COMMISSIONER OF INCOME TAX Vs. NEO SACK LTD

JUDGEMENT

(1.) THIS is an IT Reference made under Section 256 (1) of the IT Act at the instance of Revenue (CIT) by the Tribunal in RA No. 24/ind/1998 arising out of an order dt. 21st Nov. , 1997, passed in ITA No. 121/ind/1994 (Annex. C) to answer the following question of law by this Court: Whether, on the facts and in the circumstances of the case, the Tribunal was justified in deciding the issue in favour of the assessee as the issue is squarely covered by the decision of jurisdictional High Court in the case of CIT v. Hind Syntex Ltd. , MCC No. 314/92 and MCC No. 334/92, dt. 29th March, 1996, treating it receipt of capital nature ?

(2.) FACTS of the case as mentioned in the statement of case duly supported by the annexures accompanying the statement of case, need mention in brief.

(3.) THE assessee (respondent) is a limited company having one industrial unit engaged in manufacture of certain commodities, The assessee was given a power subsidy. It was essentially for running the unit and was to be utilized in the shape of certain percentage in power expenditure. The question arose before AO in the asst. yr. 1990-91 as to whether power subsidy received by an assessee can be regarded as capital expenditure or revenue expenditure in their hands. As usual, if the contention of assessee was that it is in the nature of capital expenditure, whereas the contention of Revenue was it is in the nature of revenue expenditure. The AO and CIT (A) held against the assessee. In their opinion, it was in the nature of revenue expenditure and hence, has to be taxed treating it to be in the nature of revenue expenditure in the hands of assessee. However, the Tribunal held it to be in the nature of capital expenditure. Accordingly, the view taken by AO and GIT (A) was reversed, giving rise to making of this reference to this Court at the instance of Revenue under Section 256 (1) of the Act to answer the aforementioned question.