9911796707
TMI Blog2020 (3) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... stion has arisen in the backdrop of the following factual matrix. 5. Appellant is a resident company assessed under the Act. Earlier it was known as M/s Karnataka Shipping Corporation Limited and carrying on the business of shipping. During the relevant previous year because of certain developments the company was amalgamated with M/s Essar Bulk Carriers Limited, Madras whereafter it came to be known as M/s Essar Shipping Limited. 6. In the assessment proceeding for the assessment year 1984-85 following amalgamation it filed a revised return of income wherein an amount of Rs. 2,52,00,000/- was claimed as a deduction being the amount of loan given by the Government of Karnataka which was subsequently waived. Assessing Officer by the assessment order dated 27th March, 1987 passed under section 143(3) of the Act disallowed the above claim of the appellant. It was claimed on behalf of the appellant that Government of Karnataka had written off the said loan advanced to the appellant as the said amount had become irrecoverable. Assessing Officer did not accept the claim of the appellant. Assessing Officer observed that waiver of loan benefited the appellant in carrying on its business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh. He submits that this court in Mahindra and Mahindra Vs. CIT, 261 ITR 501 has held that the income which can be taxed under Section 28(iv) must not only be referable to a benefit or perquisite but it must be arising from business. Secondly, Section 28(iv) would not apply to benefits in cash or money. This was following judgment of the Gujarat High court in CIT Vs. Alchemic (P) Ltd, 130 ITR 168. He submits that revenue had questioned the finding of the Bombay High Court before the Supreme Court in CIT Vs. Mahindra & Mahindra Limited, 404 ITR 1 wherein Supreme Court had affirmed the finding of the Bombay High Court and has declared that for applicability of Section 28(iv) of the Act, the income should arise from the business or profession and that the benefit which is received has to be in some other form rather than in the shape of money. He further submits that reliance placed by the revenue before the Tribunal in Sahney Steel & Press Works Limited Vs. CIT, 228 ITR 253 is wholly misplaced in as much as in that case Supreme Court was considering the question as to whether subsidy received by the assessee from the Andhra Pradesh Government was taxable as a revenue receipt or not. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Mahindra to Kaiser Jeep Corporation which was later on waived off by the lender constituted taxable income of Mahindra & Mahindra or not. Briefly it may be stated that Mahindra & Mahindra for the purpose of expansion of its business had entered into an agreement with Kaiser Jeep Corporation whereby the later agreed to sell certain equipments to Mahindra & Mahindra. The price of the equipments was finally estimated at $ 6,50,000. Kaiser Jeep Corporation agreed to provide loan to Mahindra & Mahindra for procurement of the equipments at the rate of 6% interest repayable after 10 years in installments. Subsequently, Kaiser Jeep Corporation was taken over by American Motor Corporation which agreed to waive off the principal loan amount advanced by Kaiser Jeep Corporation to Mahindra & Mahindra. It is in this factual background that the aforesaid provision first cropped up before the Bombay High Court and thereafter, travelled to the Supreme Court in consideration of the question as to whether the loan amount which was waived off by the lender constituted taxable income of Mahindra & Mahindra. Supreme Court discussed the meaning of the term "loan" and also the right of the creditor to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fession. That apart, the benefit which is received has to be in some other form rather than in the shape of money. In the facts of that case it was found that the amount of Rs. 57,74,064.00 was received as cash receipt due to waiver of loan. Therefore, it was held that Section 28(iv) of the Act was not satisfied in as much as the prime condition of Section 28(iv) that any benefit or perquisite arising from the business or profession shall be in the form of benefit or perquisite other than in the shape of money was absent. Therefore, it was held that the said amount could not be taxed under Section 28(iv) of the Act in no circumstances. 18. Facts and issue in the present case are identical to that in Mahindra & Mahindra (supra). Here also loan of Rs. 2.52 cores was given by the Karnataka Government to the assessee which was subsequently waived off. Therefore, this amount would be construed to be cash receipt in the hands of the assessee and cannot be taxed under Section 28(iv). In view of the Supreme Court decision in Mahindra & Mahindra (supra), the earlier decision of this court in Protos Engineer Company Private Limited (supra) would no longer hold good. 19. In so far the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest i.e., a grant or contribution of money. As per Black's Law Dictionary, Eight Edition, "subsidy" has been defined as a grant usually made by the Government to any enterprise whose promotion is considered to be in the public interest; although Governments sometimes make direct payments (such as cash grants), subsidies are usually indirect. A subsidy granted for production or bringing into existence any new asset of the assessee would be construed to be a capital receipt whereas a subsidy granted for the purpose of assisting the assessee to carry on its already existing business would be in the nature of revenue receipt and thus taxable. Therefore, when a subsidy is given, the character thereof in the hands of the recipient - whether revenue or capital - would have to be determined having regard to the purpose for which it is given. In Sahney Steel and Press Works Ltd. (supra), Supreme Court held that subsidy provided by the Andhra Pradesh Government was basically an endeavour of the state to extend a helping hand to the newly set up industries to enable them to be viable and competitive. 22. Thus, from a careful analysis, it is evident that there is a fundamental differenc ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
