CIT Vs. KANPUR SAHKARI MILK BOARD LTD

JUDGEMENT

(1.) 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. 0.5 lakh from the U.P. Government was a capital receipt and not a revenue receipt in nature?'

(2.) BRIEFLY stated that facts giving rise to the present reference are as follows: The respondent assessee is a co -operative society engaged in the business of milk, ghee and butter etc. During the assessment year 1978 -79 it had received a grant of Rs. 0.5 Lakhs from the Governor of U.P. vide Government order dated 3 -3 -1997 for the re -organisation of the society and was to be utilized specifically as working capital and for no 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 (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.

(3.) THE learned standing counsel for the revenue submitted that the grant of Rs. 0.5 Lakhs 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 tile 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.