Madhya Pradesh High Court
Gadia Wires vs Commissioner Of Income-Tax on 2 March, 1989
Equivalent citations: [1989]178ITR596(MP)
JUDGMENT
G.G. Sohani, Actg. C.J.
1. By this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), the Income-tax Appellate Tribunal, Indore Bench, has referred the following question of law to this court for its opinion ;
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 54,454 received by the assessee as sales tax subsidy was a taxable receipt ?"
2. The material facts giving rise to this reference, briefly, are as follows :
The assessee had set up an industry in Madhya Pradesh at Ratlam and under the scheme framed by the Government of Madhya Pradesh for grant of sales tax subsidy to industries in backward areas in Madhya Pradesh, a sum of Rs. 54,454 was paid by the Government of Madhya Pradesh to the assessee during the relevant accounting year. In the return of income filed by the assessee, it excluded the said amount claiming the same as a capital receipt. The Income-tax Officer, while framing the assessment, held that the payment of the aforesaid amount to the assessee was refund of sales tax earlier paid by the assessee and it was, therefore, taxable under Section 41(1) of the Act. On appeal, the Appellate Assistant Commissioner dismissed the appeal. The second appeal preferred by the assessee before the Tribunal was also dismissed. Aggrieved by the order passed by the Tribunal, the assessee sought reference and it is at the instance of the assessee that the aforesaid question of law has been referred to this court for its opinion.
3. Having heard learned counsel for the parties, we have come to the conclusion that this reference must be answered in the negative and against the Revenue. In CIT v. Dusad Industries [1986] 162 ITR 784, a Division Bench of this court has held that the sales tax subsidy received by the assessee in pursuance of a scheme framed by the Government of Madhya Pradesh granting sales tax subsidy to industries set up in backward areas in the State was a capital receipt and, hence, was not exigible to tax.
4. Following that decision, therefore, our answer to the question referred to this court is in the negative and against the Revenue. In the circumstances of the case, parties shall bear their own costs of this reference.