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TMI Blog2014 (9) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the refund of customs duty amount as part of incentive measures by the Government of India, is liable to be treated as capital receipt in the hands of the assessee and not revenue in nature? 2. Whether the Appellate Tribunal is correct in holding that the rent paid with reference to guest house or transit house as the case may be, is liable to be deducted from the income in spite of Section 37(4)&(5) of the I.T.Act? 2) So far as question No.2 is concerned, it is submitted by the learned counsel for the revenue and conceded by the learned counsel for the assessee that the question is required to be answered in favour of the revenue and aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive price. Thus, as the amount received from the Central Government has gone to reduce the cost of establishment the said amount has to be treated as a capital receipt and not as a revenue receipt. The Assessing Officer rejected the claim of the assessee and treated the same as a revenue receipt on the ground the purpose of Central Government reimbursing the customs duty was in fact to bring down the cost of production of the fertilizers and also to make indigenous fertilizer industry more competitive. In other words, the support given by the Central Government was only to enable the assessee to sell the fertilizers at competitive prices and as such the same is required to be treated as a revenue receipt. 5) Citing the judgment of the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the subsidy given by way of sales tax incentive given in Sahney Steel Case (2 supra). 8) On the other hand, Sri A.V. Krishna Koundinya, learned Senior Counsel appearing on behalf of the assessee by referring to the judgment of the Supreme Court in Commissioner of Income-Tax v. P.J. Chemicals Ltd. , and also the judgment of the Supreme Court in Commissioner of Income Tax v. Ponni Sugars and Chemicals Ltd., support the order of the Tribunal. 9) As held by this Court in Commissioner of Income-Tax v. Godavari Plywoods Ltd., case whether a receipt is of the capital nature or a revenue nature has to be determined. 10) Two leading judgments of the House of Lords in the cases of The Seaham Harbour Dock Co. Vs. Crook (16 Tax Cases 333) and Os ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld plants, the committee recommended abolition of customs duty on imported equipments for revamping/rehabilitation of the old fertiliser plants. The Committee also recommended elimination of customs and excise duties on capital goods, to make new units viable and to attract fresh investments in fertiliser section. 12) After a detailed analysis of the principles, the orders of the Commissioner of Income Tax (Appeals) V (Central) and CIT appeals and the facts on record and the central scheme in detail, the Tribunal concurred with the finding recorded by the Commissioner that the amount received has gone into the reduction of capital expenditure in the establishment/expansion of the fertiliser units. This finding of fact as recorded by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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