TMI Blog1993 (7) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural production. In order to suggest measures to avoid the recurrence of such shortages in future, it was decided to appoint a Committee under the Chairmanship of Minister for Agriculture. 3. In para 2 of the said resolution, the Government took into consideration the factor that seeds production could fluctuate from year to year. It was also recognised that the programme for seed production which sought to fully meet the seeds requirements of the farmers would, therefore, inevitably carry with it the possibility of carry-over stock of seeds. They, therefore, decided to make a financial provision in the plan for such carryover of stocks. 4. In para 3 of this resolution it was mentioned that the certified seeds of Hybrid Jowar, Hybrid Bajra, H-4 cotton and Hybrid Maize, left unsold with this assessee at the end of the selling season, would be covered by the scheme of financing carry-over stock of seeds. In paras 4 to 7, a methodology has been discussed under which the payments could be made to this assessee. In para 6, it was provided that the assessee, in due course, should render the detailed account to the Government of the expenditure incurred on the carry-over stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yments were made for compensating the Corporation for the losses on revalidating of carry-over stock of seeds for expenses incurred on the same. It was also mentioned in the order that though the amounts so given were taken to the balance sheet as loans to the Corporation, nothing was paid out of the same to the Govt. It was, therefore, held that the amounts received under the scheme for financing carry-over stock of seeds was trading receipts in the hands of the assessee and, therefore, assessable to tax. Regarding the year of taxability, it was observed that the assessee sent the bills for expenses incurred by it, the bill was processed by the Government of Maharashtra and then the G.R. was issued authorising the placement of fund to the assessee. The actual payment took place only after that. Since the Corporation maintains its accounts on the basis of mercantile system, the year of taxability could be the year in which the assessee got the right to receive the amount. This right arises to it only when the G.R. of the State Government is issued. According to the Assessing Officer, the amounts received by the assessee had to be taxed in the year in which the G.R. authorising the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government but by its conduct. When it was realised that such reimbursement of expenses would be treated as revenue receipts in the hands of this assessee and would be liable to be taxed, then a resolution was adopted on 6-2-1982 to cancel the resolution dated 18-11-1981. He invited our attention to the decision of the Bombay High Court in the case of Dhrangadhra Chemical Works Ltd. v. CIT [1977] 106 ITR 473. He submitted that under the similar circumstances, the Bombay High Court, relying upon certain House of Lords' decisions, held that the receipts in the hands of that assessee were liable to be taxed. He, further proceeded to invite our attention to the two Houses of Lords' decisions in the cases of IRC v. Corporation of London 34 Tax Cases 331 and Inspector of Taxes v. Lincolnshire Sugar Co. Ltd. 20 Tax Cases 646. He submitted that we should not be guided by the nomenclature given to such payments. An amount said to be given as loan which is not expected to be paid back has to be treated as revenue receipts. Our attention was invited to the bills submitted by the assessee to the Government of Maharashtra appearing on pages 16 to 18 of the paper book. He submitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an idea regarding the reasons for which the finance was made available to the assessee. Incidents which led to creation of this assessee and which lead the Government of Maharashtra to contribute the finance to this assessee are very relevant in this regard. From the general reading of the resolution dated 18-11-1981, it is clear that the whole scheme was brought out with a view to help the farmers of Maharashtra to tide-over artificial scarcities created by the private traders. As it was realised that the assessee may be saddled with large items of stock at the end of the crop years, the Government decided to advance this assessee the amounts to tide-over such a situation. No doubt that in para 4 of the G.R. dated 18-11-1981 an elaborate procedure was laid down which was to be followed by the assessee before it could claim reimbursement for the expenditure incurred by it. However, it was, later on, realised that this scheme would not have fulfilled the aspiration of the farmers of the Maharashtra. The same was, therefore, cancelled by the resolution dated 6-2-1982. It is interesting to note the words of that resolution that "Government is pleased to direct that orders issued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of London deducted the tax at source at the time when the payment was made. In this case, within the accounting period itself, the Government of Maharashtra by G.R. dated 15-3-1982 amended the G.R. dated 18-11-1981. That means that what was paid to the assessee was a loan only. Regarding the decision in Lincolnshire Sugar Co. Ltd.'s case , we are of the opinion that the same is also not applicable to the facts of this case. In that case, the sugar subsidy was to be paid for 10 years on sugar manufactured in Great Britain from beet grown therein. Under a particular enactment, a further assistance was given to the companies engaged in the manufacture of sugar by way of weekly advances for one year. Certain conditions were laid down under which the assessee in those cases were required to repay the amounts within two years. It was, under such circumstances, the Hon'ble Lords of the House of the Lords upheld the plea of revenue that such subsidy would be taxable. In this case, the Government of Maharashtra, within the accounting period passed the resolution by which instead of reimbursement of expenses, the loans were advanced to this assessee. Now we have definite material on record t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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