TaxTMI 
TaxTMI 
2011 (3) TMI 1438
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the very low tax effect and the Board's circular binding on the Revenue, the appeal is liable to be dismissed. Learned counsel appearing for the assessee pointed out that the issue raised in this appeal does not fall under any of those excepted circumstances to maintain an appeal ; consequently, the appeal has to be dismissed as not maintainable, having regard to the low tax effect. 3. It is seen from the instructions given in the said circulars, particularly that of the year 2007 where the substantial question of law involved is of recurring nature to be decided by the court, without recourse to the monetary limit, an appeal could be considered on the merits. It is seen that instructions were also issued to that effect in Board's Instruction No. 1979, dated March 27, 2000, was clarified subsequently on June 29, 2000, and again on October 24, 2005. 4. Learned counsel appearing for the assessee placed reliance on the deci- sion of the Delhi High Court as regards the maintainability reported in CIT v. Nanak Ram Jaisinghania [2009] 317 ITR 302 (Delhi). We do not think that the said decision would be of any assistance to the assessee. Admit- tedly, in the assessee's case for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....going by the decision of this court reported in CIT v. Super Spinning Mills Ltd. [2008] 296 ITR 168 (Mad) and the decisions of the apex court reported in CIT v. Rajaram Maize Products [2001] 251 ITR 427 (SC) and CIT v. Ponni Sugars and Chemicals Ltd. [2008] 306 ITR 392 (SC), unless and until the assessee is able to establish that the subsidy given was for the purpose of setting up of industry, the question of granting any relief as a capital receipt did not arise in this case. Learned standing counsel further pointed out that having regard to the categorical decision of the apex court reported in Sahney Steel and Press Works Ltd. v. CIT [1997] 228 ITR 253 (SC), and the object with which the subsidy was granted, the receipt should be assessed only as revenue receipt. He further pointed out that the purpose of granting the subsidy was not as regards setting up of the industries, but it was only for carrying out the day-to-day business operations. Thus, applying the deci- sion of the Supreme Court which has been consistently followed by this court, the order of the Tribunal has to be reversed, thereby confirming the order of the assessing authority. 7. Per contra, learned coun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction were only operational subsidies hence, the pay- ments not being made up for setting up of industries and were of the character of the supplementary receipts which could not be used for dis- tribution as dividend to the shareholders. Consequently, the Supreme Court held that these subsidies were not capital subsidies. The apex court pointed if any subsidy is given, the character of the subsidy in the hands of the recipient will have to be determined by having regard to the purpose for which subsidy is given. If it is given by way of assistance to the asses- see in carrying on its trade or business, it has to be treated as trading receipt. After considering the catena of decisions the apex court rejected the plea of the assessee, and held that the same subsidies were capital in character. 10. The decision reported in CIT v. Kanyakumari District Co-operative Spinning Mills Ltd. [2003] 264 ITR 684 (Mad) relates to grant of subsidy for giving employment to workers belonging to Adi Dravida community. The court held that the taking into account the welfare of the Adi Dravida community and their poor representation in the assessee's firm, the Government of Tamil Nadu sanction....
X X X X Extracts X X X X
X X X X Extracts X X X X
....its which are using power as one of the inputs for production. It was helping only large industries with limited employment, hence, on the suggestions made by the planing commission, it was felt the scheme should be modified so as to reduce the heavy drain on the plan funds. It was also found that the present scheme ended in the growth of large medium industries which instead of promoting more labour industries, were using power as raw materials for production. Taking note of the need for modification, the Government modified the scheme. It was observed that the modified scheme would enable more labour industries to come. Accordingly, the Government order was passed, whereby the power subsidy was given, subject to a ceiling of Rs. 1 lakh per month. The subsidy herein was worked out in actual consump- tion of energy for Pondicherry and Yanam regions and a different set of subsidy was given for Karaikal and Mahe regions. All the new low tension and high tension industries that were energized on or after March 1, 1991, were brought under the power subsidy scheme, subject to the limit of Rs.1 lakh per month on a graded percentage. Paragraph 6 of the said circular further states that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ahney Steel and Press Works Ltd. v. CIT [1997] 228 ITR 253 (SC) only to reiterate that the character of the receipt of subsidy in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is granted and in such cases, one has to apply the pur- pose test. If the object of the subsidy scheme was to enable the assessee to run the business more profitably, then the receipt is on the revenue account. However, if the object under the subsidy scheme is to enable the assessee to set up a new unit or to expand the existing unit, then the receipt of subsidy would be on capital account. Applying the said decisions to the facts of this case, as already pointed out, a reading of the Govern- ment order makes it clear that the subsidy granted is for production and it is not for setting up of industry. 14. A reading of the notification dated February 11, 1991, makes it clear that what has been granted is the subsidy on power consumption with a ceiling limit of Rs. 1 lakh per month. The subsidy was given for a period of five years at a particular percentage on the actual consumption. It is not doubt true that in the preface to the notification, there i....