Dharmapuri District Co-operative Milk Producers Union Ltd. Vs DCIT (Madras High Court)
Madras High Court held that grant-in-aid/ subsidy received from the Government under a rehabilitation scheme is capital receipt and cannot be treated as revenue receipt. Accordingly, question of law is answered in favour of appellant.
Facts- The appellant is a co-operative society engaged in procurement of milk, manufacturing by-products and distribution of milk and related items and is a subsidiary to Aavin (Apex Co-operative Society – engaged in distribution of milk). For the assessment year 2007-2008, the appellant filed its return of income admitting a loss of Rs.58,46,770/-. The assessment was completed under Section 143(3) of the Income Tax Act, 1961 (the Act). A sum of Rs.3,50,00,000/- received as grant in aid was treated as revenue receipt. Amongst other things, this addition was assailed by the appellant by filing an appeal before the Commissioner of Income (Appeals) and, thereafter, before the Income Tax Appellate Tribunal, though unsuccessfully. This has given rise to the instant appeal.
The question which arises for consideration is whether the grant in aid/subsidy which was received by the appellant from the Government under rehabilitation scheme should be treated as revenue receipt in the hands of the assessee or as a capital receipt taking it out of the purview of the taxable income.
