TaxTMI 
TaxTMI 
1992 (3) TMI 105
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....e been taken by the assessee :-- " 1. That the appellate order is contrary to law & facts. 2. That on the facts and circumstances of the case learned CIT (A) has erred in treating the subsidy received to the appellant from Government of India under a specific scheme Janta Cloth Scheme of the Government as revenue receipt. 3. That the learned CIT (A) has erred in rejecting the claim of exemption under section 10(17B) in respect of subsidy received to the appellant from Government. 4. That the learned CIT(A) has erred in rejecting the claim for exemption under section 10(2) and 10(23BB) of the Income-tax. 5. That the learned CIT(A) has erred in sustaining the disallowance of shortage of silk yam amounting to Rs. 67,934. 6. T....
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....s Ltd. [1989] 178 ITR 181 (Ker.) (FB), Handicrafts & Handloom Export Corpn. of India v. CIT [1983] 140 ITR 532 (Delhi), CIT v. Plastichem [1988] 174 ITR 546 (MP), CIT v. Dunlop Rubber Co. Ltd. [1983] 142 ITR 493 (Cal.), and a few other cases for his argument that subsidy received by the assessee, was not taxable. The learned counsel for the assessee argued that we have to decide whether it was a bounty and if the answer is in the affirmative then it was not taxable under the Income-tax Act--as was argued by the learned counsel for the assessee. He also referred to the dictionary meaning of the word "subsidy" for establishing the proposition that subsidy was nothing but a financial capital assistance to make good the erosion of capital. Seco....
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.... put it on record that in the entire plethora of case laws cited before us, there is no direct bearing of the decided cases on the issue before us. Our task would have been extremely easy had there been any direct case law on the subject. When we use the word "direct", we mean to say that there is no case law, which can be said to be on all fours with the facts of the assessee's case. If any assessee had received the assistance under the Scheme formulated by the Govt. of India, Ministry of Textiles under their letter dated 9th July, 1985 and if such assistance had been adjudicated upon by either a High Court or Supreme Court we would not have had to delve deeper in the matter and we would have followed the ratio of the Hon'ble Supreme Court....
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....eme Court in Shiv Ambica Mills Ltd. (No. 1)'s case where subsidy has been held to be a grant of funds to assist the establishment or support of an enterprise deemed advantageous to the public etc. Then, the learned counsel for the assessee referred to the dictionary meaning of the word "subsidy" as given in Webster's Dictionary, Shorter Oxford English Dictionary, and specifically in Chambers Twentieth Century Dictionary, where "subsidy" has been defined to be "assistance, aid in money ..... a grant of public money in aid of some enterprise etc., or to keep down the price of a commodity." There is no difficulty in understanding the meaning of the word "subsidy". The real difficulty starts after the dictionary meaning of the word "subsidy" ha....
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.... receipt in the hands of the assessee. It is the purpose for which it is given which is material and that is the determining factor. Thus, subsidy given to meet managerial and rental expenses is of revenue nature as has been held in the case of Ludhiana Central Co-operative Consumers' Stores Ltd. v. CIT [1980] 122 ITR 942 (Punj. & Har.). Conversely, if the subsidy is given for the purpose of acquiring capital assets, it will fall beyond the purview of the tax net, because then it will be capital receipt. In the case of the assessee, it cannot be said that the subsidy was received before the conmencement of business. In the case of Ratna Sugar Mills Co. Ltd. an amount was paid in the form of subsidy, specifically with the object of compensat....