of the business; Distinguishes Revenue’s reliance on SC ruling in Sahney Steel & Press Works Ltd. and Delhi HC ruling in Bhushan Steels & Strips Ltd. On facts, relies on SC ruling in Ponni Sugars & Chemicals Ltd.:ITAT