1998 (3) TMI 103 - HC - Income Tax

Summary

Issues:
Whether the subsidy received by the assessee from a private organization is taxable under the Income-tax Act.

Analysis:
The case involved a dispute regarding the taxability of a subsidy received by the assessee from a private organization. The assessee claimed that the subsidy was a voluntary and gratuitous payment and hence not liable to tax. The Income-tax Officer contended that the subsidy arose from the assessee's export business and should be taxed. The Appellate Assistant Commissioner held that the payment was voluntary and not for services rendered, thus not taxable under section 28 of the Act. The Tribunal also found that the subsidy was received without any service rendered and that the organization was private, not established by law. The Tribunal concluded that such voluntary assistance or gift payment cannot be taxed as income under the Act.

The counsel for the Revenue argued that the subsidy received by the assessee is taxable under the Act as it was distributed from the Government of India. However, the counsel for the assessee pointed out that the insertion of clause (iiib) in section 28 clarified that subsidies or cash assistance are taxable only if given by the Government under a scheme. Since the subsidy in question was from a private body to its members, it did not fall under the purview of the taxable clause. The Court noted that there was no provision in the Act to tax cash assistance received from a private body where no service was rendered. The Court emphasized that the cash assistance was contributed by members of the private organization and was unrelated to any service provided by the assessee.

In conclusion, the Court held that the subsidy received by the assessee from the private organization was not liable to be taxed under the Income-tax Act. The judgment was in favor of the assessee and against the Revenue. The application was disposed of accordingly, with both judges concurring on the decision.