DHRANGADHRA CHEMICAL WORKS LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee the following three questions are referred to us for our determination :

(2.) SO far as the first question is concerned, the counsel for the assessee as well as the Revenue are agreed that in view of the decision ofthe Supreme Court in the case of India Cements Ltd. vs. CIT (1966) 60 ITR 52 (SC), this question has to be answered in the negative and in favour of the assessee. We answer question No. 1 accordingly in the negative and in favour of the assessee.

(3.) IT is the case of the assessee that in accordance with the resolution it became entitled to payment of a subsidy. There was a series of correspondence between the Government and the assessee as to the payment. Tata Chemicals Ltd. had already been paid such subsidy. The assessee company by its letter dated January 19, 1952, forwarded its claim for payment of the subsidy for the period commencing from October 1, 1950, up to July 12, 1951, supported by copies of orders, invoices, railway receipts and other documents. In this claim it was stated that 2,15,270 cwts. of soda ash was sold during the aforesaid period and a sum of Rs. 2,15,270 was claimed as subsidy payable by the Government to the assessee at the rate of Re. 1 per cwt. Further, letters were addressed by the assessee to the Government and ultimately on October 27, 1952, the assessee served a notice under S. 80 of the CPC upon the Government making the claim of Rs. 2,15,270 and stating that if the said amount was not paid it would file a suit to claim the said amount from the Government. As neither the amount was paid pursuant to the statutory notice, nor was any reply sent to it, ultimately, in February, 1954, the assessee filed a suit being Civil Suit No. 40 of 1954 in the Court of the Senior Sub Judge, Surendranagar, claiming a sum of Rs. 2,15,270 by way of subsidy from the Government. Ultimately, pursuant to an agreement arrived at between the Government and the assessee as stated in the letter of the Under Secretary, Ministry of Commerce and Industry, Government of India, dated August 13, 1954, a sum of Rs. 2,03,903 2 0 was sanctioned to be paid by the President to the assessee as and by way of subsidy in respect of soda ash sold during the period October 1, 1950, to July 12, 1951. It was stated in this letter that this payment was to be in full and final settlement of the claim of the assessee for subsidy as agreed to amicably between the assessee and the Government. In view of the said agreement, during the accounting year 1954 55, relevant to the asst. year 1955 56, a sum of Rs. 2,03,903 was paid by the Government to the assessee in respect of the said subsidy. This sum of Rs. 2,03,903 comprised of Rs. 1,34,422 for the period October 1, 1950, to March 31, 1951, and Rs. 69,481 for the period April 1, 1951, to July 12, 1951. In the P & L a/c for the year ending March 31, 1955, the assessee showed the receipt of Rs. 2,03,903 2 0 as subsidy income.