Law:

Section:

Section 4 of the Income-tax Act, 1961 - Income - Assessable as - Assessment year 1989-90 - Whether if true character of incentive is to enable assessee to meet capital cost, then that true character should have been given full recognition and fact that receipt is subsequent to commencement of production not be allowed to stand in way of its proper treatment as a receipt in capital field meant to meet a capital cost - Held, yes - Government formulated scheme to compensate assessees establishing new sugar mills or expanding existing ones, for shortfall likely to be incurred on account of burden to be incurred on higher capital costs - Incentives conferred under that scheme were twofold - First, in nature of a higher free sale sugar quota and second, in allowing manufacturer to collect excise duty on sale price of free sale sugar in excess of normal quota, but to pay to Government only excise duty payable on price of levy sugar - It was vital for sugar mills seeking benefit of scheme to utilise amount accrued to them by way of incentives provided under scheme exclusively for purpose of repayment of loans borrowed from public financial institutions - Whether incentives given by Government in form of higher free sale quota of sugar towards excise duty should be treated as capital receipt - Held, yes - Whether purchase tax benefit, which was given to assessee to meet cost of running of business after it had gone into production and no obligation was cast on assessee to apply subsidy for any particular purpose, was revenue receipt - Held, yes FACTS The Government had formulated a scheme providing for incentives to new sugar factories licensed during the sixth five-year plan period and expansion of existing units. The scheme was intended to compensate the assessees establishing new sugar mills or expanding existing ones, for the shortfall likely to be incurred on account of the burden to be incurred on the higher capital costs. The incentives conferred under that scheme were twofold. First, in the nature of a higher free sale sugar quota and second, in allowing the manufacturer to collect the excise duty on the sale price on the free sale sugar in excess of the normal…

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