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TMI Blog2008 (1) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... constituted the income of the Assessee for the assessment year in question under the provisions of section 41 of the Income-tax Act, 1961? 2. The brief facts of this case are that the Assessee-Corporation was formed by the Government of India with the main object of assisting and nurturing the small scale sector industries in the country. The main function of this Corporation is to provide finance to the small scale industrial units. The Assessee-Corporation is to import machinery from abroad on credit and sell such machinery on hire-purchase basis to small scale entrepreneur. An agreement was entered with a German company who was to advance the money to the Assessee-Corporation. Accordingly, the, machinery was imported. Owing to fluct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he losses, it was the amount received in the course of Assessee s business and fully satisfied the requirement to section 41 of the Act and, therefore, taxable. 4. Aggrieved against the order of Assessing Officer, the Assessee-Corporation appealed to Commissioner of Income-tax (Appeals) and raised the contention that this was not taxable under section 41 of the Act. The CIT(A) did not agree and held that the inclusion of this sum as part of the Assessee s income was justified under provisions of section 41 of the Act. 5. The matter was further taken by way of an appeal before the Tribunal and the Tribunal held that the Assessee-Corporation received this amount to meet the losses which it had incurred on account of fluctuation in excha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court in Polyflex (India) (P.) Ltd. v. CIT [2002] 257 ITR 3431. 9. The hire-purchase agreement placed on record specifically provides that the hirer (the Small Scale Entrepreneurs) will pay the additional rupees cost because of exchange variation. When the Assessee has received reimbursement of the losses from the Government, that reimbursement constituted its income under section 41 of the Act. By whatever name it is called, either subsidy or bounty, the object being to reimburse the losses, it was the amount received in the Assessee s course of business and, therefore, taxable. 10. Now, coming to section 41 of the Act, it says :- Profits Chargeable to tax.-Where an allowance or deduction has been made in the assessment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly brought to tax under section 41 of the Act. 12. In Kanyakumari District Co-operative Spg. Mills Ltd. s case (supra) the Assessee was a Co-operative Society. The Director of Handlooms and Textiles requested the Government of Tamil Nadu to sanction certain amount for recruitment of 70 Adi Dravida workers in the assessee s mill under the special component plan and on that basis, the sum of ₹ 10.50 lakhs was sanctioned in favour of Assessee. The Assessee also recruited 70 additional workers from Adi Dravida community. It was held that, the Government order sanctioning the amount clearly showed that it had framed a special component plan for employment of persons from Adi Dravida community and the amount received by the Assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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