TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1162
X X X X Extracts X X X X
X X X X Extracts X X X X
....rently based on the report dated 30.09.2009 submitted by the statutory auditors of the company, M/s Vinod Singhal & Co., Chartered Accountants who had observed that:- "(iii) The grant received for cane price payment worth Rs. 17,44,85,000 and the same has been treated by the company as revenue grant, but as per our opinion, it should be capital receipt. Hence profit for the year is overstated by Rs. 17,44,85,000." 2.1. The AO vide notice dated 10.11.2011 issued under section 142(1) of the I.T. act, 1961, specifically asked the assessee as under:- "An amount of Rs. 17,44,85,000 is received from Uttar Pradesh Government against payment of farmers in respect of outstanding cane dues. Please justify this grant why not be treated as revenue receipt." 2.2. The assessee vide letter dated 30.11.2011 submitted its explanation as under in this regard:- "Capital receipt of Rs. 17,44,85,000/- During the year, the assessee company received Rs. 17,44,85,000/- from Government of Uttar Pradesh. This is a capital receipt and hence not assessable to tax as per provisions of Income tax Act, 1961. This grant was given by Uttar Pradesh Government for payment to farmers in respect of outstandi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of cane growers and it was thus effective remission of such liability in favour of the assessee. Accordingly, the AO held that for this reason and in accordance with Section 41(1) of the Act, the corresponding amount of liability remitted i.e. Rs. 17,44,85,000/- constituted income of the assessee. 2.7. Thereafter, the AO again noted the fact that disinvestment of shares may be a view or consideration to the owner/State Government who is also the owner of majority stake in the company i.e. to enhance the intrinsic value of the company, but as far as the assessee is concerned, the subject receipt is clearly a revenue receipt. 2.8. In conclusion, the AO further relied upon case laws and held in concluding paras as under:- In the case of Rollationers Ltd. vs. CIT (2011) 339 ITR 54 (Delhi), the assessee company was declared sick under the provisions of SICA. 1985 and its debts were restructured in pursuance to scheme and part of its debts were waived by financial institutions. In respect of waiver of cash credit limit, it was claimed by the assessee that the same did not constitute taxable income. Negating such contention, it was held by Delhi High Court that amounts relating to cas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....portunity no audit report was furnished. 4.1. The ld. CIT(A) also relied upon the decisions of jurisdictional Allahabad High Court in the case of Ratna Sugar Mills Co. Ltd. vs CIT [1958] 33 ITR 644 (All.) and of the Hon'ble Supreme Court in the case of Pontypridd and Rhondda Joint Water Board vs Otine (1946) 14 ITR (Supp,.) 45 and observed that when subsidy is received from a public fund to assist the assessee to carry on business, the object of subsidy is apparent i.e. to enable the assessee to run business more profitably, become more competitive etc. The ld. CIT(A) further observed that these are operational subsides and not capital subsidies and the source from which the amount is paid is not determinative, as in such cases the subsidy is paid from public fund but the character of the subsidy in the hands of recipient determines whether the subsidy is revenue or capital in nature. 4.2. Further as regards the findings of the AO on the issue of remission of liability in terms of section 41(1) of the Act, it is observed by the ld. CIT(A) that the assessee vehemently canvassed the point that the AO had wrongly invoked the provision of section 41(1) of the Act as the grant in aid ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eated the grant so received as causing cessation or remission of the liability in terms of section 41(1) of the Act. The ld. CIT(A) held that on either of the two scores whether the grant in aid is revenue receipt or it is causing a remission or cessation of liability in terms of section 41(1) of the Act, the action of the AO in treating grant under consideration as a revenue receipt and should be taxable and accordingly confirmed the addition of Rs. 17,44,85,000/-. 4.4. The relevant extract of the order of the Ld. CIT(A) is reproduced as under:- 5. I have carefully considered the facts of the case, the assessment order and material as on record. The addition of Rs. 17,44,85,000/- has been made by the A.O. by considering the amount received by the appellant from Govt. of U.P as revenue receipt. The impugned addition was the grant received from the U.P Govt. for payment to farmers in respect of canes due for last 3-4 years. The copy of the letter was produced by the Ld A.R of the receipt of grant and also the statement that substantiated that the grant was used for the purpose of paying the cane price.(A.O order page no 3). Though originally, even the appellant accounted for it a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es, the U. P. Government ordered sugar factories within U.P. to pay wages at enhanced rates. In order to implement this order, the Government paid subsidy to all sugar factories at the rate of nine annas per maund of sugar produced by each factory. It was held that the payment was made in the form of subsidy with the object of compensating the assessee for the loss of profits arising to it from being compelled to pay additional wages to workmen. Payment was for the purposes of the business of the company and not for a separate or distinct purpose. The amount paid to the assessee was a trading receipt and was taxable. The Hon'ble Supreme Court approved the basic principle propounded in Pontypridd and Rhondda Joint Water Board vs. Ostine (1946) 14 ITR (Supp.) 45 which reads as under:- "The first proposition is that, subject to the exception hereafter mentioned, payments in the nature of a subsidy from public funds made to an undertaker to assist in carrying on the undertaker's trade or business are trading receipts, are to be brought into account in arriving at the balance of profits or gains under Case I of Schedule D". 5.3 Thus, when subsidy is received from a publ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome of the assessee. In the case of Rollationers Ltd. Vs. CIT (2011) 339 /TR 54 (Delhi), the assessee company was declared sick under the provisions of SICA, 1985 and its debts were restructured in pursuance to scheme and part of its debts were waived by financial institutions. In respect of waiver of cash credit limit, It was claimed by the assesee that the same did not constitute taxable income. Negating such contention, it was held by Delhi High Court that amounts relating to cash credit limit had irrecoverably gone to coffers of the company and such amounts were debited to profit & loss account and therefore constituted remission in terms of section 41(1) of the I.T. Act, 1961 even if section 28(iv) is found to be inapplicable. Similar view was taken by Delhi High Court in the case of Ligitronics Private Ltd. Vs. CIT (2011) 333 /TR 386. Therefore from a perusal of the relevant part of the AO's order as reproduced above, it is borne out that state govt of UP infused the amount in the form of grant in aid towards the sick accounts of the appellant with the object of making good the famers claim of dues which were outstanding since long, therefore as regards the recipien....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h holds 100% shares in the Company came forward, provided a grant of Rs. 17,44,85,000/- to the appellant specifically for clearing these outstanding dues to Farmers. 4. The appellant initially credited this amount to its Profit and Loss account but subsequently deducted it in the Computation of Income, treating it as a capital receipt based on advice of Statutory Auditors of the Company who opined that the Grant in aidis to be treated as a capital receipt, not a revenue receipt. 6. The AO added this amount to the assessee's total income under Section 41(1) of the Act, alleging it to be a remission or cessation of a trading liability which action stood confirmed by the Ld. CIT(A). Therefore, present appeal before this Hon'ble Bench requiring following issue for determination: 7. The issue therefore, which needs determination is : (a)Whether the grant of Rs. 17,44,85,000/- received from the UP government constitutes a revenue receipt under Section 41(1) of the Income Tax Act, 1961. (b)Whether the grant can be considered a "remission or cessation" of a trading liability or a "benefit obtained" in respect of such liability, as contemplated under Section 41(1) of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Pub. Communication Network P. Ltd Vs CIT (2017) 390 ITR 1(S.C) (Page-1-2) "2. The Assessment Years in question are 1999-2000, 2000-2001 and 2001-2002. The point involved in the present appeals is short and precise. The subvention received by the Assessee-Company from its parent Company in Germany in a situation where the Assessee-Company was making losses has been treated to be a revenue receipt by the Assessing Officer. Though the First Appellate Authority [Commissioner of Income Tax (Appeals)] and the learned Income Tax Appellate Tribunal ("Tribunal" for short) has reversed the said finding, the High Court, by the orders under challenge, has restored the view taken by the Assessing Officer. Aggrieved the Assessee has filed the present appeals. 3. The question of law that was presented before the High Court, namely, whether subvention was capital or revenue receipt, was sought to be answered by the High Court by making a reference to two decisions of this Court in Sahney Steel & Press Works Ltd. v. CIT [1997] 94 Taxman 368 and CIT v. Ponni Sugars &Chemicals Ltd. [2008] 174 Taxman 87. The view expressed by this Court that unless the grant-in-aid received by an Assessee is ut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er 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. [Para 4] So far as assessee's case in this appeal is concerned Rs. 3.60 crores was received as grant-in-aid in the relevant previous year towards salary and provident fund dues. On surface test, receipt under these heads no doubt has the attributes of revenue receipt. But there are two factors which distinguish the character of the grant-in-aid which the assessee wants to be treated as capital receipt. Said sum was not on account of any general subsidy scheme. Secondly, the sum was given by the State to a wholly-owned company which was facing acute cash crunch. Financial status of the company appears from the submission of the assessee's representative recorded in the order of the first Appellate Authority and there is no denial of this fact in any of the materials placed. [Para 6] In the case of the assessee, though it is not a grant from a parent compa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent, facing acute cash crunch, to keep company floating, even though large part of funds were applied by company for salary and provident funds, grant received was capital receipt - Whether Special Leave Petition filed against impugned order was to be dismissed - Held, yes In the light of above, it is submitted that the authorities below have erred in treating the grant of Rs. 17,44,85,000/- as a revenue receipt under Section 41(1) of the Income Tax Act, 1961 ignoring the legal position that grant, provided by the shareholder, is a capital receipt and not taxable under Section 41(1) of the Act. Therefore, it is respectfully prayed that the addition of Rs. 17,44,85,000/- to the assessee's total income be deleted." Written submission filed dated 27.03.2025 (second submission) The impugned order passed by the Ld. CIT(A) is directly in conflict with the Supreme Court's dismissal of the Special Leave Petition (SLP) in Principal Commissioner of Income-tax, Kolkata v. State Fisheries Development Corporation Ltd. ([2019] 102 taxmann.com 221 (SC) * Government Grant to Wholly-Owned Company: The Supreme Court upheld the Calcutta High Court's decision that a grant-in-ai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of U.P. Undertaking) for payment to cane farmers in respect of their outstanding dues for some years is taxable income. 3. The AO has noted that originally, the assessee had accounted this grant as revenue receipt in the books of accounts but subsequently, while filing the Return of Income claimed the same as capital receipt on the advice of it's consultant/CA. 4. After detailed discussion in the assessment order, the AO has concluded that the grant received by the assess was to discharge a trading liability i.e. outstanding payments of sugar cane farmers, and thus, was a trading receipt taxable u/s 2(24) r.w.s. 28 of the Act as against a capital receipt as claimed by the assessee. 5. It is only for assumption that the A.O. has noted that even if the amount was a capital receipt as claimed by the assessee, the same was utilized in discharging a trading liability and thus, the assessee was not required to pay trading liability of cane farmers. Thus effectively, the assessee got a remission of the such liability which was taxable u/s 41(1). 6. The CIT(A) in his detailed order, concluded that the said receipt was revenue receipt in nature. He observed that the AO app....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any new asset. The subsides were granted year after year, only after the setting upon of the new industry and commencement of production. Such a subsidy could only be treated as assistance given for the purpose of carrying on of the business of the assessee. The subsidies were of revenue nature and would have to be taxed accordingly." 9. Hon'ble Supreme Court in CIT v. Ponni Sugars & Chemicals Ltd. [2008] 306 ITR 392 (SC) referred to its earlier decision in the case of Sahney Steel and Press Works Ltd. (supra) and held that nature of the subsidy is to be determined with reference to the purpose for which such subsidy is given (i.e. the 'purpose test). Factors such as the source/form of the subsidy, time of payment of the subsidy are not relevant. Based on analysis of facts of the case, the SC held that as subsidy must be utilised for repayment of loans taken by sugar factories for setting up of new units or for substantial expansion of existing units, such subsidy would be of capital nature. It held that if the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the obje....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to be not covered by section 4(3)(vii) of the Indian Income-tax Act, 1922 (equivalent to section 10(3) of the Act of 1961), and the receipt was held to be taxable. 11. Hon'ble Allahabad High Court (jurisdictional High Court) had also examined the issue in the case of Ratna Sugar Mills Co. Ltd. vs. CIT (1958] 33 ITR 644 (Allahabad). The Assessee-company carrying on business of manufacturing sugar, received certain amount by way of subsidy from Government of India in order to compensate it for payment of wages to its workmen at enhanced rate in terms of order of State Government. It claimed that said sum of money received by it was not income arising from business. The Court agreed with the Tribunal and held that the amount in question was received as a trading receipt and must be held to be income arising from business. The HC referred to the decision of the Supreme Court in the case of Raghuvanshi Mills Ltd. v. CIT [1952] 22 ITR 484 (SC) wherein the assessee company had received a certain amount from the insurance company as a result of fire which was paid on account of loss of profits. The Supreme Court held that it was taxable income. The High Court held as under: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...." 15. Hon'ble Punjab & Haryana High Court in Ludhiana Central Cooperative Consumers' Stores Ltd. v. CIT [1980] 122 ITR 942 (P&H), has held that the government subsidy received by assessee to meet managerial and rental expenses constituted taxable revenue receipt. 15.1 Thus, it is the character of the receipt that has to be considered. If a subsidy is given to recoup revenue expenditure, it will take the same colour and will be deemed to be a revenue receipt in the hands of the assessee. It is the purpose for which it is given which is material and is the determining factor. Since the subsidy was given to meet the managerial and rental expenses the subsidy receipt would be to meet the actual expenses of the assessee and thus, would be liable to tax. 16. Similarly, Hon'ble Madras High Court in Triplicane Urban Cooperative Society Ltd. v. CIT [1980] 126 ITR 125 (Mad), held: That where the assessee received subsidy to meet additional expenses on staff and rent under scheme of the Government for the purpose of stabilizing the prices of import commodities, the subsidy was to be taxed as revenue receipt." 16.1 Reliance is also placed on the House of Lords decisi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nciple of law applicable to all situations. The aforesaid view tends to overlook the fact that in both Ponni Sugars& Chemicals Ltd.'s case (supra) and Sahney Steel &Press works Ltd. (supra) the subsidies received were in the nature of grant-in-aid from public funds and not by way of voluntary contribution by the parent Company as in the present cases." 20.1 Firstly, in Siemens case, it was a voluntary contribution by the parent Company in the nature of a subvention received by the Assessee-Company from its parent Company in Germany in a situation where the Assessee Company was making losses which is not the case here. The amount in the instant case was a grant in aid which had been given for a specific purpose i.e. to make payments to sugarcane farmers. 20.2 Secondly, in Siemens case, an Indian company, received subvention from its parent company in Germany. Thus, the impugned payment was contribution by the parent Company in the nature of a subvention which in not the case here. 20.3 Thirdly, the Apex Court distinguished Ponni Sugars's case and Sahney Steel case as in those cases, the subsidies received were in the nature of grant-in-aid from public funds and not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and were in the nature of capital. Share subscription money received in the hands of the respondent-assessee was a capital receipt. The intention and purpose behind the said payment was to secure and protect the capital investment made by STC Ltd. in the respondent. The payment of grant by STC and receipt thereof by the respondent was not during the course of trade or performance of trade, thus, could be categorised or classified as a gift or a capital grant and did not partake of the character of a trading receipts. Trading receipts reach a trader in his capacity as such and are made to assist him to carry on the trade. In Handicrafts & Handlooms Corpn. Ltd. (supra), the Division Bench noticing the difference between Government grant and the payment by made STC, has observed as under (page 540) : "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 i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eated as revenue receipt as observed even in these three cases relied upon by Ld. AR. 24. In view of the above discussion, it is submitted that the contentions raised by assessee are legally not tenable. It is prayed that the addition of Rs. 17.44 crore being the revenue receipt may kindly be sustained by dismissing the assessee's appeal. 8. In rejoinder, the assessee ld. AR filed a written submission on 15.04.2025 as under:- 1. The Ld. CIT D.R vide Letter dated 11th April 2025 had furnished Written Submission upon Written Submissions (Two) dated 27.03.2025 furnished by the appellant. In response to the Written Submission by the Ld. CIT DR the appellant is furnishing its Rejoinder today i.e on 15.04.2025 being the first working day after 11.04.2025. It is humbly requested that the same may kindly be taken on records. 2. The Ld. CIT DR submitting his case, justifying the Assessment made and has distinguished the case laws relied upon by the appellant during the course of hearing which got concluded on 03.04.2025. 3. The Ld. CIT, DR vide Para 2 to 6 has stated facts of the case on which there is no dispute. Vide para-7 it is submitted that amount received from Govern....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation to the owner/State Government who is also the owner of majority stake in the company i.e. to enhance the intrinsic value of the company, but as far as the assessee is concerned, the subject receipt is clearly a revenue receipts......" 7. Ld. CIT(A) too in Page No. 9, Para 5.1 has confirmed the AO's view as under: "As has also observed by the A.O. that the intention of State Government to grant such money to the assessee i.e. disinvestment of shares may be a view or consideration to the owner/State Government who is also the owner of majority stake in the company i.e. to enhance the intrinsic value of the company, but as far as the assessee is concerned, the subject sum was capital receipts has not brought any material to substantiate its claim of capital receipt. Despite giving several opportunities no material was placed on record by the appellant to prove that the grant in question is a capital grant and neither the previous year tax audit report as called for was filed by the appellant during the course of assessment proceedings. The facts on records, leave no room of doubt that sum of Rs. 17,44,85,000 had all character of revenue receipt and should be taxed as busine....
X X X X Extracts X X X X
X X X X Extracts X X X X
....209 of Financial Code No. 1 and make it available to Uttar Pradesh State Sugar Corporation Limited for the payment of outstanding cane prices for their sugar mills. The above-mentioned amount will be spent solely for the purpose for which it has been approved. The certificate of utilization for the expenditure will be submitted to the government as soon as possible. The expenditure in the current financial year (2008-09) will be covered under Grant Number 24 for income and expenditure, with the following details: 2852 Industry 08 Consumers, Industry 201 Sugar 10 Uttar Pradesh State Sugar Corporation Limited for privatization/sale - 01, cane price payment 20, auxiliary grants/contributions will be made in the name of the state. This order is being issued with the approval obtained from the Finance Department's unofficial number B-4-147/Das-2008, dated ............. 10. From the above, it is abundantly clear that the Government of Uttar Pradesh has given the payment to increase the intrinsic value of its shares held in the Company which clearly bears the character of capital receipt which material aspect has been ignored by the authorities below. The amount as was rec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and relied upon the order passed by the Hon'ble ITAT Amritsar Bench in the case of Gurdaspur Co-op Sugar Mills Vs DCIT (2009) 122 TTJ 258(Amritsar) wherein the Hon'ble ITAT concluded that in the case before them, admittedly, grant-in-aid was given for the purpose of converting the RDF loan. The RDF loan was given for the purpose of compensating the additional price paid by the assessee to the farmers. The expenditure on account of raw material is revenue in nature and being the original loan was given to compensate the assessee from suffering from the revenue loss and the waiver of such loan is to be revenue in nature. The said order is clearly distinguishable on fact as in the case relied upon the Hon'ble ITAT after due consideration of facts found and noted that "The assessee was free to use grant-in-aid in its business entirely as it liked and was not obliged to spend the money for a particular purpose." In the case on hand the appellant was obliged to pay the outstanding amount due to cane growers only. Therefore, there is a material difference in facts. Further the order passed by the Hon'ble ITAT Amritsar Bench is dated 31.12.2008 relying upon Judgements interalia in the case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s tried to distinguish the case laws relied upon by the appellant during the course of hearing. None of the point of distinction can take away the force emanating from the ratio laid down in cases relied upon by the appellant. 9. We have heard both the parties and considered the material available on record. The issue involved in this appeal is whether the grant of Rs. 17,44,85,000 by the Uttar Pradesh Government to the assessee company is a capital receipt in the hands of the assessee company as claimed by the assessee or whether it is a revenue receipt in the hands of the assessee and taxable and/ or whether it is a cessation of liability in the case of the assessee and therefore this amount was taxable u/s 41(1) of the Act as held by the AO. The assessee explained before the AO as well as before the Ld. CIT(A) that the U.P., government provided a grant of Rs. 17,44,85,000/- to the assessee for clearance of sugar cane dues to the farmers in public interest as the financial position of the company was very bad. Further, it mainly explained before the Assessing Officer that it was a capital receipt and therefore not taxable. However, in the submission made by the ld. AR filed on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mited for the payment of outstanding cane prices for their sugar mills. The above-mentioned amount will be spent solely for the purpose for which it has been approved. The certificate of utilization for the expenditure will be submitted to the government as soon as possible. The expenditure in the current financial year (2008-09) will be covered under Grant Number 24 for income and expenditure, with the following details: 2852 Industry 08 Consumers, Industry 201 Sugar 10 Uttar Pradesh State Sugar Corporation Limited for privatization/sale -01, cane price payment 20, auxiliary grants/contributions will be made in the name of the state. This order is being issued with the approval obtained from the Finance Department's unofficial number B-4-147/Das-2008, dated ............. 9.2. The Assessing Officer relying upon the decision of Sahney Steel & Press Works Ltd. vs CIT [1997] 228 ITR 253 (SC) submitted that the issue in this case was fully covered against the assessee, where, it has been held that subsidies not having been granted for production of or bringing into existence any new asset are of revenue character. Further, the ld. CIT-DR submitted that the Hon'ble Suprem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....desh State Sugar Corporation Limited for the payment of outstanding cane prices for their sugar mills. Further, vide letter dated 04.11.2011 of the UP State Sugar Development Corporation (placed at page no.37 of the paper book) a sum of Rs. 17,44,85,000/- out of the sum of Rs. 246,00,00,000/- was allotted to the assessee company for the payment of the outstanding arrears of the cane growers. 9.4. Therefore, the intent/purpose of the said grant by the U.P. Government was clearly to protect the intrinsic value of the share capital (before the sale of these shares or the disinvestment of the shares as the case may be of the assessee company in which the 100% shares were held by the UP State Government) that it held on 100% basis in the assessee company and therefore the intent or the object of the said grant was capital in nature and not revenue in nature. Even though, it helped the assessee in repaying the outstanding arrears of the cane growers, which was the liability of the assessee and to that extent, it got a benefit, but the said benefit was not main purpose of the grant by the Government of Uttar Pradesh as it was sanctioned by the Hon'ble Governor for the payment of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which was utilized for clearing salary, provident fund dues and flood relief ?" As we find from these authorities, distinction has been made between the broad principles for dealing with grant-in-aid as laid down in the case of Sahney Steel and Press Works Ltd. (supra) and money extended for assistance to subsidiaries by the parent company on stand-alone basis, not as a part of any general scheme. In the case of the assessee, though it is not a grant from a parent company to a subsidiary company, the grant is from the State Government, which was in effect, hundred per cent. shareholder of the assessee. Rs. 3,60,00,000 was meant for payment of staff salaries and provident fund dues. As we have already observed, these item heads may bear the label of revenue receipt on the surface, it is apparent that the actual intention of the State was to keep the company, facing acute cash crunch, floating and protecting employment in a public sector organization. There is no separate business consideration on record between the grantor, that is the State Government and the recipient thereof being the assessee. The principle of law as laid down in the case of Siemens Public Communication Netw....
X X X X Extracts X X X X
X X X X Extracts X X X X
....by the assessee (hereinafter referred to as the first mentioned person) and subsequently during any previous year- The first mentioned person has obtained whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income tax as the income of. that previous year.... Now the following question arises - What is the meaning of remission and cessations' as mentioned in the sec. What is the meaning of 'benefit obtained' mentioned in the section Whether the amount received from shareholder to pay the trading liability constitute remission or cessation of liability or whether it will be termed as taking any benefit in respect of such liability. Meaning of remission or cessation and benefit obtained - Remission or cessation of liability could be obtained as under- If the assessee does not pay the amount to its creditors and writes backs to its profit a....