- (1.) IN this reference, arising out of the assessee's applications under Section 256 (1) of the Income-tax Act, 1961 (hereinafter referred to as " the Act "), the following two questions of law have been referred to this court : " (i) (a) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the subsidy of Rs. 11,969 received by the assessee from the Government constituted a revenue receipt to be taxed as such (assessment year 1965-66) ? (b) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the subsidy of Rs. 12,815 received by the assessee from the Government constituted a revenue receipt to be taxed as such (assessment year 1967-68) ? (ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 6,104 representing admission fee charged by the assessee-co-operative society from its members constituted a taxable receipt ? "
(2.) THE facts giving rise to these questions of law are : The assessee is a co-oporative society registered under the Co-operative Societies Act, which is running a store of consumables primarily for its members and shareholders. The society did not succeed in its venture and approached the Govt. for subsidy which was given, at Rs. 15,719 (Rs. 2,500 for delivery van, Rs. 1,250 for equipment, Rs. 11,969 for managerial and rental expense es) for the first year, i. e. , assessment year 1965-66, and Rs. 12,815 on account of managerial expenses, for the second year, i. e. , assessment year 1967-68. The dispute, therefore, relates to Rs. 11,969 only as far as the assessment year 1965-66 is concerned and to Rs. 12,815 for the assessment year 1967-68. The assessee's case for both the years in question before the revenue authorities was that the subsidy was a receipt of casual and nonrecurring nature and was hence exempted from tax. The ITO did not accept this contention. The assessee went up in appeal and the AAC allowed the appeal, on the ground that, in his opinion, the receipt of subsidy was of the nature of casual and non-recurring receipt and was thus not taxable. In support of this view, certain authorities are referred in his order, annex. " B ". The revenue went up in second appeal before the Tribunal and contended that the case law on which the AAC allowed the appeal, is not relevant as it did not even touch upon the issues involved in these two cases. However, the learned Tribunal allowed the departmental appeals, with the following observations : " After hearing both the parties and going through the cases relied upon by both the parties, we are of the view that the AAC did not correctly apply his mind to the issue before him. The subsidy or the grant given by the Govt. was an incentive, as the assessee calls it, so that the assessee may pass through its initial stages of struggle. The receipt was a revenue receipt not to be returned to the Government at any future date. When an assessee receives an amount of such a nature, it can neither be casual nor non-recurring in nature but is positively revenue receipt which is taxable. After all, keeping in view the concern of the Government to encourage co-operatives, such subsidies are given so that the co-operatives may be in a position to carry on their business very effectively and more successfully resulting in more profitability. Such subsidies are boosters to the business and as they are not returnable or refundable either in cash or by adjustment, they are revenue receipts to be taxed as such. We, therefore, hold that the subsidies in the two assessment years assessed by the ITO had been rightly assessed and the AAC's order is, therefore, reversed and that of the ITO restored to this extent for both the years. "
(3.) THE learned counsel for the assessee has urged that, in view of Section 10 (3) of the Act, any receipt which is of a casual and non-recurring nature, is to be excluded while computing the total income of the assessee. According to him, the subsidies given by the Govt, are boosters to the co-operative movement and are not returnable or refundable and under no circumstances it can be held that these two amounts constitute a revenue receipt as contemplated by Section 10 (3), applicable for the relevant years which read as under : " 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- -. . . . . . (3) any receipts which are of a casual and non-recurring nature, unless they are (i) capital gains, chargeable under the provisions of Section 45 ; or (ii) receipts arising from business or the exercise of a profession or occupation ; or (iii) receipts by way of addition to the remuneration of an employee. ";