TMI Blog1996 (6) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... involved in this reference is 1979-80. During the relevant accounting year the assessee had received a sum of Rs. 37,500 as subsidy from the Kerala State Government for producing new regional films. In the return filed by the assessee, this amount was shown as capital receipt and hence exemption claimed from taxation. The Income-tax Officer agreed with the claim advanced by the assessee. Since the Income-tax Officer failed to include the above subsidy received from the Government during the relevant previous year for producing new regional language films, the Commissioner of Income-tax invoked the powers available under section 263 of the Income-tax Act, 1961, for enhancing the assessment. The Commissioner accordingly directed the Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Supreme Court, viz., Bombay Dyeing and Manufacturing Co. Ltd. v. CWT [19741 93 ITR 603 and Standard Mills Co. Ltd. v. CWT [1967] 63 ITR 470 and also the decision of a Division Bench of this court in CWT v. K. Gopinathan Nair [1976] 103 ITR 23. Apart from the above, another Division Bench decision of this court in Kesaria Tea Co. Ltd. v. CIT [1989] 180 ITR 134 considered a similar question. That was a case where the assessee, who carried on export business in tea, received during the previous year relevant to the assessment year 1979-80 a sum of Rs. 9,79,341 as cash assistance from the Government of India to carry on its business in a profitable manner. The Income-tax Officer held that the cash assistance was income liable to tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In fact, in Chitra Kalpa's case [1989] 177 ITR 540 (AP), the Division Bench observed thus : " If we bear in mind the special and peculiar features of the subsidy granted to industrial undertakings, which was the subject-matter of consideration in Sahney Steel's case [1985] 152 ITR 39 (AP), the decision of this court that the subsidy partook of the nature of income is clearly and entirely understandable. The observations of Viscount Simon in Ostime v. Pontypridd and Rhondda, etc. [1946] 28 TC 261 (HL) were clearly satisfied because the subsidy was to be paid from public funds in order to help the undertaker to assist him in carrying on the undertaker's trade or business. The conclusion of this court that the package of incentives offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hands of the producer and, therefore, the true character of the receipt in the hands of the assessee was on capital account. The learned judge also distinguished the decision in Sahney Steel's case [1985] 152 ITR 39 (AP) as below : " There the subsidy was given to assist the business of the assessee in the initial five years after production is commenced. The subsidy consisted in refund of sales tax paid by the assessee on raw material, etc., besides some other minor subsidies. Indeed, it was clearly held in that decision that if the State gives a subsidy to a person to set up a new plant, it would not be a trading receipt but a capital receipt. " From the materials available in this case it is crystalline that what was received by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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