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TMI Blog2014 (1) TMI 1239X X X X Extracts X X X X X X X X Extracts X X X X ..... s [2008 (9) TMI 14 - SUPREME COURT] - the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given - The subsidy was given to compensate the burden on account of interest, storage and insurance etc. for holding the Buffer Stock of sugar i.e. to compensate the assessee in running his business which is clearly revenue receipt - No substantial questions of law arises in the appeals – Decided against Assessee. - Income Tax Appeal No. - 215 of 2005, Income Tax Appeal No. - 216 of 2005, Income Tax Appeal No. - 217 of 2005 - - - Dated:- 23-1-2014 - Hon'ble Ashok Bhushan And Hon'ble Mahesh Chandra Tripathi,JJ. For the Appellant : S. K. Garg ORDER Heard Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer denying that it was not a capital receipt. It is useful to refer to paragraph 7.1 of the Commissioner (Appeals) Order dated 30/3/1999 which is quoted below: "7.1. The appellant's next objection is that the Assessing Officer erred in not accepting its claim that the "buffer Stock Subsidy" amounting to Rs.9,98,966/- could not have been treated as its income. It was submitted that the subsidy in question had been given by the Central government from Sugar Development Fund 1983 solely for serving a public cause and the same could not have been treated as the income of the appellant. The Assessing Officer disallowed the appellant's claim on the ground that subsidy or grant given by the Central government to compensate or reimburse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the buffer stock as required and all expenses relatable to maintaining buffer stock were debited. The subsidy given by the Central Government to compensate or reimburse the expenses was a revenue and taxable receipt. The Apex Court in the aforesaid judgment has laid down that test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. The purpose test has to be applied to find out the nature of the subsidy. The object of the subsidy scheme was to enable the assessee to run the business more profitably which clearly indicates that it was on revenue account. It is useful to quote paragraph 14 of the said judgment which is quoted below: "14. In our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmencement 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 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 receipt in the hands of the assessee has to be de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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