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Issues Involved:
Assessment of income for the year 1981-82 - Taxability of subsidy received by the assessee from State Industries Promotion Corporation of Tamil Nadu (SIPCOT) as revenue receipt. Judgment Summary: The High Court of Madras, in the case concerning the assessment of income for the year 1981-82, addressed the question of whether the subsidy received by the assessee from SIPCOT should be treated as a taxable revenue receipt. The Income-tax Officer had taxed the subsidy amount as revenue for the previous year, considering it as modernization business expenditure. The Commissioner of Income-tax (Appeals) upheld this decision, stating that the subsidy was related to business expenditure. The Appellate Tribunal, upon review, found that the subsidy was reimbursement for the assessee's expenses and was allowed as a deduction in computing business income for the relevant assessment year. The High Court determined that the subsidy was not an ex-gratia payment but was specifically received by the assessee for business purposes after the commencement of its operations. Therefore, the subsidy was rightly treated as financial assistance for running the business. Citing precedents such as Saroja Mills Ltd. v. CIT [1996] 220 ITR 626 and Sahney Steel and Press Works Ltd. v. CIT [1997] 228 ITR 253, the Court held that subsidies for revenue expenditure should be considered as taxable revenue receipts. In alignment with the decisions in the aforementioned cases, the High Court concluded that the subsidy received by the assessee for revenue expenditure reimbursement was a revenue receipt and correctly taxed as such. Consequently, the question of law was answered in favor of the tax authorities, with no order on costs issued in this case.
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