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CIT v. M/s Kanpur Sahkari Milk - INCOME TAX REFERENCE No. 13 of 1988 [2004] RD-AH 986 (1 October 2004)


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Court  No.37

Income Tax Reference No.13 of 1988

The Commissioner of Income Tax  Vs. M/s Kanpur Sahkari Milk Board Ltd.

Hon'ble  R.K. Agrawal, J

Hon'ble P. Krishna, J

The Income Tax Appellate Tribunal, Allahabad  has referred the following question of law under section  256 (1) of the Income Tax Act 1961 (hereinafter referred to as the Act)  for opinion to this Court:-

" Whether on the facts and in the  circumstances of the case the Income-tax Appellate Tribunal was correct in law in holding that the grant of Rs..05 lacs from the U.P. Government was a capital receipt and not a revenue receipt in nature?"

Briefly stated that facts giving rise to the present reference are as follows:-

The respondent assessee is a  cooperative society engaged in the business of  milk, ghee and butter etc. During the assessment year 1978-79 it had received a grant of Rs.5 Lacs from the Governor of U.P.  vide government order dated 31st March, 1997 for the re-organisation of the society and was to be utilized specifically as working capital and for not other purpose. The assessing Officer was of the view that the income from Government subscriptions, contributions and donations etc.  is income from business. The respondent assessee preferred appeal before the Commissioner of Income Tax (Appeals), who allowed the appeal holding that the said grant was not a revenue receipt but it was a capital receipt which order has been upheld by the Tribunal.

We have heard Shri Shambhu Chopra, the learned standing counsel for the Revenue and Shri Vikram Gulati, learned counsel for the respondent assessee.

The learned standing counsel for the Revenue submitted that the grant of Rs.5 Lacs was revenue in nature as it has been given for reorganization of the society and for working capital. According to him the society was engaged in the business and therefore the grant is utilizable to its business and the tribunal has committed an error in holding it to be a capital receipt. In contra, Sri Vikram Gulati, the learned counsel for the respondent assessee submitted that the grant was given for reorganization of the society and was towards the working capital. It did not partake the nature of revenue receipt as it was for working capital which is a capital receipt.

The question as to whether a grant receipt by an assessee is capital receipt or revenue receipt depends upon the facts and circumstances of each case and also for the purpose for which it has been given. This Court in the case of  M/s. Kalpna Palace vs. Commissioner of Income Tax  decided  on 18th August, 2004 after considering the decision of the Apex Court in the case of Sahney Steel and Press Works Ltd. Vs. Commissioner (1997) 228 TTR 253 (S.C.)  has held that a subsidy given by the State Government for construction of  cinema hall  though in the form of reimbursement looking to the entertainment tax is capital receipt. Principle laid down in the aforesaid case is wholly applicable in the present case. In this view of the we hold that the grant of Rs.5 lacs was capital receipt and not revenue.

Respectfully following the aforesaid decisions we answer the question of law referred to us in affirmative i.e. in favour of the assessee and against the Revenue. However, there shall be no order as to costs.




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