Commissioner Of Income-Tax vs National Co-Operative ...
2000 Latest Caselaw 957 Del

JUDGMENT

Arijit Pasayat, C.J.

1. All these cases involve an identical dispute. At the instance of the Revenue, the question referred relates to the nature of receipts of subsidy granted by the Central Government to the assessed. The following question which is common in all the references, except for the amount of subsidy granted, has been referred under Section 256(1) of the Income-tax Act, 1961 (for short "the Act"), by the Income-tax Appellate Tribunal, Delhi Bench-"D" (in short "the Tribunal") for the opinion of this court:

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the subsidy granted by the Central Government to the assessed amounting to Rs. 25,000 in the assessment year 1972-73 is receipt of a casual and non-recurring nature as contemplated in section 10(3) of the Income-tax Act and not covered by clause (ii) of the proviso to section 10(3) of the Act and hence the said amount cannot be brought to tax in the hands of the assessed ?"

2. The Tribunal held that the receipts are of a casual and non-recurring nature as contemplated under section 10(3) of the Act and not covered by clause (ii) of the proviso to section 10(3) of the Act and the said amounts cannot be brought to tax in the hands of assessed.

3. Learned counsel for the Revenue submitted that the conclusions of the Tribunal are not legally tenable because the true nature of the receipts and the frequency with which they have been received has not been duly considered. Learned counsel for the assessed, on the other hand, brought to our notice paragraph 14 of the Tribunal's order in I. T. R. Nos. 123 to 125 of 1978 pertaining to I. T. A. No. 3220 (Delhi) of 1973 to 74 and I. T. A. Nos. 1071 and 1072 (Delhi) of 1975 and 76. The same reads as follows :

"It is argued by the Revenue's representative that the assessed has already claimed deductions on the managerial expenses and the rent. In our opinion, since the assessed is getting subsidy from the Central Government, no deduction on managerial expenses and the rent should be allowed to the extent of the amount of subsidy given by the Central Government to the assessed. The latter cannot take double advantage. The hole created in the profits of the assessed by spending the money on managerial expenses and rent, is filled in by the aid given by the Central Government and thus, the position comes to this as if the assessed has spent nothing on managerial expenses and the rent. We are, therefore, of the view that to the extent of the subsidy amount the assessed is not entitled to the deduction of managerial expenses and the rent."

According to learned counsel for the assessed, the net result is that there is no effect on the income of the assessed and the tax liability relatable thereto.

4. Though the question referred is a question of law, yet considering the fact that the income of the assessed is not affected in view of the conclusion of disallowance of expenses relating to managerial expenses and rent, the net result is that the assessed's receipts on account of subsidy have been held to be non-taxable, but the claim of expenses to the same extent have been held to be not allowable. That being the position, we feel any answer to the question referred by the Tribunal would be of academic interest. For all these years with which we are concerned similar conclusions have been arrived at.

5. Learned counsel for the Revenue, on the other hand, contended that if for any other period the conclusions arrived at by the Tribunal are otherwise, so far as allowability of expenses is concerned, the Revenue should be permitted to raise the dispute. We find substance in this plea. So far as the question relatable to the nature of subsidy is concerned we do not think it necessary to answer the question as it is actually of academic nature as far as both the assessed and the Revenue are concerned.

6. For the assessment year 1977-78 additional questions are involved. One relates to grant of depreciation on an asset which is not registered in the name of the assessed-company and the second relates to the nature of receipt of subsidy. The questions referred read as follows :

I. T. Rs. Nos. 147 and 148 of 1983.

"1. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in allowing depreciation on the amount invested in the purchase of godown-cum-show room situated at No. 95, Nehru Place, New Delhi, in spite of the fact that it was not registered in the name of the assessed-company ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in deleting the addition of Rs. 75,000 received by the assessed as subsidy from the Central Government on capital account and utilised by it for the acquisition of a godown-cum-show room ?"

7. The issue in the first question is no longer res integra in view of the decision of this court in Gowersons Publishers (Pvt.) Ltd. v. CIT [1999] 240 ITR 191 [FB], In that view of the matter the Tribunal's view was in order. The reference has to be answered in favor of the assessed and against the Revenue.

8. So far as the other issue is concerned, it relates to the deletion by the Tribunal of addition of Rs. 75,000 received by the assessed as subsidy from the Central Government on capital account. The Tribunal has recorded a finding of fact that the receipt was made on March 28, 1972, and did not relate to the assessment year in question. Additionally, the amount was utilised for the purpose of acquisition of a capital asset and the subsidy was earmarked for the purpose. That being the position the Tribunal's view is well founded. The question referred in relation to the aforesaid issue is answered in the affirmative, in favor of the assessed and against the Revenue.

9. All the references are disposed of accordingly.