Case Law Details
RELEVANT PARAGRAPH
13. We have duly considered the rival contentions and the material on record. The crux of the matter is to determine the true character of the receipt in the hands of the assessee and not the utilization thereof. The utilization will not determine the nature of the receipt. The assessee may mis-utilise the funds but that will not either determine or change the character of the receipt. The foremost thing to be appreciated is that the assessee has taken upon itself to resuscitate a body which is in a comatose situation. The amount of Rs. 4.60 crores is given to help the assessee resuscitate the body. It is not an amount which the assessee has received in the course of its operation of business. The assessee has not earned any income in the form of Rs. 4.60 crores but it is for taking over a potential source of income which may prove to be profitable in future. It is only a milch cow which is taken over. Actual milk has not flowed to the assessee. It is absurd to say that an amount can be a capital receipt only if it is reduced from the cost of the assets. It is only a form of accounting which may be relevant in certain situations. Thirdly, though it is not exactly a loan, yet, as per clause 35 of the lease deed, the assessee is bound to return the full amount received by it if it fails to revive the unit within one year from the date of take over. In fact, the assessee failed in its endeavor and was called upon to refund the amount. Fourthly, so far as working capital is concerned, the assessee is expected to finance the same partly from its own resources and partly to raise the funds from financial institutions. Therefore, the assessee is granted Rs. 2.30 crores separately as margin money for working capital and Rs. 10.04 crores towards cash loss in the first two years. Therefore, in our considered opinion, there is not a specter of revenue nature in the receipt of Rs. 4.60 crores received by the assessee as promoters’ contribution. The funds had to be transferred to Jogighopha because the unit was located there. Further, the funds had to be transferred to the account of the assessee because the assessee was given the responsibility to revive the unit. Thus, on all counts, the receipt is of capital nature and cannot be added to the total income of the assessee. If the department can hold the margin money for working capital to be a capital receipt in assessment year 1996- 97, we see no reason why the impugned receipt cannot be so held particularly when the latter is on a stronger footing than the former. Accordingly, we uphold the order of the CIT (A) deleting the addition of Rs. 4.60 crores.
