TMI Blog2006 (1) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... that the subsidy received by the assessee under M.P. Naye Cinemagharon Ke Nirman Ko Protsahan Yojna Ke Sahayata Anudan Niyam, 1982 from the State Government, was a revenue receipt, after following the judgment of the Apex Court in the case of Sahney Steel Press Works Ltd. v. CIT 228 ITR 253 ? 2. The respondent - an assessee is engaged in business of running a cinema house. In the assessment years 1990-91 and 1991-92, the assessee received from State by way of what is called subsidy amounting to ₹ 4,93,163 and ₹ 10,89,283 respectively. The question, therefore, arose before the Assessing Officer as to what is the true nature of this amount in the hands of assessee which they have received from the State. If the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and accordingly, made the reference to this Court on the question framed supra. 3. Heard Shri Najir Singh, learned counsel for the applicant and Shri R.L. Jain, learned senior counsel with Ku. V. Mandlik, learned counsel for the non-applicant. 4. Learned counsel for the assessee placing reliance on several decisions in CIT v. P.J. Chemicals Ltd. [1994] 210 ITR 830 3 (SC) 217 ITR 740 (sic ) and Sadichha Chitra v. CIT [1991] 189 ITR 774 (Bom.) contended that the subsidy amount received by the assessee be treated as capital receipt and accordingly, the question be answered in favour of assessee. We do not agree as in our opinion, the submission has no merit whatsoever. 5. The question as to how a particular amount received by assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase (supra):- Since the issue regarding ascertainment of nature of subsidy has been re-examined by the Apex Court in the case of Sahney Steel Press Works Ltd. v. CIT (supra), we have to examine this issue a fresh in the light of guidelines laid by the Hon ble Supreme Court, by this judgment the Hon ble Apex Court has overruled the judgment of the M.P. High Court in the case of CIT v. Dusad Industries (supra) in which the receipt of power subsidy was treated as capital receipt. In Sahney Steel Press Works Limited s case (supra), their lordships have finally held after examining various judgments that if under any notification the payments were made to assist the new industries at the commencement of business to carry on their busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as assistance for the purpose of trade. 4. From a careful perusal of the aforesaid judgment, we are of the view that before giving a treatment to any subsidy received by the assessee from public fund, any authority adjudicating this issue should examine the nature of receipts and the purpose for which it is being given to the assessee. If it is given to help the assessee in setting up its business or to complete its project by purchasing remaining capital assets, the subsidy must be treated as having been received for capital purpose, but if the subsidy is given after the setting up of the business or its commencement, to help the assessee in carrying out the business operation smoothly, the subsidy should be treated as assistance for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accord with the guidelines laid down by the Supreme Court in the case of Sahney Steel Press Works Ltd. (supra). The subsidy in question was not given to assessee for establishment of business i.e., it was not meant to be used prior to commencement of commercial business so as to make the same as capital one i.e., in the form of fixed assets but it was given to the assessee after they commenced the business i.e., for running the business. If the assessee is given any subsidy for running their business, then such subsidy is never regarded as capital but it is regarded as Revenue Receipt . It is this distinction that must be kept in consideration while deciding the true nature of subsidy. In other words, every subsidy cannot be regarded as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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