ITAT Pune Validates Capital Nature of Sales Tax Subsidy and Quashes Revenue’s TP Grounds Following MAP Resolution
The Income Tax Appellate Tribunal (ITAT), Pune Bench, recently delivered a significant ruling in the case of DCIT Vs John Deere India Pvt. Ltd. (ITA No. 1733/PUN/2017), dated 31/08/2026. The judicial decision addressed two primary areas of corporate taxation for the Assessment Year (AY) 2012-13: the characterization of state-granted sales tax incentives and the maintainability of transfer pricing disputes once the Mutual Agreement Procedure (MAP) has been successfully invoked and concluded.
This article provides a comprehensive summary and legal analysis of the ITAT's full order, breaking down the factual matrix, the arguments presented by the revenue authorities, and the final determinations that led to the dismissal of the Revenue's appeal.
Factual Matrix of the Dispute
The assessee, engaged in the business of manufacturing agricultural equipment, tractors, and related spare parts, filed its return of income for AY 2012-13. During the course of the assessment proceedings, two major controversies emerged, which subsequently traveled through the appellate channels up to the ITAT.
- Characterization of Sales Tax Subsidy: The assessee received a substantial sales tax and purchase tax subsidy amounting to Rs. 36,47,53,030 under the 1993 Package Scheme of Incentives formulated by the Government of Maharashtra. The assessee claimed this amount as an exempt capital receipt.
- Transfer Pricing Adjustments: The Transfer Pricing Officer (TPO) proposed an aggregate adjustment of Rs. 19,73,03,325 under
Section 92CAof the Income Tax Act 1961, which led to parallel litigation and the eventual invocation of the MAP by the assessee's Associated Enterprise (AE).
The Assessing Officer (AO) ruled against the assessee on both fronts, treating the subsidy as a revenue receipt and incorporating the TPO's adjustments. Upon the first appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] granted relief to the assessee. Consequently, the Revenue approached the ITAT to challenge the CIT(A)'s findings.