ORDER The Income Tax Appellate Tribunal, Allahabad has referred the following question of law under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act) for opinion to this Court:
"Whether on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was correct in law in holding that the grant of' Rs. 0.5 lakh from the U.P. Government was a capital receipt and not a revenue receipt in nature?"
2. Briefly stated that facts giving rise to the present reference are as follows:
2. Briefly stated that facts giving rise to the present reference are as follows:
The respondent assessee is a co-operative society engaged in the business of milk, ghee and butter etc. During the assessment year 1978-79 it had received a grant of Rs. 0.5 Lakhs from the Governor of U.P. vide Government order dated 3-3-1997 for the re-organisation of the society and was to be utilized specifically as working capital and for no other purpose. The assessing officer was of the view that the income from Government subscriptions, contributions and donations etc. is income from business. The respondent assessee preferred appeal before the Commissioner (Appeals), who allowed the appeal holding that the said grant was not a revenue receipt but it was a capital receipt which order has been upheld by the Tribunal.
3. We have heard Shri Shambhu Chopra, the learned standing counsel for the revenue and Shri Vikram Gulati, learned counsel for the respondent assessee.
3. We have heard Shri Shambhu Chopra, the learned standing counsel for the revenue and Shri Vikram Gulati, learned counsel for the respondent assessee.
4. The learned standing counsel for the revenue submitted that the grant of Rs. 0.5 Lakhs was revenue in nature as it has been given for reorganization of the society and for working capital. According to him the society was engaged in the business and therefore, the grant is utilizable to its business and the Tribunal has committed an error in holding it to be a capital receipt. In contra, Sri Vikram Gulati, the learned counsel for tile respondent assessee submitted that the grant was given for reorganization of the society and was towards the working capital. It did not partake the nature of revenue receipt as it. was for working capital which is a capital receipt.
4. The learned standing counsel for the revenue submitted that the grant of Rs. 0.5 Lakhs was revenue in nature as it has been given for reorganization of the society and for working capital. According to him the society was engaged in the business and therefore, the grant is utilizable to its business and the Tribunal has committed an error in holding it to be a capital receipt. In contra, Sri Vikram Gulati, the learned counsel for tile respondent assessee submitted that the grant was given for reorganization of the society and was towards the working capital. It did not partake the nature of revenue receipt as it. was for working capital which is a capital receipt.
5. The question as to whether a grant receipt by an assessee is capital receipt or revenue receipt depends upon the facts and circumstances of each case and also for the purpose for which it has been given. This court in the case of Kalpna Palace v. CIT (2004) 141 Taxman 392 decided on 18-8-2004 after considering the decision of the Apex court in the case of Sahney Steel & Press Works Ltd. v. CIT (I997) 228 ITR 253 has held that a subsidy given by the State Government for construction of cinema hall though in the form of reimbursement looking to the entertainment tax, is capital receipt. Principle laid down in the aforesaid case is wholly applicable in the present case. In this view of the matter, we held that the grant of Rs. 0.5 lakhs was capital receipt and not revenue.
5. The question as to whether a grant receipt by an assessee is capital receipt or revenue receipt depends upon the facts and circumstances of each case and also for the purpose for which it has been given. This court in the case of Kalpna Palace v. CIT (2004) 141 Taxman 392 decided on 18-8-2004 after considering the decision of the Apex court in the case of Sahney Steel & Press Works Ltd. v. CIT (I997) 228 ITR 253 has held that a subsidy given by the State Government for construction of cinema hall though in the form of reimbursement looking to the entertainment tax, is capital receipt. Principle laid down in the aforesaid case is wholly applicable in the present case. In this view of the matter, we held that the grant of Rs. 0.5 lakhs was capital receipt and not revenue.
6. Respectfully following the aforesaid decisions, we answer the question of law referred to us in affirmative i.e., in favour of the assessee and against the revenue.
6. Respectfully following the aforesaid decisions, we answer the question of law referred to us in affirmative i.e., in favour of the assessee and against the revenue.
However, there shall be no order as to costs.