JUDGMENT
S.B. Sinha, C.J.
1. An application for setting aside an order dated November 29, 2001 (CIT v. Steel Authority of India Ltd. [2002] 257 ITR 241 (Delhi)), has been filed by the respondent/applicant, inter alia, on the ground that Mr. Siddharth Yadav, learned counsel appearing for the respondent at the time when the matter was taken up for hearing, was busy in some other court.
2. We have heard learned counsel for the parties.
3. By the said order dated November 29, 2001, this court answered the question referred to it for its opinion by the Income-tax Appellate Tribunal, which is to the following effect:
“Whether, on the facts and in the circumstances of the case, the grants received from the Government by the assessed-company, which is a 100 per cent. Government company, to enable the company to function, was a capital receipt or revenue receipt ?”
4. It is not in dispute that the Steel Authority of India Limited (in short the “SAIL”) is a Government company within the meaning of Section 617 of the Indian Companies Act. It was incorporated on January 24, 1973. It received a sum of Rs. 4 lakhs on February 28, 1973, Rs. 20 lakhs on December 10, 1973 and Rs. 7 lakhs on March 25, 1974. In terms of a letter dated February 8, 1973, inter alia, its subscribed capital was to include Rs. 2 crores out of which Rs. 1 crore was to be used for meeting the preliminary expenses, advance payment of rent, cost of furniture and fixtures, office equipment and vehicles. Grant of Rs. 40 lakhs was also to be paid for a period of five years. The grants-in-aid as referred to hereinbefore were used in each of the three years in the following manner :
Rs
“The year ending on 31-3-1973
3,46,663
The year ending on 31-3-1974
22,20,891
The year ending on 31-3-1975
5,32,446.”
5. The claim of the assessed was that the said sum does not come within the purview of the expression “income”. However, the Income-tax Officer (in short “the ITO”) assessed the same as its income. The learned Tribunal disposed of the appeal holding :
“The question, therefore, narrows down to the proposition, whether in a case of 100 per cent. Government company where the grants were received to enable the company to function, the amounts received were capital or revenue receipts. The amounts received by the company are not in the nature of receipts which would augment its profit and loss account but they are receipts to enable its function. If the payments had been made by the Government to enable the company either to augment the profit and loss account, they could have been treated as trading receipts or revenue receipts, hence taxable. But this is not the case before us. The amounts had been received and adjusted in accordance with the arrangement between the Government who is the 100 per cent. shareholder and the company which is a 100 per cent. Government company. Therefore, looking from the broader point of view, it can be taken as a payment from self to self, which cannot be taken as a trading receipt or revenue receipt. A question was put up to a senior Departmental Representative as to whether the amounts contributed by the shareholders to neutralise the losses of a private limited company could be treated as the company’s revenue receipts or not. The answer was that the same could not be so treated. If the same situation is envisaged which, of course, is not so, as the assessed is not a private limited company, the receipts received by the SAIL could not be taken as the assessed’s receipts of revenue nature, more so, when the assessed-company is a 100 per cent. Government company. It is a case of payments from self to self as understood in common parlance and, therefore, the same cannot be treated as revenue receipts by any stretch of imagination. We, therefore, hold on the facts that the amounts of Rs. 3,46,663, Rs. 22,20,891 and Rs. 5,32,446 in the assessment years 1973-74, 1974-75 and 1975-76, respectively, were not the assessed’s income which is taxable.”
6. Learned counsel for the assessed would submit that having regard to the decision of the apex court in ONGC v. Collector of Central Excise [1991] 4 JT 158, and in terms of office memorandum dated January 24, 1994, the dispute between the parties ought to have been referred for determination of the appropriate committee.
7. If this be the position the assessed should have taken the same stand from the stage of assessment before the Income-tax Officer. However, we are of the opinion that the matter relating to income-tax does not come within the purview of the said scheme.
8. The second submission of learned counsel appearing on behalf of the assessed is that as the company is a 100 per cent. Government company, the amount received from the Central Government would not come within the purview of the definition of income. We do not agree. It is not in dispute that the assessed is liable to pay income-tax. Whether any “income” would come within the purview of taxable income or not has to be considered keeping in view the provisions of the Income-tax Act, in terms whereof it was for the assessed to show that the grants in aid given to it by the Central Government would not come within the purview of the expression “income”.
9. In a case where a question comes up for consideration as to whether grants in aid would come within the mischief of Section 10 of the Indian Income-tax Act or not, we are of the opinion that the doctrine of lifting the corporate veil would not be attracted. If that be so, any public sector undertaking would not be liable to pay income-tax at all.
10. The decision of the apex court in Sahney Steel and Press Works Ltd. v. CIT [1997] 228 ITR 253 is relevant in this connection. The question which arose for consideration therein was, as to whether any subsidy given in relation to new industrial undertakings or subsequent expansion of existing capacities, from the State Government, inter alia, in the form of refund of sales tax paid on machinery or finished goods and subsidy on power consumed and an exemption or refund of water rate, would be an income or not. It was held that the same would constitute income. It is not a case where the grant has been made to assist the assessed to acquire a new capital asset so as to make part of the assets of the unit in public interest.
11. Such assistance was given for the purpose of trading. Grants in aid for functioning of the company cannot be equated with such subsidies which are granted for the purpose of acquisition of new assets.
12. We are, therefore, of the opinion that no case has been made out for recalling this court’s order dated November 29, 2001. The review application is dismissed.