9911796707
TMI Blog1999 (3) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... tice that the question is covered by the order of this Court dt. 31st March, 1998, in the case of this assessee whereby the application of Revenue under s. 256(2) of the Act has been rejected. Therefore, this application could be rejected outrightly or question can be answered in favour of assessee. Learned counsel for the Revenue has not controverted this fact. The Tribunal has decided the issue in favour of assessee on two counts firstly that incentive receipts have overriding obligation the additional profits will only be used to pay off the loans taken from Government financial institutions, for expansion of sugar factory in other words, the receipt on account of incentive will be used to pay off capital loan. Secondly, when the receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the incentive by way of release of additional free sale sugar quota, under the Incentive Scheme of the Government of India, Directorate of Sugar, dt. 15th Nov., 1980, read with the earlier scheme dt. 6th Dec., 1975. The salient features of the scheme and which factory is eligible of the benefit of scheme has been conveyed by the letter of Directorate of Sugar dt. 15th Nov., 1980, the relevant part reads as under : "To mitigate the hardship caused to the sugar industry, in the establishment of new sugar factories and for effecting substantial expansions in the existing sugar factories, caused by steep rise in the cost of plant and machinery needed for such sugar projects, the Government sanctioned a scheme in November, 1975 to provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the realisation of sale on additional free sale of sugar quota. The relevant part of the scheme reads as under : "The beneficiaries of the scheme should ensure that the surplus funds available by way of incentives are utilised only for the payment of term loans, if any, outstanding from the Central Financial Institutions. The factories should submit a certificate to this effect annually duly certified by their statutory auditors. Failure to submit the above certificate will result in the holding up of release of extra free sale quota for the succeeding years." There is no dispute on the facts also that additional free sale quota is available to the assessee only in case he pays the loan taken by him from the Central financial in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form part of the assessee's real profits. So, to arrive at the taxable income of the assessee from the business under s. 10(1) of the Act, the said amounts have to be deducted from its total income." 6. Any amount received under obligation, that determines the issue whether it is a income of assessee or capital receipt or revenue receipt. As there is diversion of receipt and that receipt should be treated according to diversion. As that receipt before it actually received has overriding obligation. Admittedly, the incentive has been received for payment of the loan which was taken for expansion of sugar factory. That amount is received against the capital investment, expenditure. How that can be a revenue receipt ? In view of the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the fund is quite immaterial. In p. 266 their Lordships further clarified and observed as under : "the subsidies have not been granted for production of or bringing into existence any new asset. The subsidies were granted year after year only after setting up of the new industry and commencement of production. Such a subsidy could only be treated as assistance given for the purpose of carrying on of the business of the assessee. Applying the text of Viscount Simon in the case of Ostime (HM Inspector of Taxes) vs. Pontypridd Rhondda Jt Water Board (1946) 14 ITR (Suppl) 45 (HL) : TC 13R.590, it must be held that these subsidies are of revenue character and will have to be taxed accordingly." Making this distinction finally their ..... X X X X Extracts X X X X X X X X Extracts X X X X
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