2004 (9) TMI 94

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ts and in the circumstances of the case, the Tribunal was justified in law in holding that the assessee was correct in claiming power subsidy as capital receipt?" Heard Shri R.L. Jain, learned counsel for the applicant. None for the assessee despite service and S.P.C. having been sent for hearing of the reference. The question arises out of the assessment year 1988-89. The assessee, being a limited company at the relevant time, was engaged in the business of manufacture of stainless steel in its manufacturing unit. In its manufacturing activity, the assessee received in the relevant assessment year a power subsidy amounting to Rs. 13,22,884 from the State. The question therefore arose before the taxing authorities as to whether the amount....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... Ind of 1993 by the Tribunal. This is how the aforementioned question has been referred to this court for answer. At the outset, we may take note of the fact that the Tribunal while deciding the appeal in favour of the assessee by their order dated August 28, 1997 (annexure C), did not discuss any issue much less the legal issue on the question referred and which really arose out of the controversy. Indeed, the learned member of the Tribunal only referred to and placed reliance on some earlier decisions of the Tribunal rendered in I.T.A. No. 704 of 1994 dated January 25, 1995, and I.T.A. No. 684/685 of 1984 dated October 8, 1997, and I.T.A. No. 102/1025 of 1995 dated October 26, 1993. It is on the basis of the view so taken by the Tribunal....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... by the Tribunal in such cases. Now coming to the issue involved, in our opinion, the issue is squarely covered in favour of the Revenue by the authoritative decision of the Supreme Court reported in the case of Sahney Steel and Press Works Ltd. v. CIT [1997] 228 ITR 253. It is in this case that their Lordships held as to how and on what basis and by which criteria, the taxing authorities should decide that a particular amount received by an assessee as a subsidy be regarded in his hand as a capital receipt or a revenue receipt. Their Lordships, inter alia, ruled that it is necessary to see and examine the true character of the subsidy given to the assessee by the State. It was, inter alia, held that if it is for setting up of a plant/indu....