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
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