COMMISSIONER OF INCOME TAX Vs. PREMIER PROTEINS 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. 12/ind/1997 arising out of an order dt. 20th Dec. , 1996, passed in ITA No. 911/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 is correct in law in holding that the power subsidy received by the assessee-company is a capital receipt and, therefore, not chargeable to income-tax ?"

(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 utilised in the shape of certain percentage in power expenditure. The question arose before AO as to whether power subsidy received by an assessee can be regarded as capital expenditure (sic-receipt) or revenue expenditure (sic-receipt) in their hands. As usual, the contention of assessee was that it is in the nature of capital expenditure (sic-receipt) whereas the contention of Revenue was--it is in the nature of revenue expenditure (sic-receipt ). The AO and CIT (A) held against assessee. In their opinion, it was in the nature of revenue expenditure (sic-receipt) and hence, has to be taxed treating it to be in the nature of revenue expenditure (sic-receipt) in the hands of assessee. However, the Tribunal held it to be in the nature of capital expenditure (sic-receipt ). Accordingly, the view taken by AO and CIT (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.