Prajakta DeshpandeFacts of the Case
The appellant-assesse, a private limited company was loss making Company, received subvention from its parent Company in Germany. As per assessing officer these subventions should be treated as revenue receipts.
Commissioner of Income tax & Income tax Appellate Tribunal reversed the said Findings of Assessing Officer whereas High court has resorted the view taken taken by the Assessing Officer. Aggrieved Assessee has filed appeal to the supreme Court.
Question
Whether the subvention was capital or revenue receipt?
Contention of High Court
With reference to the case law Sahney Steel & Press Works Ltd., Hyderabad versus Commissioner of Income Tax, A.P.I., Hyderabad and Commissioner of Income Tax, Madras versus Ponni Sugars and Chemicals High Court held at Assessee is utilized the said subvention for acquisition of an asset, the same must be understood to be in the nature of a revenue receipt.
Decision
- In case of Sahney Steel & Ponni Sugars, the subsidies received were in the nature of grant-in-aid from public funds and not by way of voluntary contribution by the parent Company.
- But in present case, voluntary payments made by the parent Company to its loss making Indian company in order to protect the capital investment of the Assessee Company
- In such case supreme Court held that subvention received by assessing Company from its parent company should not be treated as revenue Receipts and hence the same is liable to tax.
Date of Judgement: 7th Dec.,2016, Supreme Court of India
