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TMI Blog2013 (11) TMI 1488X X X X Extracts X X X X X X X X Extracts X X X X ..... stion of law that was formulated at the time of admission of the appeal for consideration, which read thus:- "Whether the findings of the Income Tax Appellate Tribunal that the income of Rs.1,33,45,000/- received by the assessee cannot be treated as revenue receipt is perverse, arbitrary and contrary to law? The amount reflected in the question is for the assessment year 2000-2001. Insofar as the assessment year 1999-2000 is concerned, the amount of income is Rs.21,28,40,000/- and Rs.2,95,84,556/- for the assessment year 2001-2002. 3. Before we proceed further, it would be necessary to state as to what happened when hearing of these appeals commenced. When these appeals were called out for hearing, and Mr.Aravind, learned counsel for the appellant- Revenue started addressing the Court, Mr.Malhara Rao, learned advocate appearing for the assessee, with Mr.P.Dinesh in ITA No.489/2007 requested to keep these appeals back for some time. He submitted that one Mr.Nageshwar Rao would appear on behalf of the assessee and that he was busy in some other Court. Mr.Aravind, learned counsel for the revenue submitted that he would continue and when Mr.Nageshwar Rao appears, he may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had shown a sum of Rs.21,28,40,000/- as monies received from Siemens AG Germany Company. M/s.Siemens AG is the principal shareholder of the assessee's company. The assessee's representative in the letter dated 14.02.2002 had explained the said sum as "subvention payment" from the principal shareholder of the assessee-company, and that was paid to the assessee company for two reasons, namely, the company was potentially sick company, and that its capacity to borrow had reduced substantially leading to shortage of working capital. In the letter dated 24.09.1998 issued by Siemens AG, and the assessee's letter dated 19.02.2002, they explained that M/s.Siemens AG being a parent company, had agreed to infuse further capital by reimbursing the accumulated loss. In short, case of the assessee is that the payment made by Siemens AG was to make good the loss incurred by them and payment/receipt of the subvention monies is capital receipt in nature and hence, cannot be treated as income or revenue receipt. 6. The Assessing Officer vide his order dated 26.03.2002 rejected the contention of the assessee. The Appellate Authority, however, in appeal, reversed the order of the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the judgment of the Supreme Court in Commissioner of Income Tax vs. Ponni Sugars & Chemicals Ltd. & Ors. (2008) 306 ITR 392 and Sahney Steel & Press Works Ltd. etc. vs. Commissioner of Income Tax (1997) 228 ITR 253 (SC). 8. On the other hand, learned counsel on behalf of the assessee, submitted that the appeal deserves to be rejected outright, since no substantial question of law is involved. It was further submitted that having regard to the findings of fact recorded by the Appellate Authority and the Tribunal, the questions of law as raised, does not fall for consideration being a substantial question of law. They further submitted that the findings of the Tribunal even on the question of law are justified and the Tribunal has rightly treated the amount paid by Siemens AG as "Subvention payment" and has rightly treated it against the capital account. It was further submitted that the judgments relied upon on behalf of the revenue are not applicable to the facts of the present case. The submissions advanced by both the learned counsel for the assessee are similar. They did not make any other submissions. 9. At the outset, we would like to look into the judgment of the Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business. On the facts of that case, it was held that the subsidy given was to meet recurring expenses. It was not for acquiring the capital asset. It was not to meet part of the cost. It was not granted for production of or bringing into existence any new asset. The subsidies in that case were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. Consequently, the contentions raised on behalf of the assessee on the facts of that case stood rejected and it was held that the subsidy received by Sahney Steel could not be regarded as anything but a revenue receipt. Accordingly the matter was decided against the assessee. The importance of the judgment of this Court in Sahney Steel case (supra) lies in the fact that it has discussed and analysed the entire case law and it has laid down the basic test to be applied in judging the character of a subsidy. That test is that the character of the recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive level with other established industries. It is in this backdrop, in Sahney Steel, the Supreme Court held that incentive which assessee extended was revenue and not capital in nature. Supreme Court also observed that by no stretch of imagination can the subsidies whether by way of refund of sales tax or relief of electricity charges or water charges can be treated as an aid to setting up of the industry of the assessee. It was also noticed that the payments were made only when the assessee commenced its production. The said payments were made for a period of five years calculated from the date of commencement of production in the assessee's factory. It is held that the subsidies were operational subsidies and not capital subsidies. 12. Applying the above principles to the facts of the present case, and keeping in view the objective behind the payment made by Siemens AG, we are satisfied that it was received by the assessee on revenue account. From the facts of the case, it is clear that huge amounts were paid by Siemens AG not only to make good the loss, but also to see that the assessee would run more profitably. It was by way of assistance in carrying on the business. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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