TaxTMI 
TaxTMI 
1960 (3) TMI 8
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....hich was promulgated on September 8, 1945, "for the purpose of improving the procurement and wholesale distribution of " cotton piece-goods in the Province of Bengal. The membership of the association was restricted to dealers who were engaged in wholesale trade in piece-goods. Its board of control consisted of nine members, all nominated by the Government. By an agreement between the Government of Bengal and the association, certain privileges were conferred upon the association. By one of the clauses the Government agreed to be responsible and pay every month to the association the administrative expenses which had been incurred in the previous month including establishment charges, office advertising, salaries and wages not exceeding Rs.....
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....by the exemption. The association was then assessed to business profits tax for three chargeable accounting periods ending December 31, 1946, March 31, 1947, and December 31, 1947. The association claimed exemption from tax and also claimed that Rs. 6,00,000 which had been paid by the Government to the association during the first chargeable accounting period was excluded under the provisions of section 4, proviso (c), of the Business Profits Tax Act, being a subsidy. These contentions were rejected by the Income-tax Officer and by the Appellate Assistant Commissioner as also by the Income-tax Appellate Tribunal. The Tribunal held that the business profits tax did not fall within the exemption granted ; that the exemption granted did not ha....
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....ther the amount was paid by the Central Government or the Government of Bengal was not allowed to be argued in the High Court as it was not raised before the Tribunal. After analysing the terms of the agreement, the functions performed by the association and the manner and the mode in which the business was transacted, the High Court held that though the association might be separate from the Government the payment by the Government seemed to be payment to itself. But even if the association was a third party the payment was a consideration for services to be rendered by the association under the terms of the very agreement under which the payment was to be made. Therefore "it was not help but price". Against this judgment the association h....
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....on was rightly answered in the negative. The next question raised was in regard to the nature of the payment of Rs. 6,00,000 by the Government of Bengal during the first chargeable accounting period ending December 31, 1946. The appellant claimed that it was in the nature of a subsidy and was therefore exempt under proviso (c) to section 4 of the Business Profits Tax Act. To ascertain the true nature and character of the payment of this sum it is necessary to consider the relevant terms of the agreement between the Government of Bengal and the association. The preamble sets out the obligations which were undertaken by the Government and by the association. In clause 8 it was provided that the association shall, subject to the contribution....
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....lso subject to the provisions of the Bengal Cloth and Yarn Control Order. The whole trend of the agreement shows that the association itself was responsible for the payment of its expenses subject to the contribution by the Government as above stated. On the construction of the various terms of the agreement the High Court was of the opinion that the payment by Government was a payment to itself. This view of the agreement does not appear to us to be correct. If the terms of the agreement are read as a whole, it seems to be reasonably clear that the payment was made for services rendered and the contribution was in the form of paying for the actual expenses incurred per month which were to be paid in the month following the month in which t....