Law: Income Tax Act, 1961

Section: 256(1)

JUDGMENT The Income-tax Appellate Tribunal, Allahabad, has referred the following question of law under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), for opinion to this court: "Whether, on the facts and in the circumstances of the case, the Tribunal was, in law, justified in holding the amount of Rs. 2,75,000 received by the assessee was not its income and should have been deleted ?" 2. The reference relates to the assessment year 1983-84. 3. Briefly stated the facts giving rise to the present reference are as follows. 4. The respondent assessee is a co-operative society and had a number of branches and carried on sale and purchase of various commodities. During the assessment year, the assessee, co-operative society received a sum of Rs. 2,75,000 from the Government of Uttar Pradesh for disbursement to its bhandars to meet the expenses of the salary of certain employees of those bhandars, which otherwise were not viable units. The respondent-assessee, accordingly, distributed the various amounts to its bhandars in compliance with the U. P. Government order. The Assessing Officer, however, treated the receipt of the amount as an income, which on appeal preferred by the assessee, the Commissioner of Income-tax (Appeals) has held that it was not an income of the assessee but only receipt of an amount for distribution to certain bhandars. According to the instructions of the State Government, the order of the Commissioner of Income-tax (Appeals) was upheld by the Tribunal in the appeal preferred by the Revenue. 5. We have heard Shri A. N. Mahajan, learned standing counsel for the Revenue, and Shri Krishna Agrawal, learned counsel appearing for the respondent-assessee. 6. Learned standing counsel submitted that the Assessing Officer had rightly treated the amount in question to be a subsidy receipt of the assessee from the U.P. Government and, in fact, during the year in question, it had deposited the amount in the bank and had earned interest thereon, which clearly shows that it was a receipt on the hands of the assessee without any string being attached to it. 7. We regret our inability to accept the submissions made by…

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