Delhi High Court
Cit vs Steel Authority Of India Ltd. on 29 November, 2001
Equivalent citations: 2002 123 TAXMAN 185 Delhi
JUDGMENT
The reference has been made by the Tribunal to this court for its opinion on the following question :
"Whether, on the facts and in the circumstances of the case, the grant received from the government by the assessed-company, which is a 100 per cent government company, to enable the company to function, was a capital or revenue receipt ?"
2. The Steel Authority of India Ltd. is a government company within the meaning of section 651 of the Companies Act, 1956 (hereinafter referred to as 'the Act'). It received grants-in-aid from the government on various dates, i.e., Rs. 4 lakhs on 28-2-1973, Rs. 20 lakhs on 10-12-1973 and Rs. 7 lakhs on 25-3-1974. These grants-in-aid were utilised in the profit and loss account maintained by the said company in the said years which is as under :
2. The Steel Authority of India Ltd. is a government company within the meaning of section 651 of the Companies Act, 1956 (hereinafter referred to as 'the Act'). It received grants-in-aid from the government on various dates, i.e., Rs. 4 lakhs on 28-2-1973, Rs. 20 lakhs on 10-12-1973 and Rs. 7 lakhs on 25-3-1974. These grants-in-aid were utilised in the profit and loss account maintained by the said company in the said years which is as under :
Rs.
Rs.
The year ending on 31-3-1973
The year ending on 31-3-1973
3,46,663
3,46,663
The year ending on 31-3-1974
The year ending on 31-3-1974
22,20,891
22,20,891
The year ending on 31-3-1975
The year ending on 31-3-1975
5,32,446
5,32,446
3. The said amounts were assessed as the income of the company. Against the said assessment, appeals were preferred which were dismissed. On appeals having been filed before the Tribunal, the same were disposed of holding that the grants received by the company were not capital receipts.
3. The said amounts were assessed as the income of the company. Against the said assessment, appeals were preferred which were dismissed. On appeals having been filed before the Tribunal, the same were disposed of holding that the grants received by the company were not capital receipts.
4. Having heard the learned counsel for the department, we are of the opinion that the matter seems to be covered by a decision of the Apex Court in the case of Sahney Steel & Press Works Ltd. v. CIT (1997) 228 ITR 253. In the said decision, the Apex Court held that subsidies having been granted for production or bringing into existence any new assets, the same are revenue in character. As indicated hereinabove, even in the instant case, the grants-in-aid have been made by the Central Government for the purpose of functioning of the company and not for bringing into existence any new assets. In that view of the matter, the aforementioned reference is, accordingly, answered in favor of the department and against the assessed.
4. Having heard the learned counsel for the department, we are of the opinion that the matter seems to be covered by a decision of the Apex Court in the case of Sahney Steel & Press Works Ltd. v. CIT (1997) 228 ITR 253. In the said decision, the Apex Court held that subsidies having been granted for production or bringing into existence any new assets, the same are revenue in character. As indicated hereinabove, even in the instant case, the grants-in-aid have been made by the Central Government for the purpose of functioning of the company and not for bringing into existence any new assets. In that view of the matter, the aforementioned reference is, accordingly, answered in favor of the department and against the assessed.
