| Case ID |
46491c1a-ff45-4832-b63e-eabbd0c8d0be |
| Body |
View case body. Login to View |
| Case Number |
Civil Appeal No.2193 of 1985 |
| Decision Date |
Sep 19, 1997 |
| Hearing Date |
|
| Decision |
The Supreme Court dismissed the appeal, affirming that the subsidy received by the assessee-company from the Andhra Pradesh Government is taxable as a revenue receipt. The court emphasized that payments made to assist new industries at the commencement of business are supplementary trade receipts that should be included in the assessable income. The court clarified that the character of the subsidy, whether revenue or capital, depends on the purpose for which it is given. Payments made under the subsidy scheme were intended to assist the assessee in carrying on business operations and were not for the purpose of establishing new assets. Consequently, such subsidies must be treated as revenue receipts and are subject to taxation under the Income Tax Act. |
| Summary |
In the case of Sahney Steel Press Works Ltd. vs. Commissioner of Income Tax, the Supreme Court of India addressed the taxation of subsidies received by newly established industries. The court ruled that subsidies from the government, aimed at assisting businesses in their operational activities, are classified as revenue receipts. The case revolved around whether the subsidies granted to the appellant for production incentives were taxable under the Income Tax Act, 1961. The court determined that since the subsidies were provided after the commencement of production, they were not for capital investment but rather for operational support. This decision highlights the distinction between capital and revenue receipts in tax law, emphasizing the importance of the intent behind government subsidies. The ruling has significant implications for businesses receiving similar financial assistance, as it clarifies the tax treatment of such subsidies. Keywords: Income Tax Act, revenue receipts, operational subsidies, government assistance, taxation, Supreme Court ruling. |
| Court |
Supreme Court of India
|
| Entities Involved |
Sahney Steel and Press Works Ltd.,
Andhra Pradesh Government
|
| Judges |
SUHAS C. SEN,
D.P. WADHWA
|
| Lawyers |
B.B. Ahuja, Senior Advocate,
S. Ganesh,
Mrs. A.K. Verma,
A.V. Rangam,
A. Ranganadhan,
G. Gopalakrishnan Buddy A. Ranganadhan,
S. Rajappa,
Ms. Lakshmi Iyengar (Arvind Kumar),
for Mrs. M. Karanjawala
|
| Petitioners |
others,
SAHNEY STEEL PRESS WORKS LTD.
|
| Respondents |
COMMISSIONER OF Income tax
|
| Citations |
1998 SLD 237,
1998 PTD 1718,
(1997) 228 ITR 253
|
| Other Citations |
CIT v. Dusad Industries (1986) 162 ITR 784 (MP),
CIT v. Sahney Steel and Press Works Ltd. (1985) 152 ITR 39,
Ostime (H.M. Inspector of Taxes) v. Pontypridd and Rhondda Joint Water Board (1946) 14 ITR (Suppl) 45,
Seaham Harbour Dock Co. v. Crook (H.M. Inspector of Taxes) (1931) 16 TC 333 (HL),
CIT v. Ruby Rubber Works Ltd. (1989) 178 ITR 181 (Ker.),
Sadichha Chitra v. CIT (1991) 189 ITR 774 (Bom),
Kesoram Industries and Cotton Mills Ltd. v. CIT (1991) 191 ITR 518 (Cal)
|
| Laws Involved |
Income Tax Act, 1961
|
| Sections |
41(1)
|