TMI Blog1995 (9) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively, for the assessment years 1979-80 and 1980-81 should be treated as revenue receipts ? " Thus, the only short question is whether the abovereferred amounts, which are received by the assessee from SIPCOT as subsidy are revenue receipts, as held by the Tribunal, or capital receipts, as contended by the assessee. One factual finding on which there is no dispute is that this was a subsidy in respect of a revenue expenditure incurred by the assessee in modernisation of its plant in its industrial unit, which was established in a backward area. It is also accepted by learned counsel for the assessee that the said revenue expenditure was allowed as a deduction in computing the total income of the assessee. Yet, he contends that, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r apposite. There the appellant was a dairy farmer, the greater part of whose land was, before the war, permanent pasture.... he received grants in respect of the ploughing and bringing into a state of cleanliness and fertility land previously under grass for a period of seven years or more. The court held that the ploughing grant was a revenue receipt.... So too, in the instant case, the payments to the planters were made against the expenditure incurred for maintaining the rubber plantations.... If so, it follows that the receipts by the assessees.... were revenue receipts...." (emphasis supplied). No doubt, learned counsel for the assessee sought to contend that, in the abovesaid Supreme Court case, only out of the cess sum collected f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o say that the subsidy received by the assessee is used to acquire an asset by replanting high-yield variety of rubber trees. The difference is, as said by Bowen L. J., the expenditure in the acquisition of the concern will be capital expenditure and the expenditure in carrying on the concern is revenue expenditure. This makes the vital difference.... (page 195) The subsidy scheme makes it very clear that the amount of subsidy has to be spent 'for the acquisition of an asset'...." (emphasis supplied). But, in the present case, since it is clear that the subsidy receipt is admittedly relatable to revenue expenditure incurred by the assessee, we have to hold that Meenakshi Achi (V. S. S. V.) v. CIT [1966] 60 ITR 253 (SC) is squarely applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e abovesaid transport expenditure was the expenditure which the subsidy recouped and that the purpose of the recoupment was to make up possibly a profit deficit for operating in a backward area. Learned counsel for the assessee also sought to rely on an observation in CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830 (SC). But, that decision did not at all deal with the question whether a particular receipt is a revenue receipt or a capital receipt. It only dealt with the interpretation of the term "actual cost" in working out the depreciation allowable (no doubt, in connection with a grant of subsidy by the Government, based on a specified percentage on the fixed capital cost and as incentive for setting up industries in backward areas). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and treat it to be the complete law declared by the court. Learned counsel for the assessee also sought to rely on the instructions of the Board referred to in the Tribunal's order at the end of paragraph 6. It appears that as per the said instructions, the subsidy received should be treated as a capital receipt. But, it is clear to us that the circular containing the instructions would not apply to the abovereferred to subsidy, which is in question in these tax cases. Presumably it relates to the other subsidy, which was given in relation to fixed capital investment. That apart, it may also be noted that in CWT v. V. T. Ramalingam [1993] 201 ITR 839 (Mad), this court referred to Keshavji Ravji and Co. v. CIT [1990] 183 ITR 1 (SC) a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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