- (1.) In compliance of direction of this court on an application under Section 256(2) of the Income-tax Act 1961, the Tribunal has referred the following question for the opinion of this court : "Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that realisation through additional free sale of sugar quota under the Sampat Incentive Scheme was in the nature of capital receipt ?"
(2.) At the outset it is brought to our notice that the question is covered by the order of this court dated March 31, 1998, in the case of this assessee whereby the application of the Revenue under Section 256(2) of the Act has been rejected. Therefore, this application could be rejected outright or the question can be answered in favour of the assessee. Learned counsel for the Revenue has not controverted this fact. The Tribunal has decided the issue in favour of the assessee on two counts firstly that incentive receipts have overriding obligation, the additional profits will only be used to pay off the loans taken from Government financial institutions, for expansion of sugar factory, in other words, the receipt on account of incentive will be used to pay off capital loan. Secondly, when the receipt is for payment of loan taken for capital asset, it is a capital receipt. The first finding of overriding obligation has not been challenged, therefore, the question regarding the second finding has become only of academic interest, so long as the finding of the Tribunal regarding diversion of income remains, the incentive receipts cannot be taxed as revenue receipt.
(3.) Though the question is covered in favour of the assessee but when the reference has been made as per our direction on application under Section 256(2), therefore, we would like to answer the question on the merits also. On the merits also we do not find force in the case of the Revenue.;