In the High Court of Judicature at Madras Dated :28.4.2009 Coram : The Honourable Mr.Justice K.RAVIRAJA PANDIAN and The Honourable Mr.Justice M.M.SUNDRESH Tax Case (Appeal) Nos.609 to 612 of 2004 The Commissioner of Income Tax, Tamil Nadu VIII Madras. ... Appellant Vs The Tiruttani Co-operative Sugar Mills Limited Tiruvalangadu 631 210. ... Respondent TAX CASE (APPEALS) under Section 260A of the Income Tax Act against the orders of the Income Tax Appellate Tribunal Madras A Bench dated 16.7.2003 made in I.T.A.No.1118, 1119/Mds/1996 and 1795 and 1796/Mds/1998. respectively for the assessment year 1991-92. 1992-93. 1993-94. 1994-95. For Appellant : Mr.J.Naresh Kumar For Respondents: Mr.J.Balachandar JUDGMENT
JUDGMENT OF THE COURT WAS DELIVERED BY
K.RAVIRAJA PANDIAN,J
The appeals are filed by the revenue against the order of the Income Tax Appellate Tribunal, Madras A Bench dated 16.7.2003 made in I.T.A.No.1118, 1119/Mds/1996 and 1795 and 1796/Mds/1998 respectively. The relevant assessment years are 1991-92, 1992-93, 1993-94 and 1994-95. The substantial questions of law formulated for entertainment of the appeal is as follows:-
1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the receipts from the sale of levy free sugar is capital receipt and not taxable ?
2. Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that receipt from concession in the rate of excise duty rebate is capital receipt and not taxable ?”
2. The assessee is a co-operative Society engaged in manufacture and sale of sugar. As regards the assessability of receipts on account of higher free sale of sugar and receipt of excise duty rebate, it was represented that these receipts are capital in nature and therefore not to be treated as income liable to tax. The first appellate authority held that the amount received on account of higher free sale of sugar was a revenue receipt includible in the total income of the assessee and confirmed the order of the assessing officer. The addition is confirmed on account of excise duty debited in the profit and loss account which was in fact was not an ascertained liability or a real liability of the excise duty payable by the assessee. These additions also confirmed by the appellate authority. Against the said order, the assessee preferred appeals before the Income Tax Appellate Tribunal. The Tribunal allowed the appeals filed by the assessee. Aggrieved by that order, the present tax case appeals are filed.
3. We heard the arguments of the learned counsel for the revenue and perused the materials available on record.
4. Learned counsel appearing for the revenue submitted that the issue involved in this case has already been decided by this court in the case of Chengalrayan Co-operative Sugar Mills Ltd., Vs. Commissioner of Income Tax reported in 261 ITR 575, wherein this court held that the purchase tax subsidy received by the assessee would form part of the income from business. However, the excise duty rebate or excise duty incentive would not form part of income from business assessable to tax under Section 28(iv) of the Income Tax Act, 1961. For coming to the said conclusion the Division Bench relied on the decision of this court in the case of Commissioner of Income Tax Vs. Ponni Sugars and Chemicals Ltd., reported in 260 ITR 605.
5. In the case of Commissioner of Income Tax Vs. Madurantakam Co-operative Sugar Mills Ltd reported in 263 ITR 388, the Division Bench has held that the incentives given by the Government in the form of higher free sugar and allowing the owner to collect excise duty on the sale price of free sale sugar in excess of normal quota but to pay to the Government only the excise duty payable on the price of levy sugar were incentives given exclusively for the purpose of repayment of loan borrowed for the purpose of meeting part of the capital cost from financial institutions and therefore were not revenue receipts.
6. The Supreme Court in the latest decision in COMMISSIOENR OF INCOME TAX VS. PONNI SUGARS AND CHEMICALS LTD (306 ITR 392(SC) held that the main eligibility condition in the schemes was that the incentive had to be utilised for repayment of loans taken by the assessee to set up new units or for substantial expansion of an existing unit. The subsidy received by the assessee was not in the course of a trade but was of a capital nature.
7. In view of the above enunciation of law by the Supreme Court, the questions of law have to be answered against the Revenue and the appeals are liable to be dismissed and as such dismissed.
krr
To
1. The Commissioner of Income Tax
Chennai
2. The Income Tax Appellate Tribunal,
Chennai ‘A’ Bench,
Chennai