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TMI Blog1988 (7) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... ensatory support is not a payment under any mutual or commercial arrangement or contract nor for any services rendered nor can it be said to flow out of love and affection. However, it can also not be treated to be a pure bounty or a gift paid out of sheer benevolence of the government. With effect from 1st April, 1976 the cash compensatory scheme was delinked from mere compensation for losses arising to the trader from exports and was made more broad-based. The cash compensatory scheme receipt were the result not of equalising the domestic cost of the product with the FOB value realised, but to encourage the firm (the assessee) and the product and neutralising the disadvantages arising out of the Government's policies. It was clear that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty or gift, it was not a revenue receipt taxable under s. 28(iv) but only a capital receipt given to improve and build up its capital base and to remove the inadequacies in its export apparatus or infrastructure. From the decided cases on the point, two inference are deducible. The first is that if subsidy is granted more as recompense for the hardships and inconveniences in the setting up of the industry, the subsidy can be justifiably taken as on capital account. The second point is that in the case of subsidies if both views are plausible one would be justified in adopting the interpretation which is favourable to the assessee. Cash compensatory scheme or subsidy, by whatever name it is called, is to encourage the establishment of capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of the assessee under s. 80J. No distinguishing facts brought to our notice by either of the parties on the facts of the case and facts in the case of Laxmi Udyong Limited. Therefore, we do not find any infirmity in the view taken by the CIT(A) on this issue. Accordingly the view taken by the CIT(A) is confirmed. 4. The next issue for our consideration in this appeal is whether CIT(A) erred in directing the ITO to allow deduction under s. 80HH before allowing deduction under s. 35B of the Act and under s. 80J of the Act. 5. We have heard the rival submissions sec. 80HH provides for deduction in respect of profits and gains from newly established industrial undertakings or hotel business in the backward areas. Gross total income as s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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