TMI Blog1960 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... of the association raised before us and the first question was rightly answered in the negative. In the present case the payments were made for services rendered to Government and that would negative their being a subsidy. Appeal dismissed. - - - - - Dated:- 30-3-1960 - Judge(s) : HIDAYATULLAH., KAPUR., S. K. DAS JUDGMENT The judgment of the court was delivered by KAPUR, J.--This is an appeal by special leave against the judgment and order of the High Court of Calcutta and arises out of an income-tax reference which was decided against the assessee. The appellant--Bengal Textiles Association--now in liquidation (which for the sake of convenience will hereinafter be termed the association) was a statutory corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment of the association for the previous years was liable to be reopened and the association itself would be assessed. Undertaking to this effect was given by the members. The association carried on its business and as a matter of fact it was not assessed to income-tax, super-tax and excess profits tax. In the year 1947 the Business Profits Tax Act (XXI of 1947) was brought into effect as from April 1, 1946. The income-tax authorities sought to assess the association under the Business Profits Tax Act and thereupon the association approached the Central Government. By its letter dated July 16, 1948, the Central Government informed the association that it was unable to accede to its request for exemption from business profits t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra vires of the powers of the Central Legislature ? (3) Whether the sum of Rs. 6,00,000 paid by the Government of Bengal during the chargeable accounting year ending on 31st December, 1946, is in the nature of subsidy and as such exempt from business profits tax under clause (c) of the proviso to section 4 of the Business Profits Tax Act ?" The second question was not pressed in the High Court. The other two questions were answered against the association. It was held that the profits of the association were not exempt from the Business Profits Tax Act either under the provisions of the Act or under the exemption granted by the letter dated November 13, 1945, and that the sum of Rs. 6,00,000 was not paid by the Government as a subsidy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption is inoperative in regard to the claim made by the association. The letter gave exemption on certain conditions in regard to income-tax, super-tax or excess profits tax. But under section 60(3) of the Income-tax Act the power of exemption was not exercisable by the Government after the commencement of the Indian Income-tax (Amendment) Act, 1939. This sub-section provides : "After the commencement of the Indian Income-tax (Amendment) Act, 1939, the power conferred by sub-section (1) shall not be exercisable except for the purpose of rescinding an exemption, reduction or modification already made." Consequently neither the letter of the Central Board of Revenue nor the provisions of the Income-tax Act can operate in favour of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for and pay every month to the association the administrative expenses it has incurred in the previous month including establishment charges, office rent, advertising, salaries and wages etc., but not exceeding Rs. 6,00,000 per annum less the amount, subject to a maximum of Rs. 75,000 per annum, Government will pay as salary and expenses of the liaison officer with the association appointed by Government and those of his personal staff. The Government, however, shall not be responsible for any of the costs and expenses to be incurred by the association in connection with the purchase, transport, insurance, storage and distribution of cloth." The association was started for the purpose of procurement and distribution of cloth and its func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord bonus or subsidy in section 4, proviso (c), connotes that the payment is in the nature of a gift which in the instant case it is not. Counsel for the association relied upon two cases : Seaham Harbour Dock Co. v. Crook, and Glenboig Union Fireclay Co. Ltd. v. Commissioners of Inland Revenue. In the former case the grant was given not as a supplementary trading receipt but for the specific purpose of enabling the company to undertake works of relief of unemployment and it was held not to be taxable income. Lord Buckmaster said at page 353 : "It was a grant which was made by a government department with the idea that by its use men might be kept in employment . . ." In that case the sums granted were received by the assessee not as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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