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TMI Blog1983 (8) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... that the subsidy is claimable only when the product is cleared and sold and not on any stock lying in the factory in terms of the scheme which was actually finalised on 16-6-1976. It was contended that the claim is lodged with the Government only when the goods are cleared and sold. The ITO noticed that the Government of India decided to extend a price support with a view to reduce the prices of phosphate fertilisers to the consumers. This decision was communicated in a letter dated 27-3-1976. The details about the scheme were communicated by the Government in its letter dated 16-6-1976 by the Ministry of Agriculture and Irrigation, Department of Agriculture, Government of India. The ITO incorporated the scheme from the letter dated 16-6-1976 and did not accept the argument of the assessee. In this connection, he stated that the subsidy must be regarded as an element or part of the market price for the purpose of valuation of the closing stock of superphosphate as on 31-3-1976, at market rate. He, on this ground and on some other grounds, made an addition of Rs. 1,53,000 in the trading account. 14. The assessee came in appeal before the Commissioner (Appeals) and contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sale of superphosphate was not a part of the sale consideration. It was argued that for a sale, there must be a buyer and a seller. The relation between the assessee and the Government was not of a buyer and a seller. The property in goods passes to the buyer in a sale and the price and/or credit passes to the seller. The sale was made to the consumers at the price fixed by the Government. The sale was complete as soon as the assessee supplied superphosphate to the buyer and the assessee realised the amount from buyer according to the terms of the sale. The subsidy and/or grant received by the assessee was not related to the sale. The subsidy was receivable by the assessee after the completion of the sale and subject to the various formalities as indicated in the Government's letter dated 16-6-1976. Moreover, if the claim of the assessee was not in order, the assessee was not entitled to subsidy and/or grant and according to clause (13) of the scheme, the assessee would have to refund the amount along with the penal interest. The assessee was not making any conditional sale. Therefore, the question of refund with penal interest could not arise in a sale. The subsidy was not a pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment of India's letter dated 16-6-1976 and urged that the subsidy received by the assessee was only a part of sales. Under the above circumstances, the closing stock of the assessee was not properly valued and the Commissioner (Appeals) was justified in taking into Consideration the subsidy received by the assessee from the Government of India in determining the rate at which the closing stock should have been valued. Accordingly, Shri Bagchi supported the order of the Commissioner (Appeals). 17. The assessee has closing stock of superphosphate. The closing stock has been valued at market rate. The assessee adopts the method of valuing the closing stock at market price or cost, whichever is lower. This method had been regularly adopted by the assessee and no fault had been found by the assessing officer. The grievance of the assessing officer was that while valuing the closing stock at the market rate, the assessee did not take into consideration the subsidy of Rs, 21,16,961 which it has received on the basis of the Government of India's letter dated 16-6-1976. Various clauses from the letter dated 16-6-1976 had been incorporated by the ITO in his order and, accordingly, they a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee before the Government subsequent to sale and the same had been received in the subsequent year, i.e., 1977-78, and had been subjected to tax. Therefore, the sale takes place when the property passes from buyer to the seller, whereas, the right to receive subsidy accrues when the same is granted by the Government. The assessee had not been charged sales tax on the subsidy. Subsidy had not been taken by the assessing officer as the part of the sale of the assessee. Therefore, even on this analogy, subsidy could not be taken as a part of sale. The counsel of the assessee has placed reliance on Dhrangadhra Chemical Works Ltd.'s case. The case referred to above is on a different issue. The matter has been highlighted only for the purpose that subsidy accrues when it is granted by the Government. This matter was before the Hon'ble High Court and the High Court at pages 484 and 485 ultimately came to the conclusion that subsidy accrued to the assessee when it was granted by the Government of India. This analogy is applicable for considering whether the subsidy was a part of the assessee's sale. The subsidy had not been included in the total sale of the assessee. The subsidy had been su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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