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Judgment
S. Rajendra Babu, J.-In these references arising under Section 256(1) of the Income Tax Act (for short ''the Act'') the following two questions are referred for our opinion:
(1) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the amount received by the assessee from the Minerals and Metal Trading Corporation cannot be considered as income of the assessee?
(2) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the guarantee commission paid by the assessee is an admissible revenue expenditure?
The assessee had received development grant from Minerals and Metal Trading Corporation in a sum of Rs. 19,40,656/-. The Assessing Authority took the view that under the terms of the agreement development grant is fixed at the rate of Rs. 2/- per ton calculated on the total quantity shipped for export of iron ore. Therefore, the grant is related to the production and sales of the assessee''s mining business. Hence, he took the view that it is a revenue receipt and held that it was an income. The Appellate Authority and in the second appeal the Tribunal took the view that the same does not amount to income.
It is clear from the statement of the case that the development grant had been received by the assessee for acquiring new machinery and replacement of old machinery. The Tribunal took the view that the amount having been received for acquiring new machinery for replacement of old machinery cannot be treated as revenue receipt and must be treated only as a capital receipt. The Tribunal is stated to have followed its earlier decisions in the matter.
The learned Standing Counsel for the Department urged that the view taken by the Appellate Authorities is not in order inasmuch as the development grant has been given depending upon the quantity shipped for export of iron ore and therefore is connected with the production and sales of the assessee''s mining business.
We do not think the contention advanced on behalf of the Department is tenable. If the amount had been given by way of development grant by the Minerals and Metal Trading Corporation for the purpose of acquiring new machinery and replacement of old machinery, merely a specified percentage is given on the basis of the quantum of sales effected, which is only a measure adopted under the scheme to quantify the benefit, cannot be and is not a payment made by way of a revenue receipt. In that view of the matter, we do not think there is any reason to upset the view taken by the Tribunal in this regard. We answer the first question referred for our opinion in the affirmative and against the Revenue.
The second question referred for our opinion does not really arise in this case. Hence, we decline to answer the same.
References are answered accordingly.