High Court Of Delhi
CIT vs. National Co-Operative Consumerâs Federation Ltd.
Sections 4, 10(3), 32
Asst. Year 1972-73, 1977-78
Arijit Pasayat, C.J. & D.K. Jain, J.
IT Ref. Nos. 20, 123-125, 270, 320 of 1978, 318 of 1979 & 147 & 148 of 1983
12th September, 2000
R.C. Pandey and Mrs. Prem Lata Bansal, for the Applicant : K.P. Bhatnagar, for the Respondent
PASAYAT, C.J. :
All these cases involve an identical dispute. At the instance of the revenue question referred relates to the nature of receipts of subsidy granted by the Central Government to the assessee. The following question which is common in all the reference, except for the amount of subsidy granted, has been referred under s. 256(1) of the IT Act, 1961 (âthe Actâ) by the Tribunal, Delhi Bench âDâ, for opinion of this Court : In IT Ref. No. 318 of 1979 :
“Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the subsidy granted by the Central Government to the assessee amounting to Rs. 25,000 in the asst. yr. 1972-73 is receipt of a casual and non- recurring nature as contemplated in s. 10(3) of the IT Act and not covered by cl. (ii) of the proviso to s. 10(3) of the Act and hence the said amount cannot be brought to tax in the hands of the assessee ?”
The Tribunal held that the receipts are of a casual and non-recurring nature as contemplated under s. 10(3) of the Act and not covered by cl. (ii) of proviso to s. 10(3) and said amounts cannot be brought to tax in the hands of assessee.
The learned counsel for the revenue submitted that the conclusions of the Tribunal are not legally tenable because the true nature of receipts and the frequency with which they have been received has not been duly considered. The learned counsel for the assessee, on the other hand, brought to our notice-paragraph 14 of the Tribunalâs order in IT Ref. Nos. 123-125 of 1978 pertaining to IT Appeal No. 3220 (Delhi) of 1973-74 and IT Appeal Nos. 1071 and 1072 (Delhi) of 1975-76. The same reads as follows : “14. It is argued by the revenueâs representative that the assessee has already claimed deductions on the managerial expenses and the rent. In our opinion, since the assessee 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 assessee. The latter cannot taken double advantage. The hole created in the profits of the assessee 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 assessee has spent nothing on managerial expenses and the rent. We are, therefore, of the view that to the extent of the subsidy amount the assessee is not entitled to the deduction of managerial expenses and the rent.” According to the learned counsel for the assessee, net result is that there is no effect on the income of the assessee and the tax liability relatable thereto.
Though the question referred is a question of law, yet considering the fact that the income of the assessee is not affected in view of the conclusion of disallowance of expenses relating to managerial expenses and rent, the net result is that the assesseeâs receipts on account of subsidy have been held to be non-taxable, but claim of expenses to the same extent had 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 conclusion have been arrived at.
The learned counsel for the revenue, on the other hand, contended that if for any other period 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 assessee and revenue are concerned.
For the asst. yr. 1977-78 additional questions are involved. One relates to grant of depreciation on an asset which is not registered in the name of the assessee-company and second relates to nature of receipt of subsidy. The questions referred read as follows :
In IT Ref. Nos. 147-148 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-showroom situated at 95, Nehru Place, New Delhi in spite of the fact that it was not registered in the name of the assessee-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 assessee as subsidy from the Central Government on capital account and utilised by it for the acquisition of a godown-cum-showroom.”
The issue in the first question is no longer res integra in view of decision of this Court in Gowersons Publishers (P) Ltd. vs. CIT (1999) 240 ITR 191 (Del). In that view of the matter the Tribunalâs view was in order. The reference has to be answered in favour of the assessee and against the revenue.
So far as other issue is concerned, it relates to the deletion by the Tribunal of addition of Rs. 75,000 received by the assessee as subsidy from the Central Government on capital account. The Tribunal has recorded a finding of fact that the receipt was made on 28th March, 1972 and did not relate to 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 Tribunalâs view is well-founded. The question referred in relation to the aforesaid issue is answered in the affirmative, in favour of the assessee and against the revenue.
All the references are disposed of accordingly.
[Citation : 254 ITR 599]