TaxTMI 
TaxTMI 
2017 (1) TMI 772
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....on account of the majority opinion of the 3 Member Tribunal. 3. This appeal is admitted on the following substantial question of law:- "Whether on the facts and circumstances of the case, the Tribunal was justified in holding that the transport subsidy received by the assessee during the assessment year 2001-02 was in the nature of revenue receipt and not capital receipt and thus taxable in the hands of the assessee?" 4. The appellant is a company and is assessed to income tax within the jurisdiction of the Commissioner of Income Tax (CIT), Dibrugarh. On 22.10.2001 they submitted their return of income disclosing total income at Rs. 1,82,940/- for the Assessment Year 2001-02. A non-scrutiny assessment was then made under sub-section (1) of Section 143 of the I.T. Act and the intimation under that provision was issued to the assessee on 12.03.2002, by accepting their return and granting refund. 5. However the appellant's case was taken up for scrutiny under sub- section (2) of Section 143 of the I.T. Act and an assessment order was passed on 30.03.2004 (Annexure-A), whereby the Rs. 17,45,750/-, received as transport subsidy, was construed to be a supplementary trad....
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....gh Court in CIT vs. Meghalaya Steels Ltd. (Gauhati), reported in 332 ITR 91, was rendered whereby, the transport subsidy was declared to be a revenue receipt. Following this decision of the jurisdictional High Court for Meghalaya Steels Ltd.(supra), the 3rd Member opined that the transport subsidy should be treated as revenue receipt and therefore is taxable in the hands of the assessee, by his order dated 03.07.2012 (Annexure-F). 9. When the majority members accepted the contention of the Revenue, the Tribunal by its impugned order dated 13.12.2013 (Annexure-G), declared that transport subsidy is required to be treated as revenue receipt and thus the assessment to tax for the amount received, was upheld for the Assessment Year 2001-02. 10. At this stage, it may be relevant to point out that the above decision in Meghalaya Steels Ltd.(supra) was reviewed subsequently and the earlier judgment of September 16, 2010 was recalled. The later decision is reported in 358 ITR 551, whereby adjudication of the substantial question of law after due formulation was ordered by the High Court in the Review proceeding. Exercise of the review power by the High Court was challenged by the Rev....
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....ield, so that they could compete with their counterparts in the non-remote areas of the country. Thus the receipt of the transport subsidy is submitted to be capital inflow. 12.1 On the other hand, Mr. S. Sarma, the learned standing counsel for the Income Tax Department submits that the assessee had credited the sum received as transport subsidy in their reserve and surplus account, but such accounting procedure is inconsistent with the method of accounting, specified under Section 145 and 145A of the I.T. Act. He submits that subsidy amount reimbursed to the assessee must be deemed as income for the year in which it is received and therefore he argues that it is taxable as revenue receipt, in the hand of the assessee. 12.2 The learned lawyer relies on CIT Vs. Rajaram Maize Products reported in (2001) 251 ITR 427 (SC) for the respondent to contend that the Apex Court had held that power subsidy received by the assessee was a revenue receipt and the same is subject to taxation under the I.T. Act and he submits that transport subsidy should be similarly construed in the hands of the assessee. 13. The submission made by the learned counsel for the parties have received our at....
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....ransport subsidy in the hand of the assessee is a revenue receipt. This finding was given by the High Court only on account of the agreement of both parties since none had questioned that such receipt could be capital receipt. Therefore, influenced primarily by the 16.09.2010 judgment of the jurisdictional High Court, the 3rd Member on 03.07.2012 answered the issue in favour of the revenue and against the assessee. On account of the majority view, the final pronouncement of the Tribunal was rendered on 13.12.2013, whereby it was declared that transport subsidy should be treated as revenue receipt and is taxable, in the hands of the assessee. 17. However, as earlier noted when the assessee applied for review of the judgment in Meghalaya Steels Ltd. (supra) rendered on 16.09.2010, the Division Bench recalled the earlier order by observing that the substantial question of law was not framed in the earlier proceeding and thus through the judgment dated 08.04.2013 in the Review case filed by the assessee in Meghalaya Steels Ltd. Vs. CIT reported in (2013) 358 ITR 551 (Gauhati), a fresh determination with formulation of the substantial question of law, was ordered by the Court. The re....
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....hemicals Ltd. (supra) and in CIT Vs. Meghalaya Steels Ltd. reported in (2016) 383 ITR 217 (SC), where the purpose test was applied to clinch the issue. 20. What follows from the above discussion is the relevance and applicability of the purpose test to determine the nature of the receipt towards transport subsidy in the hand of the assessee. But before we proceed further with the matter, the Court has to deal with the contention of the revenue lawyer that the assessee cannot apply certain accounting method, in order to treat the received sum as capital receipt by including the amount in the reserve and surplus head, in the balance sheet. On this point we may benefit by referring to the ratio in Tuticorin Alkali Chemicals & Fertilizers Ltd. Vs. CIT reported in (1997) 227 ITR 172 (SC). Here the Supreme Court considered the accountancy practice and observed that when the question is whether a receipt of money is taxable or not or whether certain deduction from that receipt are permissible in law or not, the question has to be decided according to the principles of law and not in accordance with the accountancy practice. It was thus declared by the Supreme Court that accounting prac....
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....he subject matter of consideration of the Apex Court in Jai Bhagwan Oil and Flour Mills (supra). In this case, the Supreme Court declared that the object of the Transport Subsidy Scheme is not augmentation of revenue but to improve trade and commerce between the remote parts of the country with other parts to bring about economic development of the remote and backward regions. The ratio of this case makes it clear that the amount received towards transportation cost in the hand of the assessee is capital receipt and the same cannot be subject to taxation in the hand of assessee, under the I.T. Act. 24. Before we part with the records, we must take into account implication of Rajaram Maize Products (supra) cited by the departmental lawyer. In this case, the Supreme Court declared that the power subsidy received by the assessee was a revenue receipt and therefore the same is subject to the levy of tax, in the hands of the assessee. In this context, reading the judgment in Mepco Industries Ltd. Vs. CIT reported in (2009) 319 ITR 208 (SC) will guide us. Here the Supreme Court opined that in order to determine the nature of the subsidy, each case will have to be assessed on its own m....