1993 (7) TMI 153 - AT - Income Tax

Summary

Issues Involved:

1. Whether the sums given by the Government of Maharashtra to the assessee constituted income in the hands of the assessee.
2. Whether the amounts received by the assessee were subsidies or loans.
3. Applicability of the rule of "promissory estoppel" in the context of the resolutions passed by the Government of Maharashtra.
4. Determination of the year of taxability for the sums received by the assessee.

Issue-wise Detailed Analysis:

1. Whether the sums given by the Government of Maharashtra to the assessee constituted income in the hands of the assessee:

The primary issue before the Tribunal was whether the various sums given by the Government of Maharashtra to the assessee constituted income in the hands of the assessee. The Assessing Officer held that the amounts received under the scheme for financing carry-over stock of seeds were trading receipts and, therefore, assessable to tax. The CIT (Appeals) overturned this decision, holding that the amounts received were loans, not subsidies, and thus not taxable. The Tribunal upheld the CIT (Appeals)'s decision, stating that the sums were indeed loans and not revenue receipts, and therefore not taxable.

2. Whether the amounts received by the assessee were subsidies or loans:

The Tribunal noted that the Government of Maharashtra had initially decided to provide financial assistance to the assessee through a resolution dated 18-11-1981. However, this resolution was later cancelled on 6-2-1982 and replaced by another resolution on 15-3-1982, which treated the grants as interest-free loans. The Tribunal observed that the amounts received were treated as loans in the assessee's balance sheet and were eventually repaid. Therefore, the Tribunal concluded that the amounts were loans, not subsidies.

3. Applicability of the rule of "promissory estoppel" in the context of the resolutions passed by the Government of Maharashtra:

The Department argued that the Government of Maharashtra was estopped by the rule of "promissory estoppel" from cancelling the resolution dated 18-11-1981. However, the Tribunal rejected this argument, citing the decision of the Supreme Court in Union of India v. Godfrey Philips India Ltd., which clarified that the rule of promissory estoppel does not apply when there is no contractual obligation. The Tribunal noted that the assessee, being a Public Sector Undertaking dependent on government assistance, did not have a contractual right to the sums received. Therefore, the rule of promissory estoppel was not applicable.

4. Determination of the year of taxability for the sums received by the assessee:

The Assessing Officer had determined that the amounts were taxable in the year in which the Government Resolution authorizing the placement of funds was issued. However, since the Tribunal concluded that the amounts received were loans and not income, the question of the year of taxability became moot. The Tribunal emphasized that the amounts were repaid, and thus, there was no real income in the hands of the assessee.

Conclusion:

The Tribunal dismissed the departmental appeals, upholding the CIT (Appeals)'s decision that the amounts received by the assessee from the Government of Maharashtra were loans and not subsidies, and therefore not taxable as income. The Tribunal also clarified that the rule of promissory estoppel was not applicable in this case, and there was no real income in the hands of the assessee as the amounts were repaid.