Income-tax---

---Income---Subsidy---Assessee-company carrying on export business -- Subsidy or cash-assistance received from Indian Cotton Mills Federation-- Federation only a private. -organisation---Subsidy was received without rendering any service to Federation- No--nexus which would give rise to right of cash assistance from'- Federation to---assessee---Cash assistance depended on discretion of cash assistance panel which would depend upon particular item and destination selected by panel---Such voluntary assistance of gift payment not: income liable to tax ---Indian--Income Tax Act, 1961, S.28(iiib).

The assessee-firm- which - carried on manufacture and export of hosiery goods and also commission business in several commodities, received a sum of Rs.2,85,923 from the Indian Cotton Mills Federation and claimed that it was a casual receipt in the form of a reward not liable to tax. The Income-tax Officer rejected the claim of the assessee on the grounds that it arose out of their export business, that it was not a case of a casual receipt, since, the subsidy or cash incentive was allowed by the Government to all similar business concerns, whoever, was carrying on the business of export in India and that the subsidy could not be said to be non-recurring in nature, since the assessee itself described that the subsidy was declared by the federation from time to time. On appeal, the Appellate Assistant Commissioner held that the payment of Rs.2,85,923 to the assessee was purely a voluntary act by the federation for no services rendered by the assessee to the federation, that the subsidy was nothing but donations or gifts and the same could not be said to be income taxable under section 28 of the Income Tax Act, 1961, and hence deleted the additions made by the Income tax Officer, On further appeal, the Tribunal found that the federation was not a body corporate established by any law for the time being in force and it was purely a private organisation, that there was no material on record to show that there was any nexus or connection or relationship which would give rise to a right, claim or expectation of cash assistance from the said federation to the assessee, that the cash assistance from the federation purely depended on the discretion of the cash assistance panel and that would depend on the particular item and destination selected by the panel and that, therefore, such voluntary assistance of gift payment by the federation could not be regarded as income liable to tax under the Act. On a reference:

Held, affirming the decision of the Tribunal, that the subsidy of Rs.2,85,923 received from the Indian Cotton Mills Federation was in the nature of voluntary and gratuitous payment and was not liable to tax.

Mitra for the Commissioner.

Dr. Pal for the Assessee.

JUDGMENT

YAD RAM MEENA, J.---In this reference application, the following question has been referred for our opinion:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the subsidy of Rs.2,85,923 received from the Indian Cotton Mills Federation was in the nature of voluntary and gratuitous payment and not liable to tax?"

The assessee is a registered firm carrying on the business of manufacture and export of hosiery goods and also commission business in several commodities. The assessee-company received Rs.2,85,923 from the Indian Cotton Textile Mills Federation, Bombay, and claimed that it is not taxable as it was a casual receipt in the form of reward. The Income-tax Officer has rejected the assessee's contention on the ground that it arose out of their export business, and that it is not. a case of casual receipt since the subsidy or cash incentive is allowed by the Government of India to all similar business concerns whoever is carrying on business of export in India. It cannot be said to be non-recurring in nature since the assessee's letter, dated December 15, 1976, itself described that subsidy is declared by the Federation from time to time.

The Appellate Assistant Commissioner has taken the view that the payment of Rs.2,85,923 to the assessee is purely a voluntary act by the Federation for no services rendered by the assessee to the Federation. Subsidy is nothing but donations or gifts and the same cannot be said to be income taxable under section 28 of the Act. Therefore, the addition made by the Income-tax Officer was deleted.

In appeal before the Tribunal, the Tribunal also found the fact that the amount of Rs.2,85,923 was received by the assessee from the Indian Cotton Mills Federation, Bombay, without rendering any service to the Federation. The aforesaid Federation is also not a body corporate established by any law for the time being in force and it is purely a private organisation. There is no material on record to show that there was any nexus or connection or relationship which would give rise to a right, claim or expectation of cash assistance from the said Federation to the assessee. The cash assistance from the Federation purely depends on the discretion of the cash assistance panel and that would depend on the particular item and destination selected by the panel. Therefore, such voluntary assistance of gift payment by the Federation cannot be regarded as income liable to tax under the Act.

Counsel for the Revenue, Mr. Mitra, submits that the amount received by assessee from the Federation is a subsidy which is taxable under the Act. He further submits that the amount distributed by the Federation is money received from the Government of India. Learned counsel for the assessee, Dr. Pal, submits that after the insertion of clause (iiib) in section 28 of the Act, the controversy has been put an end. Any subsidy or any cash assistance received or receivable by any person against exports under any scheme of the Government is taxable. After this insertion of clause (iiib) it is made clear that the cash assistance or subsidy is taxable only in cases, where the cash assistance has been given by the Government under the scheme and not otherwise. If any cash assistance by whatever name it may be called is given by the Federation which is a private body to its members, the same cannot come within the purview of clause (iiib) of section 28 of the Act.

A specific query was put to learned counsel for the Revenue to show us under which section or provision of the Act or rules the money/ cash assistance received by the assessee from a private body, where no service was rendered by the assessee, can be taxed as income, and he failed to show us any provision in the Act nor has he been able to show any authority where any such type of receipts has been shown liable to tax as income.

Considering the submissions of learned counsel for the parties, the undisputed facts remain that the amount of Rs.2,95,923 was received by the assessee from the Federation as cash assistance, which is a private body not established under any law nor any fact found by the Tribunal showing that the cash amount paid to the assessee is Government. money. It comes out from the Federation Fund. Dr. Pal submits that this has been contributed by 'members of the Federation and this cash assistance has nothing to do with any service rendered by the assessee to the Federation. Therefore, in our view, this cash assistance is not liable to be taxed under the provisions of the Income-tax Act.

In the result, we answer the question in the affirmative, that is, in favour of the assessee and against the Revenue.

The application is, thus, disposed of.

BIJITENDRA MOHAN MITRA, J.--I agree.

M.B.A./3324/FCOrder accordingly.