The Commissioner of Income Tax vs Dharani Sugar and Chemicals Limited

K. Raviraja Pandian, J.—The tax case appeals in T.C.(A) Nos. 702 and 703 of 2005 are filed u/s 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras ''A'' Bench, Chennai dated 3.12.2004 in ITA.Nos.228 and 229/Mds/1999 relating to the assessment yeas 1995-96 and 1996-97. The material facts culled out from the statement of facts stated in the memorandum of appeals are as follows:

The assessee company filed its return of income admitting a loss of Rs. 74,42,489/-. Thereafter a revised return was filed on 29.11.1996 admitting a loss of Rs. 2,95,39,980/-. The case was proceeded and taken up for scrutiny. After discussions with the assessee''s representative, the assessing officer finalized the case and determined the net taxable income at Rs. 49,21,806/-. The assessing officer while doing so, had added the deduction of Rs. 3,58,18,862/- on incentive of additional free sale of sugar not treating it as a capital receipt. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), who held that incentive on additional free sale of sugar was a capital receipt and therefore excluded from the assessment. Aggrieved by the same, the revenue filed an appeal before the Tribunal, which dismissed the same. Aggrieved by the same, the revenue is before this Court by formulating the following question of law:

Whether in the facts and circumstances of the case, the Income tax Tribunal is right in holding that the incentive on additional free sale of sugar is to be treated as a capital receipt and not revenue for the assessment years 1995-96 and 1996-97?

The issue involved in these Appeals has been decided by the Supreme Court in the case of Commissioner of Income Tax, Madras Vs. Ponni Sugars and Chemicals Ltd., , wherein the Supreme Court has held that any subsidy such as free sugar quota come under the scheme to the Sugar Mills is a capital receipt. Hence the issue is already settled in favour of the assessee and against the revenue.

The above said decision squarely answers the question of law against the revenue and in favour of the assessee. Therefore, following the said decision, these appeals are dismissed, as the question of law raised in these appeals has already been answered against the revenue by this Court. Consequently, the T.C.M.P. No. 540 of 2005 is closed.