Sales tax subsidy treated as capital receipt, not revenue income, so no income-tax reference was warranted.

Sales tax subsidy granted under a State scheme for specified industrial units in backward areas was treated as an incentive for capital investment, not as an addition to trading profits, and therefore as a capital receipt not assessable as income. On that settled legal position, the High Court held that no useful purpose would be served by seeking a reference under section 256 of the Income-tax Act, 1961, and rejected the application.

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Issues: Whether the sales tax subsidy received by the assessee from the State Government was a taxable revenue receipt, and consequently whether a reference under section 256 of the Income-tax Act, 1961, was warranted.

Analysis: The Court noted that the question stood covered by its earlier decision holding that a subsidy granted under a scheme for specified industrial units in backward areas was an incentive for capital investment and not an addition to trading profits. On that basis, the subsidy was treated as a capital receipt and not assessable as income. Since the legal position was already settled against the Revenue, no useful purpose would be served by directing a reference on the proposed questions.

Conclusion: The sales tax subsidy was not taxable as revenue income, and the application seeking reference was rejected.

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