TMI Blog1997 (9) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... asses Storage Fund. 4. We have heard both sides on these two disputes in the two assessment years. In our view, the provisions of sub-section (4), read with sub-section (5) to section 37 of the Income-tax Act, 1961 clearly debar the assessee from relying any claim for allowability of expenditure incurred on the maintenance of the guesthouse. We, therefore, agree with both the lower tax authorities that the expenditure or the maintenance of guesthouse is not allowable for both the assessment years under appeal, namely, 1986-87 and 1987-88. Since the law is very clear on the subject, the decisions relied upon by the assessee's, counsel Sri Devanthan are in applicable and on that basis we cannot give any relief to the assessee. 5. Regarding the assessability of bank interest on Molasses Storage Fund, we agree that the matter stands covered in favour of the assessee and against the revenue by the decision of this Tribunal rendered in the case of Dy. CIT v. Ambur Co-operative Sugar Mills Ltd, as per order dated 28-3-1996 relating to the assessment year 1990-91 in IT Appeal No. 1826 (Mad.) of 1994. Copy of the said order has been perused by us and this Tribunal has relied upon the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the previous year commencing from October 1984 and ending with September 1985, which is relevant to the assessment year 1986-87, the assessee received a sum of Rs. 1,12,28,283.59 Ps. as total purchase price benefit for free sale sugar quota of 13 66.7 5 Qtls. of sugar and Rs. 11,76,972 as excise duty benefit calculated @ Rs. 12 per Quintal for 98081 Quintal of free sale sugar quota. Full and complete details are given in page 97 of the paper book filed by the assessee in this appeal. 8. The purchase price and excise duty rebate/benefit aggregating Rs. 1,24,05,255 was credited by the assessee to the profit and loss account for the period ending 30-6-1985 which is placed at page 24 of the paper book. But the appellant-assessee while filing the income-tax return deducted this sum of Rs. 1,24,05,255 from the profits on the ground that it was a Central subsidy being a capital receipt. 9. The assessee's counsel, Shri Devanathan, fairly conceded when put to him that excise duty liability is payable no sooner sugar is produced and that it is taken to the "excise duty paid account" in the ledger maintained by the appellant assessee and our attention was drawn to the copies of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Tribunal in the case of Tamil Nadu Sugar Corpn. Ltd. v. ITO for assessment years 1985-86 1986-87 being IT Appeals Nos. 3709 3710/ MDS/88 which has since been reported in [1994] 48 ITD 345; (ii) Order dated 14-5-1992 of Calcutta 'A' Bench of this Tribunal in the case of Balrampur Chini Mills Ltd v. ITO, relating to assessment years 1986-87 and 1987-88 being ITA Nos. 2032 2033/Cal/1988; (iii) decision of Calcutta 'E' Bench of this Tribunal in the case of Babhnan Sugar Mills Ltd v. Asstt. CIT [1997] 57 TTJ (Cal.) 72; (iv) decision of Chandigarh Bench of this Tribunal in the case of Ludhiana Steels (P.) Ltd v. Dy. CIT [1996] 56 ITD 394/86 Taxman 269 (Mag.). On the basis of the above submissions and the case laws relied, the assessee's counsel prayed for deleting the addition of Rs. 1,24,05,255. 12. The Departmental Representative, on the other hand countered the arguments of the assessee's counsel and further submitted that the receipt of Rs. 1,24,05,255 was a benefit to the appellant-assessee in the course of carrying on of business and as such assessable as business income under section 28(iv) of the Act. The learned departmental representative supported the reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are unable to accept the argument advanced by the assessee's counsel that the purchase price and excise duty rebate/incentive is a capital subsidy and therefore not taxable. What the assessee received is nothing but a grant or a concession to meet and re-coup the revenue expenditure viz., purchase price and excise duty already incurred by the assessee and debited in its accounts, as is evident from the copies of profit and loss account finding place in the paper book filed by the assessee's counsel. According to us the benefit/gain received by the assessee is neither a capital subsidy nor a capital receipt. 14. It is very well known that the purpose for which a rebate or concession is given qualifies and determines its nature. The imposition of condition in para 5 of the letter dated 15-11-1980 of the Food Agriculture Ministry, Government of India, is more as a safe-guard to ensure that the rebate given to the sugar factories is properly utilised. That condition per se is not determinative of the character or nature of the receipt. It is well known and accepted principle of law that receipt of a subsidy, rebate or concession etc. is given to re-coup an expenditure incurred and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Ludhiana Central Co-operative Consumer's Stores Ltd. v. CIT [1980] 122 ITR 942 at page 947 have also observed that the character of the receipt has to be seen and if it has been given to re-coup or meet the revenue expenditure, then it is a revenue receipt in the hands of the assessee. The payment of purchase price for sugar cane and excise duty on conversion into sugar is a revenue expenditure forming part of the cost of sugar produced and since the assessee received back the same clearly goes to show that it was granted to meet and re-coup the revenue expenditure already incurred and reflected in the accounts maintained by the assessee. On this reasoning also, the action of the Assessing Officer requires to be upheld. 16. The assessee paid excise duty no sooner the sugar got manufactured and produced because under the Excise Law, excise duty is attracted and becomes payable no sooner the production is complete. The assessee paid excise duty as is evident from the entries made in the excise duty account, copies of which account have been placed in the paper book which we have earlier referred to above in this order. Since the purchase price of sugar has been claimed as a reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th or accept the argument advanced by the assessee's counsel that since the benefit received from the Government was utilised for the purpose of liquidating term loans it therefore amounted to diversion of income at source by an over-riding title, namely; the Sampath Committee report for establishing sugar factories. A glance of balance-sheet as on 30-9-1985 which is placed at page 32 of the paper book reveals that the total borrowings as on that date were to the tune of Rs. 42,65,694 as against the total borrowings of Rs. 64,91,665 as on 30-9-1984. Thus, there has been reduction in borrowings over a year to the extent of Rs. 22,25,971 only. We are, therefore, not able to give any credence to the certificate given by Sri S. Parameswaran, Chartered Accountant, which is placed at page 36 of the paper book. Moreover, it cannot be said that the term loans have been repaid from out of the purchase price and excise duty rebate of Rs. 1,24,05,255. The turnover of the assessee in the sugar account itself as on 30-9-1985 is nearly to the tune of Rs. 13 crores. It therefore cannot be contended by the assessee that the loans have been repaid during the previous year ending 30-9-1985 from out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that the Tribunal has felt coerced by its earlier decision on the question regarding the nature of the gifts. There I must say, the Tribunal was not well instructed in law, for, it is well-settled that the fact that in the earlier proceedings the Tribunal took a different view of the gifts was not a conclusive circumstance, the decision of the Tribunal reached in those proceedings did not and could not, in law, operate as res judicata. Reference in this connection may be made to a decision of the Supreme Court in the case of Commissioner of Income-tax v. Brijlal Lohia. Decisions may be multiplied but the principle of law is so well settled that I do not see any necessity for it. I have thus no hesitation in answering the first question as reframed in the negative as it must be held that the Tribunal was not correct in coming to the conclusion that the gifts were inchoate and incomplete only on the ground that this question was concluded by the Tribunal's previous order in relation to the assessment year 1954-55." 24. The Calcutta High Court in the case of Namadang Tea Co. Ltd. v. CIT [1982] 138 ITR 326 have held at page 333 of the said reports that on the question of pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d judgment it is also observed as under: "In curia literally means 'carelessness'. In practice per incuriam appears to mean per ignoratium. English Courts have developed this principle in relation of the rule of stare decisis. The 'quotable in law' is avoided and ignored if it is rendered, 'in ignoratium of a statute or other binding authority'. Same has been accepted, approved and adopted by this Court while interpreting Article 141 of the Constitution which embodies the doctrine of precedents as a matter of law." 28. The Hon'ble Supreme Court in a recent judgment in the case of Secretary, Jaipur Development Authority v. Daulat Mal Jain decided on 20-9-1996 [1997] 1 SCC 35 at page 50, para 24 has observed that: "If some persons derived benefit by illegality and had escaped from the clutches of law, similar persons cannot plead, nor the court can countenance that benefit had from infraction of law and must be allowed to be retained. Can one illegitimate be compounded by permitting similar illegal or illegitimate or ultra vires acts? Answer is obviously no." 29. The Apex Court in the well-known case of Yadu Nandan Garg v. State of Rajasthan [1966] 1 SCC 334 at page 356 has o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 1986-87. 32. In the result, the appeal for the assessment year 1986-87 is partly allowed whereas the appeal for the assessment year 1987-88 is dismissed. Per P.S. Kalsian, A.M. - I have perused the order of my learned brother. I agree with his conclusion. However, I would like to mention some facts of the case. The Government of India set up a committee on 5-4-1974 to examine the viability of sugar factories. The Chairman of the Committee was Shri S.V. Sampath, Joint Secretary to the Government of India. Consequent upon the recommendations of this committee, the Government of India, Ministry of Agriculture and Irrigation, Department of Food vide letter dated 6th December, 1975 allowed incentives to sugar factories for a period of 5 years from the date of commencement of production in each of the new sugar factories and for expansion schemes. The concessions or incentives were linked to the actual cost of a 1250 tonnes standard plant as prescribed by the Government. These concessions were available when the F.O.R. cost of plant and machinery was above Rs. 200 lakhs subject to a maximum of Rs. 400 lakhs. If the F.O.R. cost of the plant and machinery was below Rs. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales of sugar Rs. 1,12,28,283 (ii) Excise duty collected from the customers which was not paid to the Government Rs. 11,76,972 ------------------- Total Rs. 1,24,05,255 -----------------------------------------------------As the result of policy and scheme of the Government of India, the assessee collected extra amount of Rs. 1,12,28,138 from the dealers/ customers on account of additional free sale of sugar because the price charged by the assessee on free sale sugar was more than price of levy sugar. The assessee could not receive extra amount of Rs. 1,12,28,13 8 if the assessee had not been allowed additional quota of free sale sugar. Similarly, in view of the policy and the scheme of the Government the assessee was required to pay less excise duty to the Government than what was collected from the dealers/customers by the assessee. The duty collected by the assessee from the dealers/customers which was not paid to the Government of India amounted to Rs. 11,76,972. 5. Though the Government of India imposed the condition that the surplus funds genera ..... X X X X Extracts X X X X X X X X Extracts X X X X
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