TaxTMI 
TaxTMI 
1983 (2) TMI 80
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....t Indo, against such export of plant and machinery the assessee had received a sum of Rs. 3,81,602 by way of subsidy and cash assistance from Government of India and the said receipt was not reflected in the Profit and Loss Account as the same was treated by the assessee as being a capital reserve. The ITO was of the opinion that export always connoted carrying of business activities. He referred to the commentary of Kanga and Palkhivala, according to which export incentives and sale proceeds of import entitlements were business income. Accordingly, the ITO held that the export subsidy and cash assistance received against export under equity share capital participation constituted a revenue receipt. In that view of the matter, he added Rs. ....
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....essee, letter dated 12-3-1982 from the Ministry of Commerce, Government of India, to the assessee and Note on CCS---The Policy and Coverage as extracted from the book "Export Incentives" (5th Edition), published by Anupam Publishers, Delhi and copies of applications made by the assessee for cash compensatory support on exports and the letters of the Joint Chief Controller of Exports and Imports granting the CCS and orders from the Assistant Collector of Customs granting the duty drawback. The arguments of the assessee's counsel were to the following effect : The Board of Directors of the assessee-company in their meeting held on 4-6-1980 resolved to make investment in the equity capital of P.T. Ispat, Indo to the extent of US $ 5,00,000 ....
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....d. The equity shares got by the assessee from the Indonesian company were shown as assets under the head "Investment" in the Balance Sheet of the assessee for the year 31-3-1983. The details of acquisition of the shares from the Indonesian company were also mentioned in the Schedule of Notes attached to the Balance Sheet as on 31-3-1983. The duty drawback and the incentive on export amounting to Rs. 3,81,602 were credited to the capital reserve account and it was duly exhibited on the liabilities side of the Balance Sheet as on 31-3-1983. The duty drawback amounted to Rs. 75,636. The cash compensatory support received by the assessee from the Ministry of Commerce amounted to Rs. 3,05,966. The assessee received the duty drawback in respect o....
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....ness of manufacture and sale of aluminium utensils, exported such products and received cash assistance from the Government of India on the exports whereas in the present case the assessee has not received the cash compensatory support and the duty drawback not as a trader, but as an investor in the equity participation scheme as approved by the Government of India. In the other case, namely, Dhrangadhra Chemical Works Ltd. the assessee carried on the business of manufacture of chemicals and the subsidy was received by the assessee to assist it in its business. Hence, the said cases are distinguishable and are not applicable. 7. We have considered the rival submissions. It is true that clause III(1) of the Memorandum of Association of th....