ORDER
U.B.S. Bedi, Judicial Member
1. This appeal of the assessee is directed against the order passed by kerned CIT(A), Gwallor dated 7/77/2003 relevant to assessment year 93-94 whereby assessee has challenged confirmation of order of Assessing Officer by learned CIT(A) in treating Rs. 4,65,496/- received on account of subsidy as a revenue receipt against its claim as capital receipt.
2. The appeal of the assessee was found to be defective inasmuch as same was filed beyond the time limit prescribed and appeal filing fee was less paid for which defect memo was issued and the assessee while making good the deficiency in payment of the fee has pleaded for condonation of delay in filing of the appeal on the ground that same got delayed with the earlier engaged Counsel and by filing affidavit of the concerned Counsel and relying upon Hon’ble Supreme Court decision in the case of M.K. Prasan v. Arumogam decided on 30/7/2001, Collector, Land Acquisition, Anantnag and Anr. v. Mst. Katiji and Ors. decided on 19/2/1997, Bidasaria Brothers v. Addl. CCT (MP) (2004) 3 STJ 73 (MP), it was pleaded for admission of the appeal as there was a bonafide reason for not presenting the appeal within the time and discrepancy in payment was also due to wrong advise given by the then Counsel for the assessee.
3. Learned D.R. has been heard on this point who opposed the move of the assessee and pleaded that since appeal was not filed within the due time and part payment was also unduly delayed, therefore, application of the assessee should be rejected.
4. After hearing both the sides and considering the material on record as well as case law relied upon by the parties, it is seen that the assesses not only filed the appeal late but also there was deficiency in payment of appeal filing fee and responsibility for both the discrepancies have been taken by the concerned Counsel engaged by the essessee who has filed his affidavit in this regard. Keeping in view the entirety of facts and circumstances and the fact that the assessee has not been property guided for depositing proper appeal filing fee and delay in filing of appeal was also caused by concerned counsel for the assessee who has take both the responsibilities, therefore, under these circumstances and in the interest of justice, it would be appropriate to condone such delay and admit the appeal. As such, while accepting the application of the assesset, condone the delay and admit the appeal for hearing.
5. The facts indicate that the assessee company received subsidy Rs. 4,65,496/- on 26/3/93 from State Government through DIC, Sagar. In the original order dated 10/10/95, the Assessing Officer treated it as revenue receipt and disallowed depreciation to the extent of Rs. 81,457/-Wniie deciding the appeal against this order the CIT(A) Gwalior vide order dated 17/7/98 set aside the assessment order directing the Assessing Officer to decide the case afresh in the light of the decision of the Hon’ble (sic) Supreme Court in Sahney Steel & Press Work Limited v. CIT 288 ITR 253. While making fresh assessment, the Assessing Officer was of the view that the core issue involved in the judgement of the Hon’ble Supreme Court cited by the CIT(A) in his order was the time factor of the receipt of subsidy. He found that in the case of the assessee, the unit started production in the financial year 1987-88 and the Subsidy was received by the assessee in the financial year 1992-93 which is after setting-aside up of the industry and commencement of production He was therefore, of the view that the subsidy in the case of the assesses was in the nature of revenue receipt and, accordingly, disallowed the claim of the assessee.
6. In appeal against such order of the Assessing Officer assessee’s Counsel submitted that the assessee applied to the DIC before the commencement of production, but it was finalized in routine manner after the commencement of production. According to the authorised representative this was beyond control of the assessee and for this , the assessee should not be penalized by making addition of Rs. 4,65,496/-. He accordingly urged that the action of the Assessing Officer should not be confirmed.
7. Learned CIT(A) while considering but not accepting the pleas of the assessee has concluded to confirm the order of the Assessing Officer in para 2 on page 2 of his order as under:
I am unable to agree With the contention of the learned authorised representative. The ratio of the Hon’ble Supreme Court cited earlier by the CIT (A) is very clear in the matter. It has been clearly held in that case that if the subsidy is given after commencement of production of an Industrial Undertaking, such subsidy must be treated as assistance for the purpose of the trade and is in the nature of revenue receipt. The learned A.R has not produced before me any cogent material that goes to support his claim. In this view of the matter, the action of the Assessing Officer is confirmed.
8. Still aggrieved, the assessee is in further appeal and while reiterating the submissions as made before lower authorities, it was pleaded for setting aside the orders of authorities below. By filing copy of the State Investment Subsidy and Sanction Rule 1989, It was pleaded that though the subsidy was granted after the commencement of the production but it was applied for before such commencement and subsidy received is a capital receipt. Therefore, same cannot be treated as revenue receipt and decision of Hon’ble Supreme Court in the case of Sahney Steel (Supra) is not applicable to the facts of this case, it was thus pleaded for treating subsidy of Rs. 4,65,496/- as capita! receipt and to exclude the addition made by the Assessing Officer and confirmed by learned CIT(A).
9. Learned D.R. has been heard who relied on the orders of authorities below. On specific query, Learned D.R. was unable to show as to how such subsidy could be said to be revenue receipt when it is claimed to be relatable to the capital investment.
10. After hearing both the sides and considering the material on record as well as relevant rules for of grant of subsidy and the case law relied upon, it is seen that in the case of Sahney Steel and Press Works Ltd. and Ors. v. CIT Hon’ble Supreme Court has held as under:
If payments in the nature of subsidy from public funds are made to the assesses to assist him in carrying on his trade or business, they are trade receipts. The: character of the subsidy in the hands of the recipient whether revenue or capital – will have to be determined, having regard to the purpose for which the subsidy is given. The source of the fund is quite immaterial. However, if the purpose is to help the assessee to set up its business or complete a project the monies must be treated as having been received for capital purposes, But if monies are given to the assessee for assisting him in carrying out the business operations and the money is given only after and conditional upon commencement of production, such subsithes must be treated as ass/stance for the purpose of the trade.
11. The assessee was granted subsidy of Rs. 4,65,496/- received on 26/3/93 from State Government (under State Investment Subsidy Sanction Rule 1889 from DIC, Sagar). This subsidy was made to hold the growth of industry and not supplementing the profits of the entrepreneurs. Under the scheme the quantum of subsidy is determined with reference to the fixed capital investment and not on the basis of sale or profit. The assessee received 15% capital subsidy in a single stroke and not in any recurring manner on fixed capital Rs. 31,03,309/- in land, building, plant and machinery, electric installations, dies etc. The working capital has been specifically excluded from computation of fixed capital for this purpose and important grant of subsidy is that the industrial unit must remain in production atleast for a period of five years after Its goes into production otherwise it is recoverable from the unit as an arrears of land revenue. Thus in this way the subsidy is intended to encourage and induce new entrepreneur to work for setting up industries in backward area as such it is a capital receipt and is not covered by the above noted Hon’ble Supreme Court decision. In this case the assessee applied for grant of subsidy to DIC before commencement of production but it was finalized in routine manner on 26/03/99 i.e. after commencement of production but It was beyond control of the assessee and considering the nature of subsidy in the light of relevant Rules and other relevant considerations. I am of the considered view that subsidy amount received by the assessee is not a revenue receipt which has rightly been claimed by the assessee to be a capital receipt and action of authorities below in treating the same to be a revenue receipt is not legally correct and as such same is not tenable. Therefore while accepting the appeal of the assessee, I direct the Assessing Officer to uphold/allow the claim in this regard end delete the impugned addition made/confirmed.
12. As a result, the appeal gets allowed.