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TMI Blog2003 (7) TMI 63X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income. The assessee-claimed that the transport subsidy is granted with reference to the cost of transporting raw materials and finished goods to and fro from the backward areas. The Assessing Officer has held the transport subsidy to be a revenue receipt and made it taxable as it has not been exempted under any relevant provision of the Income-tax Act, 1961. The assessee has also claimed the expenditure incurred by him of Rs. 6,93,729, in connection with survey and feasibility report and various technical services for setting up the cement plant, to be a revenue expenditure on the ground that the main business of the assessee is to manufacture the asbestos sheets. The assessee wanted to set up the mini cement plant for feeding the existing need of the asbestos plant and in the process has incurred the expenses in connection with survey and feasibility report and various technical services for setting up the mini cement plant, which of course, would not materialise as the Government has not permitted setting up of the mini cement plant. As per the assessee, the proposed cement plant was completely interconnected with the existing business of manufacture of the asbestos sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat as has been held by the High Court, subsidy is a generous act of the State, or rather a grant or gift to the assessee for the sole purpose of assisting the assessee for the growth of industries and, therefore, cannot be considered as a trading or revenue receipt liable to be taxed and has confirmed the order passed by the Commissioner of Income-tax (Appeals). Considering the other question as regards the expenditure incurred by the assessee for preparation of the feasibility and technical report of the proposed mini cement plant it was held by the Tribunal that it appears from the record that the assessee has incurred the expenses for searching the site and preparing the feasibility report for setting up a mini cement plant. From the record it appears that the intention for the proposed mini plant was not to sell the cement in the market but was to supply the cement as a raw material to the main plant. So it is to be considered as an ancillary of the main plant. The Tribunal has accepted the finding of the Commissioner of Income-tax (Appeals) that both units were under common management and common funds and common account and so they cannot be treated as a separate business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave to be taxed. When the subsidies were granted only after the setting up of the new industry and commencement of production such subsidies would only be treated as assistance given for the purpose of carrying on of the business of the assessee and the subsidies will be treated as revenue nature and would have to be taxed accordingly. In the present case we do not find that any of the taxing authorities has considered the question of the purpose of the subsidy given to the appellant and how the subsidy has been utilised by the assessee, before determination of the question whether it is capital subsidy or revenue subsidy. In the absence of any decision of any of the taxing authorities on the purpose for which the subsidy is given and utilisation of the subsidy by the assessee, the nature of receipt cannot be ascertained. The decision given by the taxing authorities in the matter of subsidy, is a decision without there being any factual foundation, and thus we feel it necessary to remand the case to the assessing authority to consider the question of subsidy in the light of the decision in Sahney Steel and Press Works Ltd.'s case [1997] 228 ITR 253 (SC). We now propose to take up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interfere with such findings of fact if they have been arrived at on a proper application of those principles. From the above authority it is clear that the nature of the expenditure has to be judged taking into consideration the general business factors and the aim and object for which the expenditure was incurred. It is for the taxing authorities to ascertain the nature of expenditure on the basis of the materials placed before it and determination by the taxing authority of the nature of expenditure would be a question of fact and normally shall not be disturbed by the court in appeal. In Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1, the apex court has further elaborated the nature of expenditure incurred by the assessee and said there may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, none the less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing up a mini cement plant, which if it comes into existence, is an advantage of enduring benefit. But when the mini cement plant has not come into existence it cannot be said that the expenditure incurred for project report is an expenditure on capital account and it cannot be treated as an expenditure on the revenue account. The feasibility report for the said mini cement plant is for the purpose of finding out the advantage and enabling the management to find out whether the business of the asbestos sheet manufacturing unit can be carried out more efficiently or more profitably by setting up the mini cement plant. It is apparent that the feasibility report has not brought into being new fixed capital, simple preparation of the feasibility report for a mini cement plant would not result in bringing into existence a new capital. Preparation of the feasibility report is to find out the viability of establishment of a mini cement plant, which in turn would supply and maintain consistent supply of raw material to the already established asbestos plant of the assessee. The endeavour was made so as to find out ways and means to carry on the assessee's business more profitably and more ..... X X X X Extracts X X X X X X X X Extracts X X X X
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