Commissioner of Income Tax vs S. Kumars Tyre Mfg. Co.

S.K. Seth, J.

This reference u/s 256(1) of the Indian Income Tax Act, 1961, at the instance of the revenue has been made by the Income Tax Appellate Tribunal, Indore Bench, for the opinion of this court on tile following question of law :

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the power subsidy received by the assessee company was a capital receipt and therefore, not chargeable to Income Tax ?"

The facts, in brief, giving rise to this reference as per the statement of the case, are as follows :

Assessee company manufactures tyres and tubes, which are mostly sold to Bajaj Auto and Maharashtra Scooters. During the assessment year 1992-93 corresponding to the accounting period from 1-4-1991 to 31-3-1992, assessee company had received power subsidy to the tune of Rs. 4,66,160. The Income Tax Officer was of the opinion that power subsidy was revenue in nature and, as such, is liable to tax as income of the assessee. Consequently, he added the amount in the assessee''s hands as income chargeable to tax. This was confirmed in appeal by the appellate authority. On a further appeal being filed by the assessee company before the Tribunal, it deleted the addition following its earlier decision given in the case of Kashyap Sweetners (P) Ltd. v. Dy. CIT (IT Appeal No. 704 (Ind) of 1994) without any detail discussion. On an application being moved by the revenue, the Tribunal has referred the question as mentioned above for the opinion of this court.

We have heard learned counsel for the parties at length and perused the record. In our considered view power subsidy received by the assessee, is a revenue receipt and as such, is liable to tax in the assessee''s hand. Taxability of income is not dependent upon its destination or manner of its utilisation. It has to be seen that whether the amount is to be of revenue nature; if so, the amount will have to be taxed. The Income Tax Officer had rightly added the amount of power subsidy to the assessee''s income. The Tribunal committed an error in holding the said addition from the assessee''s income.

It has been held by their Lordships of the Supreme Court in catena of cases that the objects of power subsidy granted to an industrial undertaking on the percentage of its electricity bills is to meet out certain percentage of expenditure on power. The receipt is, therefore, revenue in nature in the hands of assessee. M/s. Sahney Steel and Press Works Ltd., Hyderabad etc. etc. Vs. Commissioner of Income Tax, Andhra Pradesh-I, Hyderabad, is a complete answer to the referred question. This decision of the Supreme Court has been followed in subsequent decisions in Commissioner of Income Tax Vs. Rajaram Maize Products, and CIT v. Eastern Electro Chemicals Industries (2000) 9 SCC 320. Against the last mentioned judgment a review was sought which too was dismissed by the Supreme Court.

In view of the foregoing discussion, we are of the opinion that on the facts and in the circumstances of the case, the Tribunal was not justified in holding that the power subsidy received by the assessee company was a capital receipt not chargeable to Income Tax. According to us, the power subsidy received by the assessee company was a revenue receipt and was chargeable to Income Tax in the hands of the assessee and it was rightly added by, the Income Tax Officer for the assessment year 1992-93.

Thus, the reference is to be answered in favour of the revenue and against the assessee. The reference is disposed of accordingly with no order as to the costs.

Let a copy of the order be sent under the seal of this court and signature of the Registrar to Appellate Tribunal which shall pass such necessary order in confirmity to the judgments referred to above.