TMI Blog2018 (9) TMI 714X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific business consideration on the part of the State has been demonstrated before us in this appeal. The assistance extended appears to us to be measures to keep the assesse company floating, the assessee being, for all practical purposes an extended arm of the State. Though large part of the funds were applied for salary and provident fund dues, the object of extension of assistance, it was argued before us, to ensure survival of the company. As regards the funds extended for flood relief, the same cannot constitute revenue receipt. Flood relief does not constitute part of business of the assessee. - Decided in favour of the assessee - ITAT No. 19 of 2017 With GA 413 of 2017 - - - Dated:- 14-5-2018 - MR. ANIRUDDHA BOSE AND MR. AMITABHA CHATTERJEE, JJ. For The Appellant : Ms. Smita Das Dey, Advocate Mr. Abhratosh Majumdar, Learned Additional Advocate General For The Respondent : Mr. Avra Majumder, Advocate ORDER ANIRUDDHA BOSE, J.:- 1. We admit the appeal on the following point, which in our opinion, involves substantial question of law:- Whether the amount of ₹ 4,60,00,000/- received in the assessment year 2006-07 by the Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the appeal of the assessee. The assessee, before the decision was delivered Tribunal in respect of the subject-assessment year on 16th September 2016 was successful before the Tribunal on near-identical claim for deduction in respect of the earlier assessment year. The Tribunal, in its decision in ITA 1281/Kol/2009 delivered on 19th April, 2016 had sustained the assessee s claim that grant-in-aid in that year towards provident fund dues constituted capital receipts. In the decision against which this appeal has been preferred, the Tribunal followed its earlier decision in ITA 1281/Kol/2009. We are informed that the said decision is also under appeal before a coordinate Bench of this Court. Learned counsel appearing for the parties, however, agreed to disposal of this appeal independently on merit and this appeal has been argued on the points involved at length before us. Hence, we are also addressing the point of law involved in this appeal independently. 4. The fundamental principle for distinguishing capital receipt from revenue receipt in relation to government grant has been laid down by the Supreme Court in the case of Sahney Steel and Press Works Ltd. Vs. CIT [(1997 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC)] had considered the ratio of Sahney Steel Press Works Ltd. (supra) for in testing the nature of receipts in the hands of the assessee. Though the main dispute involved in Mepco Industries (supra) was whether in the order against which appeal was preferred there was a rectifiable mistake enabling the department to invoke Section 154 of the Act, the question of treatment of government grant in the form of different types of subsidies was considered in that case. The decision of Sahney Steel Press Works Ltd. (supra) was also examined. While analyzing the aforesaid decision along with the case of Ponni Sugars Chemicals Ltd. (supra), the Supreme Court observed that in each case, one has to examine the nature of the subsidy. 6. So far as assessee s case in this appeal is concerned, ₹ 3,60,00,000/- was received as grant-in-aid in the relevant previous year towards salary and provident fund dues. On surface test, receipt under these heads no doubt has the attributes of revenue receipt. But there are two factors which distinguish the character of the grant-in-aid which the assesse wants to be treated as capital receipt. The said sum was not on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uations. The aforesaid view tends to overlook the fact that in both Ponni Sugars (supra) and Sahney Steel (supra) the subsidies received were in the nature of grant-in-aid from public funds and not by way of voluntary contribution by the parent company as in the present cases. The above apart, the voluntary payments made by the parent company to its loss making Indian company can also be understood to be payments made in order to protect the capital investment of the assesseecompany. If that is so, we will have no hesitation to hold that the payments made to the assesseecompany by the parent company for assessment years in question cannot be held to be revenue receipts. We also find such a view in a recent pronouncement in CIT v. Handicrafts and Handlooms Export Corporation of India Ltd. with which we are in respectful agreement. 9. The concept of parent to son grant had been highlighted in the case of Handicrafts Handloom Export Corporation of India Vs. Commissioner of Income Tax, Delhi-II [140 ITR 532] by the Delhi High Court, which was followed by the same High Court in a subsequent case, CIT Vs. Handicrafts Handloom Export Corporation of India Ltd. [(2014) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our order for the earlier year, the position will be clear if we consider the case of a father agreeing to recoup the losses incurred by a son in his business. The amounts given by the father will be only in the nature of gifts or voluntary payments motivated by affection or personal relationship and not stemming from any business consideration. The position is similar here 11. The issue came up again for consideration for the assessment year 1985-86 concerning the very same assessee before the Delhi High Court, which was examined in the case reported in 360 ITR 130 . In the relevant previous year, grant of ₹ 25,00,000/- was received by the assessee. This grant was given to recoup losses incurred by the assessee. Considering the entire range of authorities on this point. The Delhi High Court held:- In the present case, ₹ 25 lakhs was not paid by a third party or by a public authority but by the holding company. It was not on account of any trade or a commercial transaction between the subsidiary and holding company. The holding company was a shareholder and the shares partake of and were in the nature of capital. Share subscription money received in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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