Trade tax exemption embedded in sale proceeds was held to be revenue receipt, not capital subsidy.

A statutory exemption from trade tax under Section 4-A of the U.P. Trade Tax Act, 1948 did not convert the amount embedded in sale proceeds into a capital receipt or subsidy. The exemption operated as relief from liability to pay trade tax, not as a State-granted capital incentive, and the statute did not authorise the assessee to collect tax on exempt sales and retain it as capital. Amounts realised as part of the sale price had to be dealt with under the Act, and a self-created segregation of the sale price into a tax component was impermissible. The amount was therefore revenue in nature, not capital.

---

---

Issues: Whether the amount corresponding to trade tax exemption on sales under the U.P. Trade Tax Act, 1948, claimed by the assessee as a capital receipt or subsidy, was in law a capital receipt or a revenue receipt.

Analysis: The exemption under Section 4-A of the U.P. Trade Tax Act, 1948 was a statutory exemption from liability to pay trade tax and not a subsidy granted by the State Government. The Act contained no provision authorising the assessee to collect tax on exempted sales and retain it as a capital subsidy. Sections 8-A(2)(b) and 29-A reinforced that any amount realised as trade tax had to be dealt with only in accordance with the statute, and no part of the sale price could be treated as a capital receipt merely because it corresponded to an exempted tax component. The receipts were shown as part of the sale price received from purchasers, and a self-devised bifurcation of sale proceeds into a supposed tax component was impermissible.

Conclusion: The amount claimed on account of trade tax exemption formed part of the sale price and was a revenue receipt, not a capital receipt or subsidy.

Ratio Decidendi: A statutory exemption from sales tax does not, by itself, convert the embedded tax component in sale proceeds into a capital subsidy or capital receipt unless the statute expressly authorises such subsidy or retention.

---