TMI Blog2002 (12) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... t arises for consideration is whether certain amounts received by the assessee as subsidy are to be treated as revenue receipts or capital receipts. The relevant facts that are necessary for the disposal of the tax case reference are that the assessee received certain amount of subsidy from the Government of Tamil Nadu and in the assessment proceedings for the assessment year 1985-86, the assessee claimed that the amount received as subsidy from the Government of Tamil Nadu was a capital receipt and not liable to tax. The assessee received the subsidy amount in the following circumstances. The Government of Tamil Nadu, taking into account the welfare of Adi Dravidas and their poor representation in the assessee's firm, sanctioned certain financial assistance amounting to a sum of Rs. 10.50 lakhs under a special component plan to the assessee to recruit 70 Adi Dravidas and the assessee received the same. The assessee is a co-operative society and the total number of workers belonging to Adi Dravida community in the assessee-mill were only 90 against the sanctioned strength of 912 persons out of which 832 permanent workers were employed. The Director of Handlooms and Textiles request ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills, so as to enable the mill to recruit and employ 70 Hindu Adi Dravidars. The Managing Director, Tamil Nadu Adi Dravidar Housing and Development Corporation, is requested to release the amount sanctioned above to the mill as and when it is actually required. 4. The technical and professional responsibility for overseeing, monitoring and ensuring proper tie-ups for finance and marketing will rest with the Director of Handlooms and Textiles, Madras. He is requested to see that all the 70 Hindu Adi Dravidars are employed within three months from the date of issue of the order and send a report to the Government. 5. The beneficiaries to be employed should be selected in accordance with the guidelines already issued in G. O. Ms. No. 2593, Social Welfare Department, dated 30-10-1982. (By order of the Governor) M. S. Ramesh, Commissioner and Secretary to Government." The Income-tax Officer held that the amount of Rs. 3 lakhs received as subsidy was revenue in nature and assessed the same. The Commissioner of Income-tax (Appeals) confirmed the order of the Income-tax Officer holding that the subsidy was received in the course of business and income in nature. The Appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the society and make adequate provision. From that, it cannot be said that the amount received was towards the payment of salary the persons to be employed ignoring the public and social purpose behind it. The second submission of Mrs. Pushya Sitharaman, learned senior standing counsel for the Revenue, is that what was granted by subsidy was reimbursement of the salary payable to the employees and since the assessee had ready commenced its business, the subsidy amount received for running the business would be revenue in nature. Mr. V. Ramachandran, learned senior counsel for the assessee, on the other hand, submitted that the object of granting the subsidy is not to benefit the assessee, but to benefit the persons from Adi Dravida community by providing employment to them and, therefore, it ; only capital in nature. We find considerable force in the submission of learned senior counsel for the assessee. A close reading of the Government order as well as the order sanctioning the amount clearly shows that the Government of Tamil Nadu has framed a special component plan for employment of persons from Adi Dravida community and to provide employment to persons coming from Adi Dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt depending upon the quality, nature and character of the receipt in the hands of recipient. The House of Lords, as early as in 1930, in Seaham Harbour Dock Co. v. Crook (H. M. Inspector of Taxes) [1931] 16 TC 333, was considering a case of grant from an Unemployment Grants Committee to the dock company and the House of Lords held that the grants were not annual profits or gains liable to income-tax. The following observation of the House of Lords in the Seaham Harbour Dock Co.'s case [1931] 16 TC 333 is relevant for the purpose of this case as well : "It was a grant which was made by a government department with the idea that by its use men might be kept in employment, and it was paid to and received by the Dock Company without any special allocation to any particular part of their property, either capital or revenue, and was simply to enable them to carry out the work upon which they were engaged, with the idea that by so doing people might be employed. I find myself quite unable to see that it was a trade receipt, or that it bore any resemblance to a trade receipt. It appears to me to have been simply a grant made by the Government for the purposes which I have mentioned, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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