TMI Blog1982 (1) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the meaning of the said provision of the said Act and that the assessee-company was not entitled to relief under section 80E of the said Act ? " For the assessment year 1968-69 also, the following two questions have been referred to us: "1. Whether, on the proper interpretation of entry (2) of the Fifth Schedule to the Income-tax Act, 1961, the Tribunal was right in holding that the expression ' Aluminium ' occurring therein denoted merely the aluminium metal and not aluminium articles ? 2. Whether, on the facts, and in the circumstances of the case, and on a proper interpretation of section 80B(7) read with entry (2) of the Fifth Schedule to the Income-tax Act, 1961, the Tribunal was justified in holding that the business of manufacture and sale of aluminium articles could not be considered as priority industry within the meaning of the said provision of the said Act and that the assessee-company was not entitled to relief under section 80-I of the said Act ? " So far as the first two questions for the assessment year 1967-68 as mentioned in para. II of the statement of the cases are concerned, these must be answered in the affirmative and in favour of the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India by a communication, on the subject No. 1(51)/66-EAC dated 17th August, 1966, issued by the Ministry of Commerce to the Engineering Export Promotion Council, stated that the Government has decided to grant cash assistance against exports effected from 6th June, 1966, of specified engineering products, as per list, such cash assistance, at that time, was fixed at 10 per cent. of F.O.B. value of export. It would be relevant to refer to that letter because that letter has been referred to subsequently by one Member of the Tribunal, which appears at p. 243 of the paper book as follows : " Circular No. EPC/REC/34/66-67 August 24, 1966. To All Members of the Council. To All Registered Exporters in Eastern Region. To All Regional Officers, Delhi/Bombay/Madras. As members are aware, the Special Export Promotion Scheme for engineering goods was abolished by the Government with effect from 6th June, 1966. The Government have since announced the new scheme under which exporters will get cash assistance against exports effected from 6th June, 1966. In addition, exporters would also be eligible for replenishment of the imported materials to the extent of single import content. A list of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly benefited thereby but the benefit was wholly independent of the assessee's business. He, however, held that the exporter could get benefit whether he carried on any business or not. According to the judicial Member the cash assistance on exports received by the assessee company from the Government did not constitute trading receipt. The Accountant Member, however, could not agree with this view. According to him, the scheme of cash assistance was promulgated by the Government for the mutual benefit of both the exporter and the Government and such cash assistance was inextricably linked up with the assessee's carrying on of its export business. He held, by implication, that such cash assistance was given by the Government to assist the trader in his business and such receipts were therefore supplemental trading receipts. According to him, such cash assistance went to swell the export receipts of the assessee-company and it was not rendered to him for any specific purpose unconnected with his carrying on the business. Therefore, the Accountant Member took the view that the assessee-company received such incentives by way of cash assistance from the Government for rendering servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter, which was filed before the same date of the letter written by the Export Promotion Council. It was sought to be urged that in considering the additional facts or the said letter, the third Member had committed an error because his jurisdiction was limited and it was improper to say that the decision of the third Member, which was rendered after consideration of additional facts which the other two Members of the Tribunal had no occasion to consider, the decision of the Tribunal was u/s. 255(4) of the Act. This question has not been specifically referred to us but it was submitted that this matter was embedded in the question already referred to us. This might or might not have some consequence which it is not necessary to consider in this case. But it appears that subsequently when the letter dated 11th May, 1978, was produced before the third Member, neither party objected and that is so recorded in the order dated 19th May, 1978. Therefore, the assessee cannot now object to such a procedure. Quite apart from that it appears that the said letter only referred to the previous letter which is dated 17th August, 1976, which we have set out hereinbefore, written by the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce received was revenue receipt or not. A large number of authorities were cited before us on this aspect of the matter. We may first, however, refer to the decision of the Supreme Court in the case of Shri Ambica Mills Ltd. v. Textile Labour Association, AIR 1973 SC 1081; [1973] 43 FJR 150. That was a decision, however, under the Payment of Bonus Act and the question was whether a subsidy shall be taken into consideration for the purposes of the Act. The Supreme Court further observed that subsidy did not cover indirect assistance but would only include direct cash payments. It is instructive how the expression " subsidy " has been defined in the dictionary. The Supreme Court referred to that fact at p. 1083 of the report as follows (see also p. 153 of 43 FJR) : " We find ourselves in agreement with this view. The various definitions given in the dictionaries, in so far as they are relevant, are as follows: Webster's New World Dictionary, 1962:-'......a grant of money, specifically (a)... (b) a government grant to a private enterprise considered of benefit to the public.' Shorter Oxford English Dictionary:-' Help, aid, assistance...... Financial aid furnished by a stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erested in encouraging exports and, therefore, offers many incentives for export, of which any manufacturer could take advantage, does not mean that any such manufacturer is rendering any service to Government. These are schemes intended by the Government for the benefit of the country and, therefore, any person would be entitled to take advantage of that scheme and be entitled to subsidy or assistance promised by the Government. Such payments do not become either payments for service rendered or cease to be subsidy merely on the ground that any number of persons coming under that category would be entitled to that benefit or payment." On behalf of the assessee our attention was drawn to the circular on the taxability of subsidy. There the CBDT had issued a circular being 'Circular No. 142 dated August 1, 1974: " 10 percent. Central outright grant of subsidy scheme, 1971 ". Our attention was drawn to the circular in order to submit that the Government had not treated this amount as amount of revenue payments. Such circular appears at p. 151 of the statute portion reported in (1974] 95 ITR. It would be instructive in this connection to refer to the observations of Viscount Simon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nual profits or gains liable to Income tax. Lord Buckmaster observed at p. 353 of the report as follows : "Now I do not myself think that the matter can be put more succinctly than it was put by Mr. Hills when he said: 'Was this a trade receipt?." and my answer is most unhesitatingly: No. It appears to me that it was nothing whatever of the kind. 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, and in those circumstances cannot be included in revenue for the purposes of tax. " It was submitted on behalf of the assessee that the dominant purpose in the instant case for grant of the amounts was promotion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [1966] 60 ITR 253 at p. 260 (SC). In the view we have taken about the nature of the receipts in the instant case, that is to say, by exportation, the assessee got the assistance from the Government for the purpose of encouraging export market, that may be the motive of the Government, it is connected inextricably with the act of exportation and, therefore, supplemental to the earnings by exportation. Our attention was also drawn to the unreported judgment of this court in Income-tax Reference No. 4 of 1977 (jeewanlal (1929) Ltd. v. CIT, judgment delivered on March 2, 1981-since reported in [1983] 139 ITR 865). There, however, we were concerned with the provisions of the Special Export Promotion Scheme and not of cash assistance as such. But we have referred to the principles enunciated in the said judgment. In the view we have taken, we are, therefore, of the opinion that the majority of the members of the Tribunal arrived at the correct conclusion and the question must, therefore, be answered in the affirmative and in favour of the Revenue. In the facts and circumstances of the case, parties will pay and bear their own costs. SUHAS CHANDRA SEN J.-I agree. - - Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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