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TMI Blog1995 (11) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the subsidy amount constituted the income of the period during which the films were released and that it did not constitute the income of the accounting year in which the subsidy was received ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the subsidy amount did not constitute the income of the assessee-firm as constituted during the accounting period relevant to the assessment year 1979-80? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the subsidy amount was not taxable in the hands of the assessee ? " The facts relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it was sanctioned in the name of Smt. Annamma Kunchacko, partner, Excel Productions. Even though the films were released during the period between 1975-77, the subsidy was actually sanctioned only under the orders of the Government of Kerala dated March 25, 1978. Excel Productions was a firm consisting of eight partners, having been constituted under a partnership deed dated August 4, 1965, at the time when the films were released. The firm was later reconstituted on October 1, 1977, with five partners and it is this firm, which is the assessee-respondent herein. The subsidy amount received by the assessee was treated by the Department as income arising out of business of the assessee. But the Tribunal took the view it was the firm as c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kerala may grant the subsidy. There is no right as such in the producer to claim the subsidy as a matter of course. Reliance was placed by the Revenue on the decision of the Supreme Court in Keshav Mills Ltd. v. CIT [1953] 23 ITR 230, in support of the above contention. Therefore, only when the order was passed by the Government of Kerala on March 25, 1978, the right to receive the subsidy accrued. No serious contentions were raised before us by the respondent-assessee against the above position. We are inclined to accept the contention raised by the Revenue that the income by way of subsidy accrued only in the relevant accounting year. It was further contended by the Revenue that if it has to be taken that there was no continuity in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on the provisions contained under sub-section (3A) of section 176 of the Income-tax Act and a contention was raised that even if it is to be taken that the subsidy is received by the former firm it is liable to be taxed under sub-section (3A). Learned counsel appearing on behalf of the assessee pointed out that in view of the specific finding of the Tribunal that subsidy was earned by the firm as constituted during the years 1975 to 1977, the Revenue cannot be heard to contend that the subsidy amount was, as a matter of fact, received by the assessee-firm. It is true that the amount was received in the hands of the assessee-firm, but this amount was due to the former firm. He also contended that since the amount was receivable onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngth feature films produced during the earlier years. Therefore, even though the receipt of the subsidy in this case was in the year 1978, it would enure to the former firm. It may be that the subsidy was received through the newly formed firm in 1978, but the receipt of the newly formed firm can be only for and on behalf of the former firm. We find no merit in the contention raised by the Revenue on the basis of sub-section (3A) of section 176 of the Income-tax Act. Sub-section (3A) provides that " Where any business is discontinued in any year, any sum received after the discontinuance shall be deemed to be the income of the recipient and charged to tax accordingly in the year of receipt, if such sum would have been included in the total ..... X X X X Extracts X X X X X X X X Extracts X X X X
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