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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ALOK ARADHE, SANDEEP V.MARNE
Bajaj Auto Limited – Appellant
Versus
Dy. Commissioner of Income Tax – Respondent
| Table of Content |
|---|
| 1. proper classification of sales tax incentives. (Para 1 , 2 , 3) |
| 2. substantial questions of law for determination. (Para 4 , 5 , 6) |
| 3. arguments about nature of sales tax incentive. (Para 11 , 12 , 13) |
JUDGMENT :
SANDEEP V. MARNE, J.
A. THE CHALLENGE
1. These Appeals, filed under Section 260A of the INCOME TAX ACT ,1961, (the Act) raise a common question of law as to whether an incentive received in sales tax liability under a Scheme formulated by the State Government would be on capital account, exempt to taxation, or on revenue account, liable for taxation. The State Government had introduced schemes from time to time for encouraging setting up of industries in specified backward areas of the State, by providing sales tax incentives. In Income Tax Appeal No.156 of 2003 filed by the Revenue, the Income Tax Appellate Tribunal (ITAT) has treated the amount received towards such incentive to be capital receipt, exempt from taxation, whereas in Income Tax Appeal No.505 of 2003 filed by the Assessee, the amount forming part of similar incentive is treated as revenue receipt, liable for taxation.
2. Income Tax Appeal No.156 of 2003 is filed by the Revenue challenging judgm
The classification of sales tax incentives under state schemes hinges on the purpose of the subsidy, determining whether they constitute capital or revenue receipts.
Excise duty exemptions granted for industrial development are capital receipts, not subject to taxation under normal provisions or included in MAT calculations.
The purpose of a subsidy determines its classification as a revenue or capital receipt; financial assistance aimed at rehabilitation is a capital receipt.
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