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TMI Blog2016 (5) TMI 1139X X X X Extracts X X X X X X X X Extracts X X X X ..... d in upholding the treatment of grant-in-aid of Rs.2,38,41,000/- towards salary & PF as taxable. 4. The facts in brief are that assessee is a Limited Company and engaged in the business of pisciculture. The Govt. of West Bengal is holding 100% shares of assessee-company. During the year under consideration, assessee has received the grant-in-aid from Govt. of West Bengal for the following purposes as detailed hereunder:- a) The grant-in-aid for Rs.76.77 lacs was received for the payment of arrears of PF of the employees, b) The grant-in-aid for Rs.2,06,64,000/- for the payment of salary and wages of employees. The assessee treated the above said receipts from the Government of West Bengal as capital in nature and therefore not taxable. However, AO during the assessment proceedings has disregarded with the claim of the assessee and treated the same as revenue receipt which is liable to tax. The AO for treating the grant-in-aid as revenue in nature relied on the decision of Hon'ble Apex Court in the case of the M/s Sahney Steel & Press Works Ltd. Vs CIT (1997) 228 ITR 253 (SC) wherein it was held that Government grant in aid to meet the revenue expenses will be treated as income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Commissioner of Income-tax (Appeals) has erred in law as well as in fact in upholding the treatment of Grant-in-aid of Rs. 23841000/- towards salary & PF as taxable, made by the Assessing Officer. 3. That the disallowance of Rs. 23841000/- referred to in Ground No.2 above should be allowed in full." 6. We have heard rival submissions and perused the materials available on record. Before us Ld. AR filed paper book which is running from pages 1 to 119 and submitted that the case relied by the lower authorities does match with the facts of the case of the assessee. The above case is applicable to the situations where the government grant was given to the certain class of industries. On the contrary the ld. DR submitted that in the instant case the grant in aid is not from government to government but government to corporate. The grant was given to the assessee for the purpose of meeting the revenue expenses which are recurring in nature. The facts of the case cited by the assessee i.e. handicrafts and handloom export Corporation of India (supra) are different from the instant case as in that case the holding company has given cash assistance to its subsidiary company therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess Works Ltd. (supra) are different from the instant case of assessee, as it was given for the specific payment of salary and PF. The relevant portion of the sanctioned letter of Government of West Bengal is reproduced below:- " GOVERNMENT OF WEST BENGAL FISHERIES DEPARTMENT Writers' Buildings, Kolkata-1 No.155-Fish(FS)/C-VI/2C-5/00-Pt/1 Dated Kolkata the 30th March 2005 From: The Joint Secretary to the Govt. of West Bengal To: The Treasury Officer, Bidhan Nagar Treasury, Accounts Deptt. Jalsmpad Bhavan, Salt lake, Kolkata-91. Sub: Sanction of a fund worth Rs. 76.77 lakh (Rupees Seventy six lakh and seventy seven thousand only) as Grant-in-aid for the purpose of payment of arrear Provident Fund of the employees of the State Fisheries Development Corporation Ltd. MEMORANDUM In continuation of this Deptt's Memo No.87-Fish(FS)/C-VI dated 16.2.2005, the undersigned is directed by order of the Governor to say that the Governor has been pleased to accord sanction to a further sum of Rs. 76.77 lakh (Rupees Seventy six lakh seventy seven thousand) only as Grant-in-aid to the State Fisheries Development Corporation Ltd., a Govt. company under the administrative control ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue receipt. It depends on the facts and circumstances of each case. This view is supported by the decision of Hon'ble Supreme Court in the case of Mepco Industries 319 ITR 208 (SC) wherein the Hon'ble'ble Apex Court held that in each case one has to determine the nature of subsidy based on the its own facts. We find that in the instant case the Government being hundred percent shareholder of the assessee company has given grant in aid for holding the employment. The grant-in-aid was given specifically to the assessee company and that it was not for certain class of industries. We are also relying on the decision of Hon'ble Delhi High Court in the case of Handicrafts and Handlooms Export Corporation of India Limited (supra) wherein the relevant portion is reproduced below. "We have heard learned counsel on both sides in regard to this matter and we agree with the conclusion of the Tribunal that the sum of Rs. 11,70,000 stands on no different footing from the amounts received from the STC in earlier years. We have pointed out that what happened in earlier years was that the assessee, having incurred certain losses in its export business, approached the STC for assistance t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition on the ground that similar disallowance was made in the earlier assessment year 2003-04. In this connection, we find that the AO made the addition of grant in aid for Rs. 48,22,698/- in the assessment year 2003-04 but the AO in the assessment year 2004-05 has allowed the relief of grant-in-aid for Rs. 44 Lacs. From the facts of the case we find that grant in aid for Rs. 48,22,698/- pertaining to the assessment year 2003-04 was allowed in the immediate subsequent assessment year 2004-05 for Rs. 44 Lacs. The learned AR has produced the copies of the assessment orders for the AYs 2003-04 and 2004- 05 in support of its claim and the same are placed on the record. Similarly, we also find that the grant-in-aid received by the assessee in the assessment year 2004-05 was not disallowed by the AO. The ld. DR failed to bring anything on record contrary to the argument of the ld. AR and he left the issue to the discretion of the Bench. In view of above and in the interest of justice, we are inclined to treat the grant-in-aid as capital in nature therefore it is not liable to tax. Accordingly we reverse the order of the lower authorities and ground raised by the assessee is allowed. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 dated 7th September, 2011, wherein it has been held as under:- "After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec. 43(B) of the income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988. Such being the position, the deletion of the amount paid by the Employees' contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal." From the above, we find that the issue is squarely covered in favour of assessee by the jurisdictional High Court in the case of M/s Vijay Shree Limited (supra). As the issue is covered, hence, we allow assessee's ground of appeal. 11. Last issue raised by assessee in this appeal is that the learned CIT(A) erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e following the decision of Hon'ble Apex Court, in the case of Prakash Cotton Mills v. CIT (1993) 2174 air 983 (SC) whereas the head-note:- "The appellant paid Rs. 19635 in the accounting year for A.Y. 1966-67, on account of interest, under Bombay Sales Tax Act, 1951, for delay in payment of sales tax, and for damages for delayed payment of contribution under Employees State Insurance Act, 1947. The assessee-appellant in the return of income, claimed the amount as allowance under section 37(1) of I.T. Act. The appellant, also claimed the entire entertainment expenses, amounting to Rs. 3865 as allowance under section 37(2) of the I.T. Act The Income-tax Officer treated the payment of Rs. 19635 as penal interest and disallowed it as allowance under section 37(1) of I.T. Act. Out of the entertainment, expenses, amounting to Rs. 3865 incurred by the Directors of the assessee company, for entertainment at the Diners club and C.C.1, the I.T.O. regarded Rs. 1365 only as permissible deduction under section 37(2) of I.T. Act, taking the view that the remaining sum of Rs. 2500 was attributable to personal expenses of the Directors of the assessee company and therefore impermissible deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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