SADICHHA CHITRA Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference is made by the Income -tax Appellate Tribunal, Bombay Bench 'B' Bombay, under section 256(2) of the Income -tax Act, 1961, in pursuance of an order of this court dated July 18, 1985, in Income -tax Application No. 599 of 1982 at the instance of the assessee. The question for our consideration is as under :

(2.) THE relevant assessment year is 1976 -77.

(3.) THE Income -tax Officer held that the said sum of Rs. 2,10,085 received by the assessee from the Government of Maharashtra constituted a revenue receipt and was, therefore, taxable. Being aggrieved by the said order, the assessee filed an appeal before the Commissioner of Income -tax (Appeals) - II, Bombay. By this well -considered order dated January 25, 1980, the Commissioner held that the said amount was not taxable. During the course of his order, the Commissioner of Income -tax referred, inter alia, to Circular No. 142 dated August 1, 1974, issued by the Central Board of Direct Taxes and published in : [1974]95ITR151(Delhi) . The said circular in terms applied only to 10% Central Outright Grant Subsidy Scheme for industrial units in backward areas and dealt with the question as to whether the receipt of such subsidy would constitute a revenue receipt or capital receipt in the hands of the recipient for the purpose of income -tax. It was observed by the Board in the said circular that the Scheme under consideration was framed by the Government for the growth of industries and not for supplementing the trade profits of the recipient and such subsidy was liable to be considered as a capital receipt in the hands of the assessee and non -taxable. In paragraph 15 of his appellate order, the Commissioner of Income -tax held that the subsidy in question was granted to the assessee for production of a new film and was thus a part of the capital outlay. The matter was carried in second appeal by the Department before the Income -tax Appellate Tribunal. On this aspect, the Income -tax Appellate Tribunal held that the order of the Commissioner of Income -tax (Appeals) was erroneous. The Tribunal set aside the order of the Commissioner and held that the receipt of the said subsidy in the hands of the recipient constituted a revenue receipt and was taxable as income of the assessee. The Tribunal relied upon the decision of the Hon'ble Supreme Court in the case of V. S. S. V. Meenakshi Achi v. CIT : [1966]60ITR253(SC) . Learned counsel, Shri S. N. Inamdar, appearing for the assessee, submitted at the hearing of the reference that the ratio of the judgment of the Hon'ble Supreme Court in : [1966]60ITR253(SC) is not applicable to our case and the said case is clearly distinguishable.