1992 (12) TMI 68 - AT - Income Tax

Summary

Issues:
1. Taxability of subsidy received from the Government under the Transport Subsidy Scheme of 1971.
2. Taxability of the claim for refund of excise duty.

Analysis:

Issue 1: Taxability of subsidy received from the Government under the Transport Subsidy Scheme of 1971

The appeal was filed by the assessee challenging the order of the Appellate Commissioner regarding the taxation of a subsidy received from the Government of India. The assessee argued that the subsidy was not a revenue receipt and should not be taxable as income. The Tribunal examined the nature of the subsidy under the Transport Subsidy Scheme of 1971 and various court decisions cited by the assessee's counsel. The Tribunal concluded that not all receipts are taxable as income under the Income-tax Act, 1961, and subsidies or grants from the government do not automatically fall under the category of taxable income. The Tribunal emphasized that the subsidy was aimed at promoting industrial growth and economic development, not at augmenting profits. Referring to legal precedents and the purpose of the subsidy, the Tribunal held that the subsidy was a grant or gift for industrial growth and prosperity, not a trading receipt. Therefore, the Tribunal directed the deletion of the amount of subsidy from the assessment.

Issue 2: Taxability of the claim for refund of excise duty

The assessee also contested the inclusion of a claim for refund of excise duty in the assessment for the year under appeal. The Tribunal considered the argument that mere submission of a claim does not imply that the income has accrued to the assessee until final adjudication or acceptance of the claim. Citing a judgment of the Calcutta High Court, the Tribunal highlighted that income can only be considered accrued when there is a legal obligation to pay. In this case, the Tribunal found that the excise duty refund claim was not taxable in the year under appeal as the right to the amount did not arise or accrue during that period. The Tribunal ruled that the Assessing Officer was not justified in assessing the sum for the year under appeal but could assess it in the subsequent year when the claim was accepted and refund ordered by the authorities. Consequently, the Tribunal partly allowed the appeal, directing the exclusion of the excise duty refund claim from the assessment for the year under appeal.