TaxTMI 
TaxTMI 
2015 (4) TMI 944
X X X X Extracts X X X X
X X X X Extracts X X X X
....n facts in treating the amount of subsidy of Rs. 19,82,600/- received from Government of Gujarat as capital receipts instead of revenue receipts (Trade Receipts) liable to income tax?" 2. The facts leading to the present appeal in nutshell are as under. 3. That the respondent-assessee filed return of income for A.Y. 1996-1997 declaring the total loss of Rs. 35,60,619/-. That subsequently, notice under Section 142(1) of the Income Tax Act along with the detailed questionnaire was issued on 27.05.1998. That during the course of the assessment proceedings and as per the balance-sheet of the assesseecompany, it revealed that the assessee-company received state subsidy of Rs. 19,82,600/- in the assessment year under consideration. As the afore....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3.2. Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A), the assessee preferred the appeal before the learned Tribunal and the learned Tribunal, by impugned judgment and order and considering the decision of the co-ordinate bench in ITA No.3565/Ahd/2003 and 1721/Ahd/2005 by which, on facts, the learned Tribunal earlier distinguished the decision of the Hon'ble Supreme Court in the case of Sahney Steel & Press works Ltd. (supra), has allowed the appeal preferred by the assessee by quashing and setting aside the order of assessment passed by the Assessing Officer confirmed by the learned CIT(A) treating the subsidy amount of Rs. 19,82,600/- as revenue receipt by holding that the amount of subsidy is a capital i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that, therefore, on facts, the learned Tribunal ought not to have followed its earlier decision when, on facts, the same may not applicable. 6.1. It is submitted that in the present case, the subsidy was given to the assessee not to set up its business or complete the project. It is submitted that as per the findings recorded by the Assessing Officer, the assessee received subsidy after the production was commenced and its purpose was to assist in carrying on the business of the assessee. It is submitted that even out of the amount of subsidy of Rs. 19,82,600/-, Rs. 8,82,600/- was paid as interest on loan from Gujarat State Financial Corporation directly in the year under consideration and Rs. 11 lacs was paid to the Gujarat State Indust....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessing Officer and the findings recorded by the Assessing Officer, it appears that the assessee-company received from the State, subsidy of Rs. 19,82,600/-. It has also come on record that the assessee - company/industry was established by the assessee before 1986. The subsidy of Rs. 21,97,000/- came to be sanctioned to the assessee vide letter dated 29.08.1992 of the Gujarat State Financial Corporation on behalf of the State Government. As per the sanctioned letter/approval letter, it appears that the above subsidy was to be disbursed in installment after fixed assets of the proposed project was acquired and paid before 01.04.1986. One of the conditions as per the approval letter of the subsidy was that the sanctioned subsidy shall be di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l-will have to be determined having regard to the purpose for which the subsidy is given. It has observed that source of the fund is quite immaterial. It has further observed that, however, if the purpose is to help the assessee to set up its business or complete a project, the monies must be treated as having been received for capital purposes. But if monies are given to the assessee for assisting him in carrying out the business operations and the money is given only after and conditional upon commencement of production, such subsidies must be treated as assistance for the purpose of trade. In the case before the Hon'ble Supreme Court, the amounts of subsidy were granted year after year, only after setting up of the new industry and c....