2009 (5) TMI 26 - HC - Income Tax

Assessee a public sector co-operative sugar mill involved in mfg. and sale of sugar - Amount received by assessee being incentive as levy sugar released for free sale claimed by the assessee as capital receipt but the AO has treated it to be revenue receipt - Order of the ITAT sustained in with tribunal held that the subsidy in question should be treated as capital receipt revenue appeal dismissed

Summary

Issues:
1. Classification of Rs. 2,79,68,413/- received by the assessee as capital or revenue receipt.

Analysis:
The case involved an appeal against the order of the Income Tax Appellate Tribunal regarding the treatment of an amount received by a public sector cooperative sugar mill as an incentive for levy sugar released for free sale. The assessee claimed it to be a capital receipt, while the Assessing Officer treated it as a revenue receipt. The Tribunal, in line with a previous judgment of the High Court, dismissed the appeal of the revenue. The Tribunal's decision was based on the interpretation of the Incentive Scheme, which aimed at making the factory viable by utilizing additional funds generated through such incentives for loan repayment. The Scheme specified conditions for eligibility for incentives, linking them to the commencement of production. Citing a Supreme Court case, the Tribunal concluded that the subsidies received were of revenue character and should be taxed accordingly.

In light of the above findings and the precedent set by the Supreme Court, the High Court found no fresh question of law to be decided in the present case. The Court, after considering the arguments presented by the appellant's counsel and reviewing the ITAT's order, summarily dismissed the appeal. The decision was based on the consistency with the previous judgment and the established legal principles regarding the nature of the subsidies received by the assessee.