TaxTMI 
TaxTMI 
TaxTMI 
2013 (11) TMI 1249
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....-89. The Tribunal has referred the following question of law to be considered by the Court:- "Whether on the facts and in the circumstances of the case, the Ld. ITAT was legally correct to hold that incentive/subsidy in the form of additional quota of sugar to be sold as free for a specified period meant for repayment of terms loans was a capital receipt." 3. Brief facts, giving rise to this reference, are as follows:- "The assessee is a Cooperative Society manufacturing sugar from sugarcane. The factory is located at Bhagpat, District Meerut. The assessee claimed deduction towards incentive received out of its business income on the ground that the incentive or subsidy received by the assessee under the Central Govt. Scheme cannot form ....
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....ncome Tax Vs. Ponni Sugars and Chemicals Ltd (2008) 306 ITR 392 (SC) the Supreme Court, in the matter of sugar mills and in case of receipt of subsidy under a scheme, held that for determining whether the receipt of subsidy is a revenue account or a capital account, the purpose test has to be applied. The point of time, at which the subsidy is paid, is not relevant. The source is immaterial. If the object of the subsidy scheme is to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance 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 the subsidy would be on capital account. 6....
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....t of his claim, the assessee has cited various court's decisions. It is explained that this incentive is in the form of additional quota of sugar to be sold as free for a specified period and the difference in sale price over levy price was a subsidy. This incentive/subsidy has been given to the assessee for repayment of term loans. Also as the subsidy received by the assessee is nothing but the difference in sale price of free sale sugar and levy sugar; the same is clearly a revenue receipt and has to be taxed. The assessee has rightly shown this amount as income in the P/L a/c. The claim of the assessee for allowing deduction of this amount from his income is, therefore, rejected." 9. The CIT (A) in paragraph 9.1 had considered the argum....