Madras High Court
Cit vs Ponni Sugars & Chemicals Ltd. on 3 December, 2002
Equivalent citations: [2003]129TAXMAN231(MAD)
JUDGMENT N.V. Balasubramanian, J.
The Income Tax Appellate Tribunal has stated a case and referred the following questions of law in relation to the assessment years 1986-87 to 1988-89 :
"1. Whether on the facts and in the circumstances of the case the Tribunal is right in law in holding that the incentive provided by the Government of India and also subsidy given by the State Government are capital receipts not liable to tax?
2. Whether on the facts and in the circumstances of the case the Tribunal is correct in law in holding that there is diversion of income and the said receipts cannot be treated as part of the income of the assessee?
3. Whether on the facts and in the circumstances of the case the Tribunal is right in law in holding that the amounts transferred to Molasses Storage Fund under statutory obligation will not form part of the assessees total income?"
2. Insofar as the first question of law referred to us is concerned, it is fairly stated by the counsel for the revenue that the incentive provided by the Government of India in respect of the difference in sale price in levy sugar and excise duty repaid would form part of the sale price and would be taxable as business income. As far as the subsidy given by the State Government is concerned, this court in T.C. No. 492 of 1996 by judgment dated 16-9-2002 considered the similar issue and has taken the view that the subsidy amount received by the assessee would be capital receipts. Accordingly, the Tribunal was not correct in holding that the incentives provided by the Government of India are capital receipts and not liable to tax and accordingly, that part of the question is answered in favour of the revenue and against the assessee. Insofar as the subsidy amount received from the State Government is concerned, we hold that the Tribunal was correct in holding that the subsidy given by the State Government is capital receipt and not liable to tax. In view of the answer given to the first question, we are of the view that it is not necessary for us to answer the second question. Accordingly, we are not answering the second question.
3. As far as the third question is concerned, it is fairly submitted that the said question is to be answered in favour of the assessee in view of the earlier decision of this court in CIT v. Salem Co-operative Sugar Mills Ltd. (1998) 229 ITR 285 (Mad), wherein this court has considered a similar issue and held that the amount transferred to Molasses Storage Fund under a statutory obligation did not form part of the assessees total income. Following the said decision of this court, we answer the third question of law referred to us in the affirmative in favour of the assessee and against the revenue. In view of the circumstances of the case, there will be no order was to costs.