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TMI Blog2002 (1) TMI 1265X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, a public sector undertaking all the shares of which are held by the State Government, was set up under the Orissa Government s resolution dated August 28, 1980 (published in Government of Orissa Gazette dated September 12, 1980 ; copy placed at pages 26-27 of the paperbook) which is reproduced below for ready reference : Government of Orissa, Food and Civil Supplies Department. Resolution 27th August, 1980. With a view to implementing the scheme of distribution of essential commodities and to ensure easy availability of some selected articles of mass consumption at reasonable prices, the question of establishment of a State level civil supplies corporation was under active consideration of the Government for some time past. After a careful consideration, the Government have been pleased to decide that a Corporation known as Orissa State Civil Supplies Corporation Limited should be formed with the following broad objectives. Objectives To engage either on its own or as agents of the Government of any firm, company, or institution in production, purchase, processing, storage, transport, distribution and sale of food grains, food stuffs, and such other essentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Shri H. N. Das Mohapatra, Chairman, Orissa State Civil Supplies Corporation Ltd., Bhubneshwar. (emphasis supplied by us by way of underlining) We may also reproduce contents of a certificate dated February 14, 2001, issued by Shri A. K. Tripathy, Principal Secretary to the Government of Orissa (Finance Department), Bhubneshwar. It may also be stated that the aforesaid certificate was admitted by us as an additional evidence since, in our considered view, it is necessary to take this into account for proper disposal of the appeals. This is to certify that Orissa State Civil Supplies Corporation is not a profit making organisation. It is engaged in the distribution of essential commodities to the common people through PDS. The rate of purchases and sale of essential commodities are fixed by the Government of Orissa. Since the sale of commodities is made at subsidised rates, there is bound to be a loss. The Government of Orissa has undertaken to recoup the loss incurred by the Orissa State Civil Supplies Corporation Ltd. to the extent of loss incurred by them. This loss can be determined only after finalisation of audited accounts. Subsidies are given on ad hoc basis whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fically submitted that the subsidy received from the State Government is always provisional subject to the finalisation of accounts for the year and it is always corporation s liability to the Government, to refund the subsidy after adjusting the same to the extent of loss actually incurred. It was thus contended that the subsidy received during the year has been taken credit of, to the extent of loss and the balance shown as liability of the corporation to be refunded to the State Government. It was thus argued that the treatment of unadjusted subsidy in the accounts as liability is proper and, in no circumstances, it should be treated as a revenue receipt exigible to tax. However, the Assessing Officer was far from impressed and dismissed these submissions as having no relevance in the facts and in the circumstances of the case . He noted that, apart from enclosing a copy of the earlier letter dated February 6, 1993, from the Government of Orissa, no material/documentary evidences were furnished by the assessee in support of the facts claimed about the scheme of subsidy. He further observed that the copy of letter dated April 16, 1996, of the Government of Orissa, requesting fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme of subsidy received by the appellant during both the years and the letter dated April 16, 1996, of the Government requesting refund of subsidy cannot override the nature of any particular receipt which is determined during the year of receipt. Further, contents of letter dated April 16, 1996, of the Government of Orissa, in a sense, is similar to that of letter dated February 6, 1993, which has already been considered by the Income-tax Appellate Tribunal while deciding the taxability of subsidies received. The Income-tax Appellate Tribunal has also approved the order of the Commissioner of Income-tax (Appeals) in the case of the appellant for the assessment years 1984-85 and 1985-86 in respect of the taxability of subsidy and has held that the liability for refund of subsidy, if any, were contingent in nature and if the amount is refunded in a future date, the same would be considered as a revenue expense for that year. Keeping in view the decision of the Income-tax Appellate Tribunal in the case of the appellant, I am inclined to agree with the contention of the Assessing Officer that subsidies received during the year are receipts subject to taxation. In the result, incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the assessee was asked whether the debit of Rs. 5,97,62,647 in the profit and loss account for the assessment year 1988-89 included the subsidy received for these two years. Learned counsel stated that the information was not available but it was unlikely since it included the subsidy received of Rs. 4,74,672,647 for this year alone. Thus nothing has been established before us to show that even the subsidy received for these two years was later refunded to the Government of Orissa. We, therefore, hold that the amounts were not loans or held as trustees and we further hold that they were trading receipts of the assessee. It was in the backdrop of the above observations that our distinguished colleagues dismissed the assessee s appeals and decided the matter in favour of the Revenue. The rival contentions are conscientiously heard, the orders of the authorities below carefully perused, and applicable legal position duly deliberated upon. Apart from having heard the learned authorised representative and the distinguished senior Departmental Representative, we have also heard Dr. K. S. Ganeshan, a senior I. A. S. Officer and chairman and managing director of the assessee-corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the taxpayer s income for any subsequent year of assessment. (IRC v. Sneath [1932] 17 TC 149, 162 (CA)). The aforesaid principle holds good even if the assessment of an earlier year had been taken to the High Court by way of a case stated under section 256 and the High Court has answered the reference. The High Court can only express an opinion on question of law. It has no jurisdiction whatsoever to review the facts. Hence, no estoppel can arise by the virtue of an answer to the reference . . . We are also conscious to the judicial consensus that this Tribunal should be extremely slow in departing from the findings given in an earlier order of the Tribunal, with a view to ensure that there is finality and certainty in all litigations, including the litigations arising out of the Income-tax Act. However, it is equally well settled that the Tribunal has the liberty of deviating from the stand taken in an earlier order particularly when the earlier decision has been arrived at without the enquiry and without taking into account all material evidence, particularly in a situation fresh facts are placed before the later Bench. To our mind, in the name of adhering to the princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n entrusted with the task of procurement, purchase and distribution of these commodities to consumers at controlled or subsidised rates, there is bound to be deficiency in the receipts against the expenditure incurred thereon. It was in this background that Secretary (F CS) observed that the net loss is to be made good by way of subsidy . Similarly, Principal Secretary to the Government of Orissa (Finance Department) has, vide letter dated February 14, 2001 (reproduced in paragraph 4 above), clarified that the rate of purchases and sale of essential commodities are fixed by the Government of Orissa and that since the sale of commodities is made at subsidised rates, there is bound to be a loss. It has been further clarified that the sole purpose of the state subsidy is to meet the loss thus incurred by the assessee-corporation but since determination of actual loss can only be done after finalisation of audited accounts, subsidies are to be given on ad hoc basis which are to be adjusted against actual loss after taking into account all the income and expenses as per audited accounts. In our considered view, one cannot simply brush aside these statements by the senior Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this proposition, on the admitted facts of this case, the assesseecorporation cannot even be allowed any deduction in respect of any refund of the subsidy in the year in which such a refund of excess subsidy received is made. The question of refund of subsidy would only arise in respect of the subsidy which does not legitimately belong to the assessee-corporation but then such a subsidy, following the discussions above, cannot be taken to be the income of the assessee-corporation in the first place. Accordingly, it would appear that in the mercantile method of accounting that is followed by the assessee-corporation, not only that the ad hoc subsidy receipt per se is not in the nature of income of the assessee, even subsequent refund of excess subsidy received is not a tax deductible payment because to the extent of it is in excess of what rightfully belongs to the assessee, it cannot be taken to income in the first place. It leads to the inescapable conclusion that in case the statements made by the Orissa Government officials, about the nature of subsidy, are indeed correct, the earlier decision of the Tribunal will clearly be inappropriate to the facts and circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be denied the opportunity. But, on the other hand, if the evidence led turns out to be spurious, fabricated or of irrelevant nature, such consequences, as are provided for under the law, will ensue. It is, therefore, incorrect to shut out an assessee in the process of administration of justice from leading evidence to prove its case. The earlier inability to lead evidence, should not be held against the assessee unless it is known to the court or suggested to the court or there was evidence to suspect that the evidence was fabricated. There is no such suggestion in this case. We are, therefore, of the opinion that the request of learned counsel of the assessee is reasonable and that the request made by the department for the refusal of its admission is not proper. . . . We have, however, noticed the fact that the above evidences were not before the Assessing Officer and, therefore, in all fairness, he should have an opportunity to examine the same. We have also noticed that the Assessing Officer had completed the assessment proceedings under section 144 of the Act, even though there was sufficient time to seek further specific clarifications from the assessee, if the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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