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TMI Blog2011 (7) TMI 1343X X X X Extracts X X X X X X X X Extracts X X X X ..... ? 2. The question arises in following factual background:- 2.1 The respondent assessee is a statutory Corporation involved in the activity of water resource development. It implements various schemes by digging tube wells, lift irrigation, laying down pipes, sanctioning loans etc. to ensure that there is adequate and proper water supply to the people of the State. 2.2 In the year under consideration i.e. for the assessment year 1996-97 the assessee received certain Government assistance in the form of subsidy to enable it to repay the loans taken from NABARD. The Revenue was of the opinion that receipt was a revenue receipt and should, therefore, be taxed in the hands of the assessee. 2.3 The issue reached Tribunal. The Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on the decision of the Apex Court in the case of Sahney Steel and Press Works Ltd. and others vs. Commissioner of Income-Tax reported in [1997] 228 ITR 253(SC) and in the case of Commissioner of Income-tax vs. Ponni Sugars and Chemicals Ltd. reported in [2008] 306 ITR 392(SC) was of the opinion that the receipts cannot be treated as revenue receipts. 4. In the case of Sahney Steel and Press Works Ltd. and others vs. Commissioner of Income-Tax (supra), the Apex Court held and observed that if payments in the nature of subsidy from public funds are made to an assessee to assist him in carrying on his trade or business, they are trade receipts. The character of the subsidy in the hands of the recipient, whether the revenue or capital, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trepreneurs. In that background, the Apex Court held that the main eligibility condition in the schemes was that the incentive had to be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. The subsidy received by the assessee was not in the course of a trade but was of a capital nature. The Apex Court noted difference in facts in the case of Sahney Steel and Press Works Ltd. and others vs. Commissioner of Income-Tax (supra), wherein the assessee could utilize the subsidy the way it liked for the purpose of the business. 6. In the present case, we find that the subsidy came with a specific rider. It had to be utilized for repayment of loans to NABARD. Such loans were ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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