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TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 714
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....assessee in the relevant previous year received Rs. 4,60,00,000/- as grantsin- aid. Out of that sum Rs. 3,00,00,000/- was received for payment of salary to its employees, Rs. 60,00,000/- for payment of Provident Fund dues and Rs. 1,00,00,000/- for the purpose of flood relief. The Assessing Officer found the same to be revenue receipt, rejecting the assessee's claim for deduction of the said sum from its income on the plea that the same constituted capital receipt. The Assessing Officer found that the fund was being applied for items which were revenue in nature. The Assessing Officer recorded in his order that such receipts were consistently treated in the past by the assesse as revenue receipt. The assessee's contention on that count, however, is that in the preceding assessment year, i.e. 2005-06 also similar claim was made by the assessee, and assessment of that year is also subject of another appeal before this Court. 3. For the subject-assessment year, the assessee failed in its appeal before the Commissioner of Appeals on this point. The assessee thereafter preferred an appeal before the Tribunal. The Tribunal, however, did not solely rely on the nature of application of the....
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.... capital receipt. In that case, however, the scheme contemplated for refund of sales tax on purchase of machinery and raw materials, subsidy or power consumption and certain other exemptions on utilities consumed. The Supreme Court rejected the plea of the assessee for treating such facilities and incentives as capital receipt on the reasoning that such subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Three earlier authorities carrying the same reasoning were cited before us by Ms. Das Dey, learned Counsel for the Revenue. These were (i) Ratna Sugar Mills Co. Ltd. Vs. Commissioner of Income Tax, being a judgment of the Allahabad High Court reported in XXXIII ITR644, (ii) V.S. SV. Meenakshi Achi Vs. Commissioner of Income Tax, a judgment of the Madras High Court reported in 50 ITR 206 and (iii) the case of Ludhiana Central Co-op Consumers' Stores Vs. C.I.T., a Punjab and Haryana High Court decision reported in 122 ITR 942. In all these authorities, the Court primarily examined the character of the receipt and held that if the receipt was to recoup the revenue expenditure, it would take the same colour and shall be deemed ....
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....Tax and Another [(2017) 390 ITR 1(SC), certain sum was received by the assessee from its principal shareholder termed as "subvention payment". This sum, the assesse claimed was capital receipt. Such claim was disallowed by the Assessing Officer. The said sum was paid to the assessee company for two reasons. First was that the company was potentially sick company and that its capacity to borrow had reduced substantially leading to shortage of working capital. It was sought to be explained by the assesse to the tax authorities that its parent company had agreed to infuse further capital by reimbursing the accumulated loss. The Appellate Authority as well as the Tribunal however found the monies received to be capital receipt. The department was successful in its appeal before the High Court. The High Court found that the financial assistance was not extended by the parent company for setting up any unit or for expansion of its existing business or acquiring any asset. On the other hand, the High Court observed that it was a case where financial aid was extended by the parent company not only to make good the loss but to see that the company is run more profitably. 8. On further appe....
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....urring dispute pertaining to several assessment years in the past and in this judgment it was observed by the Delhi High Court:- "In all the years it is only a case of a cent. per cent holding company coming to the rescue of its subsidiary which has incurred losses and enabling it to recoup those losses and continue to carry on the business in spite of such losses. In the circumstances, what we have said in our earlier judgment in ITR Nos. 17 and 94/74 (Addl. CIT v. Handicrafts & Handloom Export Corpn. [1982] 133 ITR 590) will equally apply in regard to the assistance received by the assessee from the STC during the current year." 10. The Delhi High Court further held : "There is, in our opinion, a basic difference between grants made by a Government or from public funds generally to assessees in a particular line of business or trade, with a view to help them in the trade or to supplement their general revenues or trading receipts and not earmarked for any specific or particular purpose and a case of a private party agreeing to make good the losses incurred by an assessee on account of a mutual relationship that subsists between them. The former are treated as trading receip....