The amendment to the Income Tax Act, defining subsidies as taxable income, is constitutional and does not violate fundamental rights, thereby broadening the tax base without distinguishing between capital and revenue subsidies.

JUDGMENT :

K.R. SHRIRAM, J.

1. Considering the reliefs sought in the petition, it was decided to hear the petition finally at the admission stage itself.

2. Therefore, rule. Rule made returnable forthwith.

3. Petitioner is a biotechnology company manufacturing drugs and vaccines. Petitioner has a manufacturing plant at Hadapsar, Pune. Petitioner’s units at Hadapsar area are eligible for deduction under Section 10AA of the Income Tax Act, 1961 (the Act). Petitioner also has commissioned another manufacturing facility in the Special Economic Zone (SEZ) located at Manjari, Pune, which commenced production during the Financial Year 2019-2020.

4. The Government of Maharashtra had, from time to time, issued several Industrial Policies and Schemes to promote industries in less developed areas of the State of Maharashtra. The present writ petition is concerned with one such scheme being, ‘Package Scheme of Incentives, 2013’, which came into effect from 1st April 2013 for a period of five years (hereinafter referred to as the said Scheme). The said Scheme provides for various incentives to major industries depending on the type of project and amount of investments they make. The benefits include stamp duty concessions, exemption from electricity duty and VAT/CST/SGST subsidy.

5. The said Scheme covered various eligible industrial units as specified from time to time which included biotechnology manufacturing units. Petitioner would fall in this category. The said Scheme covered various projects as defined in the Scheme including mega projects/ultra mega projects. These are industrial units satisfying the minimum threshold limits of fixed capital investments or direct employment prescribed in the said Scheme. Petitioner’s project qualified as ultra mega project under the said Scheme. The qualifying criteria for ultra mega project states was either investment in eligible fixed assets of Rs.1500 Crores or direct employment of 3000 employees. The admissible period for investment under the said Scheme was from 1st April 2013 to 21st March 2020 and the operative period for the said Scheme is 30 years from the date of effect of the Entitlement Certificate. Petitioner’s operative period is 1st January 2015 to 31st March 2045.

6 Petitioner states it being an eligible unit under the ultra mega project, made capital investment of more than Rs.1500 Crores. Petitioner made its application for being eligible under the said Scheme on 27th March 2018, i.e., after making an investment amounting to more than Rs.1500 Crores which has been approved by the State of Maharashtra on 12th October 2018 and further amended on 25th March 2019. In view of the approval, the State of Maharashtra has issued to petitioner eligibility certificate dated 25th January 2019 read with letter dated 17th December 2019. According to petitioner, in view of the above, petitioner is entitled to receive the following benefits under the said Scheme :

As per the approval letter, petitioner is entitled to total incentive/benefit of 75% of the eligible investment.

7 The Income Tax Act was amended in 2015 and sub-clause (xviii) to Section 2(24) of the Act was inserted by the Finance Act, 2015 with effect from 1st April 2016. The present petition is filed assailing the constitutional validity of sub-clause (xviii) to Section 2(24) of the Act (hereinafter referred to as impugned sub clause). Clause (24) to Section 2 defines the term “income. The relevant portion of sub-clause (xviii) is reproduced herein below :

2(24) – Income includes :

(xviii)