Commissioner Of Income Tax, Haldwani, District Nainital v. Kisan Sahkari Chini Mill Sitarganj, District Udham Singh Nagar

IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL MCC Correction Application No. 563 of 2008 IN ITA No. 76 of 2002 Commissioner of Income Tax, Haldwani, District Nainital. ……Appellant. Versus Kisan Sahkari Chini Mill Sitarganj, District Udham Singh Nagar. ………..….Respondent. Mr. Arvind Vashisth, learned Assistant Solicitor General for the Central Govt./appellant. Ms. Puja Banga, learned counsel for the respondent. 4thSeptember, 2008 Hon’ble P.C. Verma, J.Hon’ble B.C. Kandpal, J. The question no. 2 as framed in the appeal is as under:- “2. Whether the Hon’ble Appellate Tribunal was legally justified in holding the receipt on account of incentive on sugar sales to be a capital receipt and granting exemption on the same?” 2. The incentive is given to the Sugar Factories, which is not refundable rather is an asset added to the capital. This question has to be decided in paragraph 9 of the judgment sought to be reviewed, which reads as under: “As far as question no. 2 is concerned, this point has also been dealt by the division bench of this Court in ITA No. 194 of 2005 and has decided that the subsidies are of revenue character and have to be taxed accordingly. This substantial question of law is decided in favour of the department.” 3. We have perused the judgment of ITA No. 194 of 2005 and we have relied upon paragraph 5 of the said judgment, which reads as under: “These two abstracts portion of the scheme clearly shows that the incentive was for making the factory viable and was available only after the production was started. The Hon’ble Apex Court in Sahney Steel and Prem Works Ltd. Vs. CIT reported in (1997) 223 ITR 253 (SC) has held as under: “In the case before us, the subsidies have not been granted for production of or brining into existence any new asset, the subsidies were granted year after year only after setting up of new industries and commencement of production such a subsidy could only be treated as assistance given for the purpose of carrying on of the business of the assessee. Applying the test of Viscount Simon in the case of Ostime (1946) (14) ITR (Suppl.) 45 (HL), it must be held that these subsidies ore of revenue character and will have to be taxed accordingly.” 4. In view of the aforesaid law laid down by the Hon’ble Apex Court that subsidy could be treated as an assistance given for the purpose of carrying on the business of the assessee and it must be held that these subsidies are of the revenue character and will have to be taxed accordingly, therefore, the observations made in paragraph 9 of the judgment is perfectly based on the Apex Court’s judgment. This review petition is devoid of merit and is hereby dismissed. 5. All the pending application(s) is/are disposed of accordingly. Rathour/Saleem