Jeevan Reddy, J.
1. The Income-tax Appellate Tribunal, Hyderabad, has referred the following question for our opinion under s. 256(1) of the I.T. Act, 1961, at the instance of the Revenue :
'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the amount of Rs. 14,665 received by the assessee from the Government of Andhra Pradesh in the relevant accounting period was not liable to be included in the total income assessable for the assessment year 1974-75 ?'
2. On December 31, 1968, the Government of Andhra Pradesh in Industries Department issued G.O. Ms. No. 1225, providing certain facilities and incentives to entrepreneurs wishing to set up industries in the State with a view to speed up the Industrial development of the State. This G.O. was superseded by G.O. Ms. No. 455, Industries and Commerce Department dated May 3, 1971. The preamble to both the G.Os. is identical, and, therefore, it is sufficient if we notice the reasons for issuance of the said G.Os. as recited in the second G.O. It states :
'Having regard to the slow pace of industrialisation in the State particularly in the private sector and with a view to stimulating rapid industrialisation throughout the State, Government had offered facilities and incentives in the G.O. cited for new industrial under takings. Subsequently, certain issues arising out of the Government or der were considered by the Officers' Committee constituted in G.O. Ms. No. 1226, dated 31st December, 1968. At their meeting held on 16th July, 1969, certain clarifications were considered with regard to these issues. Subsequently, the Director of Industries raised further issues for clarification on certain aspects of the G.O. cited and also of the Officers' meeting.'
3. We may set out the relevant portions of the G.O. relevant for the present purpose.
'2. Keeping in view the points raised by the Director of Industries, the Government issued the following order in suppression of the orders issued in the G.O. cited, with regard to the facilitates and incentives which may be given to industrialists wishing to set up new industries as indicated below :
(a) Refund of sales tax on raw materials, machinery and finished goods, levied by the State Government subject to a maximum of 10 % of the equity capital paid up in the case of public limited companies and the actual capital in the case of others :
Explanation. - The ceiling of 10% shall be for the whole period of five years for which this concession is available according to para. 3 and not an annual ceiling.
(b) Subsidy on power consumed for production to the extent of 10% in the case of medium and large scale industries and 12 1/2% in the case of small scale industries. The concession will not apply to cases where concessional tariffs are allowed by the Electricity Board.
Explanation. - 'Small Scale Industries' referred to above will include all industrial units with a capital investment of not more than Rs. 7.5 lakhs irrespectives a of the number of persons employed. Capital investment for this purpose will be invested in plant and machinery only. In calculating the value of plant and machinery the original price paid by the owner irrespective of whether the plant or machinery are new or second hand will be taken into account.
This Explanation is subject to such modifications as the Government may from time to time make.
(c) Exemption from payment of water rate on water drawn from sources not maintained at the cost of Government or any local body;
(d) Refund of water rate in respect of water drawn from a Government source or from a source maintained by any local body but returned purified to it;
(e) Liability on account of assessment of land revenue or taxes on land used for establishment of any industry, shall be limited to the amount of such taxes payable immediately before the land is so used.
(f) The following additional incentives will be allowed to new industrial units set up in the ayacut areas of Nagarjunasagar, Pochampad and K.C. Canal in the Ramagundam-Kothagudem areas and in the following eight backward districts :
(1) Nalgonda, (2) Medak, (3) Mahaboobnagar, (4) Karimnagar, (5) Warangal, (6) Anantapur, (7) Khammam, and (8) Chittor, and such other districts as may, from time to time, be notified by the Planning Commission as backward districts for the purpose of grant of incentives for industrialisation :
(i) Sale or lease of Government land at concessional rates; and (ii) grant of financial assistance on a priority basis by the State Financing Institutions.
Explanation. - 'Ayacut areas' mean villages, all or part of the lands of which are included in the ayacut of the irrigation project specified above.
4. The above incentives will be available to all new industrial undertaking which commenced production on or after 1st January, 1969, with investment capital (excluding working capital) not exceeding Rs. 5 cores. The incentives under items (a) to (f) in para. 2 above will be allowed in each case for a period of five years from the date of commencement of production. The concessions will also be available for subsequent expansions (50% and above) of existing capacities provided, in each case, the expansion is located in a city or town or Panchayat areas, other than that in which the existing unit is located.'
5. The assessee - Sahney Steel and Press Works Ltd. - set up a factory at Patancheru in Medak District, which went into production in the year 1973. The assessee maintains its accounts according to the calendar year. It was, therefore, entitled to the benefits of the said G.O. in the calendar year 1973, which means the assessment year 1974-75. In the said accounting year, the assessee obtained refund of the following three items totaling Rs. 14,665.70 in terms of G. O. Ms. No. 455. The three items are :
Rs.(i) Refund of sales tax on purchase of 5,839.93machines during 1971-72(ii) Refund of sales tax on purchases 390.79of raw materials during the year 1971-72(iii) Refund of sales tax paid on sale 8,423.98of finished goods during the year 1971-72
6. The ITO, while making the assessment for the year 1974-75, included the said amount in the assessable income of the petition which was confirmed on appeal by the Commissioner of Income-tax (Appeals.) On further appeal, however, the Tribunal upheld the assessee's contention and held that the amount of Rs. 14,665.70, refunded to the petitioner in terms of the said G.O. 'did not represent refund of sales tax' but was a development subsidy in the nature of a capital receipt. The Tribunal also held that the said amount cannot be deemed to be the income of the assessee under s. 41(1) either. Reliance was also placed upon a circular (N0.142) of the Central Board of Direct Taxes dated August 1, 1974, issued with respect to '10% central grant of subsidy scheme (1971)', in support of its conclusion. Thereupon the Revenue asked for and obtained this reference.
7. Mr. M. S. N. Murty, the learned standing counsel for the Revenue, contended that items Nos. 2 and 3 comprised in the said refunded amount squarely falls within the four corners of sub-s. (1) of s. 41 and must, therefore, be deemed as income of the assessee for the relevant assessment year. He contended that the Tribunal was in error in holding that the amount refunded to the assessee did not represent refund of sales tax. The counsel contended further that all the three items constitute trading receipts and are, therefore, includible under sub-s. (1) of s. 28. According to him, the receipts are not in the nature of capital receipts in the hands of the assessee but they are receipts of a revenue nature. Counsel also contended that the circular of the Central Board has no application to the facts of the case, nor is it valid and enforceable being inconsistent with the provisions of the Act. On the other hand, Sri. Y. V. Anjaneyulu, the learned counsel for the assessee, submitted in the first instance that none of the three items comprised in the said amount constitute income as understood in the income-tax law, nor do they fall within the four corners of sub-s. (1) of s. 41. Counsel contended that the said amount represents a voluntary contribution unrelated to the character of the assessee, that it is not a return for the capital, skill or labour employed but a bounty given by the State for the specific purpose of development of industry which the assessee is not entitled to use as he pleases. He contended further that the assessee had no right to receive the said amounts, that it was purely out of generosity that the State made the said grant in terms of the G.O. which was issued long prior to the petitioner commencing production. He also submitted that this amount has to be used specifically for the purpose of development which means for the expansion of the unit and cannot be distributed as profits nor can it be used as any other income of the assessee and, hence, is in the nature of a capital receipt.
8. Since it is stated that the decision in this case governs a large number now pending in this court, we have heard both the counsel at quite some length and we are obliged to both of them for the valuable assistance rendered to us.
9. The following questions arise for our decision :
'(1) Whether the refund of the amount of Rs. 14,665.70 in terms of G.O. Ms. No. 455 represents refund of sales tax paid by the assessee or whether it was a voluntary contribution by the State unrelated to the character of the assessee and whether the said amount constituted income in the hands of the recipient, viz., the assessee
(2) Whether the three items comprised in the said amount or any of them fall within the four corners of section 41(1)
(3) Whether the circular of the Central Board of Direct Taxes applies herein and whether it helps the assessee's case in any manner ?'
10. The first question has four aspects, viz., whether the refund of the said amount was a voluntary contribution, secondly, whether the contribution was unrelated to the character and business of the assessee, thirdly, whether the nature of the receipt is capital or revenue and, lastly, whether it can be called 'income' in the hands of the assessee.
I. (i) G.O. Ms. No. 455 is of general application. It was not issued for the purpose of helping this particular assessee. Whoever fulfills the conditions prescribed in the said G.O. is entitled to the facilities and benefits provided by it. In other words, any person satisfying the requirements of the said G.O. was entitled to the facilities and incentives as a matter of right. If in the case of any person, the same were denied, he could well maintain a writ petition or other proceeding to compel the State to extend the said benefits to him in terms of the said G.O. It may be that there is no consideration for the benefits extended thereunder in the common law sense. But it cannot be said that it is an act of generosity on the part of the State. The State is interested in the industrial development of the State; it wants to attract industries to enhance the employment potential, economic prosperity and the income of the State. It is to attract the new entrepreneurs that the Government has come forward with the said incentives. The extension of the said benefits cannot, therefore, be likened or equated to the receipt of funds by the monastery concerned in Rev. Father Prior, Sacred Heart's Monastery v. ITO . In that case, the Sacred Heart's Monastery, a religious institution was in receipt of certain donation from foreign countries for putting up charitable institutions and for other similar purpose. The donations were being sent regularly over a considerably long period. The Department's contention was that, since the monastery was in receipt of these amounts coming in with a certain regularity over a fairly long period, the same must be treated as income of the Monastery. This view was challenged by way of a writ petition in the Kerala High Court. Section 5(3)(iii) of the Cochin Income-tax Act, in so far as it is relevant, read as follows (at p. 471) :
'Any income of a religious or charitable institution derived from voluntary contributions and applicable solely to religious or charitable purposes.'
11. The High Court observed (p. 473) :
'The mere fact that a particular item of receipt does not come within an exemption clause does not mean that it is assessable income. The primary question is whether it is income at all...... If donations of this kind are assessable income all individuals and bodies other than religious or charitable institutions should be liable to be assessed to income-tax in respect of such income under the Cochin Income-tax Act. We do not think that it will be seriously contended that under the Indian Income-tax Act, donations received by a person for putting up a charitable institution and used for that purpose will be regarded as his income and assessed to income-tax. They are obviously of the nature of gifts and are capital receipts. They do not come within the meaning of the word 'income' as understood in the ordinary language.'
12. Then the Division Bench referred to the decision of the Privy Council in CIT v. Shaw Wallace and Co.  2 Comp Cas 276 and certain other decisions and observed (p. 476) :
'...... it cannot be contended for a moment that donations received by a person from a few individual on different occasions for putting up a charitable institution and utilised for that purpose will constitute his income. The payments depends entirely on the whim of the donors. There is also no regularity or expected regularity in the payments. It is obvious that receipts of this nature do not constitute 'income' of the recipient.'
13. They also observed that the receipts are of a casual and non-recurring nature and that they do not arise from the business or exercise of profession, vocation or occupation of the monastery. We are unable to see that the nature of the receipts in the kerela case and the nature of the receipts concerned herein is the same. In this case, as we have pointed out herein before, the assessee and for that matter any other person setting up an industry in the state of Andhra Pradesh was entitled to the facilities and incentives provided by the said G.O. as a matter of right, which, if denied he could enforce in a court of law. These receipts are also not of the same nature as were received by Rani Amrit Kunwar v. CIT : 14ITR561(All) . The Rani concerned in that case was the wife of the ruler of the Kalsia State and the sister of the Maharaja of Nabha State. She was receiving certain amounts towards her maintenance, etc., both from the Kalsia State from Nabha state. The controversy arose about the payment received form Sabha state which were styled as 'wardrobe allowance' and included present on certain specified days of festival in each year. Each payment was specifically budgeted for in the annual budget of the Nabha State and the payments were made consecutively over a period of twenty years. The Allahabad High Court held that there was no evidence in the case to show that the payments made by the Nabha State were attributable to any custom, usage or tradition or obligation and there was consequently no origin for the payments which could amount in its nature to a definite source so as to render each payments income and not merely a casual or annual windfall. It was accordingly held that the said payment do not constitute income in the hands of the Rani and were not assessable to income-tax. In that case, though the rani was receiving the said amounts from the Nabha State regularly, she had no right to the said amounts, which were being made out of pure generosity and which, if stopped, the Rani could not claim as a matter of right nor could she enforce the payment through a court of law.
14. Mr. Y. V. Anjaneyulu, the learned counsel for the assessee, the contended that the said G. O. could be withdrawn at any time by the Government and that neither the assessee nor any other person could compel the Government not to withdraw it. It is true that in para. 8 of G.O.Ms. No. 455, the Government expressly stated :
'Government, however, reserve the right to withdraw at any time any or all of the concessions mentions above in relation to a class or classes of industries without assigning any reasons.'
15. Yet we do not think that this would make any difference to the nature of the payments. The position would be no different if these payments were provided by a statute. A statute too can be repealed or modified or amended by a legislature at any time and no person has a right to compel the legislature not to do so. But that does not mean that so long as the stature is in operation, the person concerned does not have a right to enforce the same. Similarly, the fact that the Government reserved to itself the power to withdraw the G.O. or to amend it, does not mean that so long as the G.O. is in operation, the person concerned do not have a right to enforce the same.
16. A similar question was considered by a Bench of this court in Panyam Cements and Mineral Industries Ltd. v. Addl. CIT : 117ITR770(AP) . A large number of representations were made by the industrialists in this State submitting that the existing power rates charged by the Andhra Pradesh State Electricity Board, being very high compared to the other states in the country, were adversely affecting their competitive capacity and the growth and expansion of the industries in the state and that the same should be reduced. A committee appointed by the Government to look into the representation recommended that the Government should evolve a scheme of concessional rates for attracting new industries to the state and also to help the existing industries. Accordingly, the Government issued G.O. Ms. No. 678 dated April 27, 1961. The relevant portions of the G.O. extracted in the said decision read as follows (at p. 774) :
'This committee examined, in all its aspects, the question of making available the supply of power to new industries at concessional rates as a method of stepping up the pace and range of industrial development in Andhra Pradesh. The Committee came to the conclusion that reductions in existing power rates were necessary and, therefore, steps should be taken by the Government to work out a scheme of concessional rates for attracting new industries to the State.
17. As regards the methods of financing to be adopted for the grant of concessional rates, in view of the inability of the Andhra Pradesh Electricity Board to meet the cost involved, the Committee considered that a subsidy should be granted to the Industries Department by the Government to defray the loss of revenue likely to be incurred by the Andhra Pradesh Electricity Board.
18. The Director of Industries and Commerce has reported (in his second letter read above) that the present rates of power supply in Andhra Pradesh (as compared to those obtained for the same loads in neighbouring states like Madras, Mysore and Bombay) have been a contributory cause of the unsatisfactory pae of imdustrial growth in Andhra Pradesh. He has, therfore, urged the grant of concessional rates of power supply to selected categories of medium and large industries on the following basis :
(i) Power tariff rates in Andhra Pradesh should be brought on a level with those ruling in mysore, Madras and Maharashtra for comparable loads.
(ii) Concessional power rates should be offered to the following categories of new industries :
(a) industries for which power is an important cost factor;
(b) industries which require bulk loads; and
(c) essential of catalyst industries - the establishment of which will attract other industries to this state.
(iii) Concessional power rates to be offered to new industries falling within the abovementioned categories for a period of five years in the first instance.
(iv) The cost of difference between existing negotiated power rates and proposed concessional rates (estimated at Rs. 20 to 25 lakhs over the period of the next five years) be given as a grant to the Industries Department by the Government; and
(v) The applications for these concessions should be screened and sanctioned by a small committee consisting of the Secretary, Industries Department (Chairman) and secretary, Finance, the secretary, Public works Department, the Director of Industries and Commerce, and the chief Engineer, Electricity Board and Projects, with powers to add new items/industries to the approved lists under the three categories of industries mentioned above.'
19. In pursuance of the said G.O., the assessee in that case, Panyam Cement and Mineral Industries, was sanctioned 20% concession on the existing tariff rates in respect of it second plant. When the amount representing the said concession was ought to be treated as income of the assessee, it was contended by the assessee that the same does not constitute its income and that it was an amount granted by the government and was in the nature of a windfall wholly unconnected with the business carried on by it. This was repelled by a Bench of this court in the following words (p. 776) :
'In these circumstances, it cannot be held that the amounts granted by the Government was in the nature of a windfall to the assessee and that they are wholly unconnected with the business carried on by it. The assessee has to use electricity in the manufacture of cement and the subsidy given by the Government has only the effect of supplying electricity at reduced rates. The assessee was entitled to the concessional rates because it had been approved by the screening Committee appointed by the Government as per G.O. Ms. No. 678. If the assessee was not carrying on the business, it would not have been eligible for the said concession. The receipt of the amounts mentioned above is not of a casual and non-recurring nature. The assessee was granted the subsidy as result of G.o. Ms. 678. It is not a casual payment. Though there was no contractual obligation on the part of the government, the assessee could reasonably expect the grant of the amount for a period for which the government passed the orders. We are unable to see how it could be called a windfall or a causal receipt.'
20. We are of the opinion that the principle of this decision squarely governs the present case. Just as in that case the assessee had to obtain the approval of the Screening Committee appointed by the Government to obtain the benefits of that G.O. the assessee in this case had to, and did, obtain a certificate from the director of Industries, on the basis of which he became entitled to the benefits under G.O. Ms. No. 455.
21. For these reasons, we reject the contention that the refund of the said amount was purely voluntary in nature, or that it was in the nature of a windfall or a generous bounty on the part of the State. We hold that the assessee had a right to the said refund in terms of the said G.O. which he could enforce in a court of law. The G.O. was issued prior to the setting up of the industry by the petitioner and it did expect to receive the said benefits and it did receive them. The source as well as the payments were both certain and definite.
(ii) We shall now consider whether the said payments were unrelated to the character of the assessee or the business carried on by it. We think that the said payments or refunds, as the case may be, are closely and inseparably connected with the business carried on by the assessee. The benefits are available only from the date the new industrial undertaking commences production and for a period of five years therefrom. The refund or the subsidy, as it may be called, is dependent upon the industry continuing in production. Paragraph 7 of the G.O. says that if any industrial unit stops production, the concession shall be discontinued. We have also referred to the fact that in the case of a similar G.O., a Bench of this court held in panyam Cements case : 117ITR770(AP) that the grant of subsidy is closely connected with the business carried on by the assessee. The said observation applies with equal force here. In this connection, the following passage from the judgment of Rowlatt J. in Beynon (H. M. Inspector of taxes) v. Thorpe  14 TC 1 may be usefully quoted (p. 13) :
'It is perfectly true that a voluntary payment or gift, though in itself not a profit or gain at all, may become a profit or gain in the hands of the recipient if it can be attached to an office or if it can be attached to an employment or vocation of which we have many instances. The best known instances are of course the offerings made voluntarily to ministers of religion which gives rise to many cases, that is, they become profits or gains of an office, because although they are voluntary, it is by the office which is the source of the minister's taxable income that he has been given them. So also voluntary payments made to persons exercising employments; gratuities to servants and so on, are undoubtedly, because they are servants-I do not mean to say from master to servants but to people like waiters, to put a concrete example-gratuities to people of that kind, which they get because they are carrying on a particular employment; although they have no right to ask for them, when they do get them they get them they get them as profits or gains in their employment and, therefore, they are profits or gains which are taxable. But a mere gifts is not a profit or gain at all.' 22. This passage, and particularly the illustrations given therein, in our opinion, clearly bring out the true position in law. Indeed, the correctness of the same is not questioned before us. Applying the principle of the said decision, we hold that the amount in question was refunded or paid to the assessee because he had set up a new industrial undertaking and has commenced producing goods and continued in production. It is not possible to divorce the said payment from the character of the business carried on by the assessee. Reference may be made in this connection to cases holding that the income derived from sale of import entitlements, which were granted on account of export performance of the assessee, is income within the meaning of s. 28(iv). It was held that the import entitlements were issued only because of, and by virtue of, the exports made by the assessee, they must be treated as profits of business : vide Agra Chain . v. CIT : 115ITR143(Cal) .
(iii) In Ostime (H. M. Inspector of Taxes) v. Pontypridd and Rhondda Joint Water Board  28 TC 261; 14 ITR (supp) 45 Viscount Simon stated the following two propositions (p. 278) :
'The first proposition is that, subject to the exception hereafter mentioned, payments in the nature of a subsidy from public fund made to an undertaker to assist in carrying on the undertakers trade or business are trading receipts, that is, are to be brought into account in arriving at the balance of profits or gains under Case I of Schedule D....
The second proposition constitutes an exception. If the undertaker is a rating authority and the subsidy is the proceeds of rates imposed by it or comes from, a fund belonging to the authority, the identity of the source with the recipient prevents any question of profits arising... '
23. Only the first of the two propositions stated by Viscount Simon is relevant for our purposes. While the learned standing counsel for the Department seeks to read the said observations as applying to all subsidies given by the state to an undertaking, Mr. Y. V. Anjaneyulu seeks to limits the same only to such subsidies as are given 'to assist in carrying on the undertaker's trade or business'. We are not inclined to read the said proposition in such a wide fashion as the Department wants us to do. The state may give a subsidy to a person to set up a new plant. In such a case, it cannot be said that the subsidy is a trading receipt. At the same time, we must say that a subsidy to assist the business of a assessee may be given in many a manner. There are several ways of subsidising an industrial undertaken. The State may do it by supplying the raw material at a concessional rate, by giving a tax holiday, by giving a development rebate, by purchasing its goods at a rate higher than the market rate and so on. It is not possible to exhaustively lay down the several methods or manner in which the State may choose to subsidies an undertaking; but, one thing is clear in all such cases, the subsidy so given would fall within the first proposi tion of Viscount simon. However, before we express our opinion on the nature of the subsidy concerned herein, it would be appropriate to refer to a few cases cited at the Bar. Seaham Harbour Dock Company v. Crook (H.M. Inspector of Taxes)  16 TC 333 (HL) is a case where the grant made was for a specific purpose, viz., relieving unemployment. There, a dock company applied for financial assistance. The committee consented to sanction grants from time to time as the work progressed were paid for, equivalent to half the interest for two years (not exceeding an average rate of 51/2% per annum), on approved expansion made out of loans. Payments were made on that basis several times. The Revenue included these payments in the profits and gains of the company and sought to tax them. When the mater came before the House of Lords, Lords Buckmaster held that it was not a trading receipt and that (p. 353) :
'It was a grant which was made by a government department with the idea that by its use men might be kept in employment, and it was paid to and received by the Dock Company without any special allocation to any particular part of their property, either capital or revenue, and was simply to enable them to carry out the work upon which they were engaged, with the idea that by so doing people might be employed. I find myself quite unable to see that it was a trade receipt, or that it bore any resemblance to a trade receipt.' 24. Lord Atkin dealt with the mater in the following words (p. 353) :
'It appears to me that when these sums were granted and when they were received, they were received by the appropriate body not as part of their profits or gains or as a sum which went to make up the profits or gains of their trade. It is a receipt which is given for the express purpose which is named, and it has nothing to do with their trade in the sense in which you are considering the profits or gains of the trade. It appears to me, with respect, to be quite irrelevant whether the money, when received, is applied for capital purposes or is applied for revenue purposes; in neither case is the money properly said to be brought into a computation of the profits or gains of the trade.' 25. Strong reliance is placed by Mr. Anjaneyulu on this decision. He says that it is really unnecessary for this court to go into the question whether the amount received by him is capital or revenue in nature. According to him, the amount is received for a specific purpose, viz., development of the unit and that it is not open to the assessee to use the said amount as it chooses. For example, it is pointed out that it is not open to the assessee to distribute the said amount by way of dividends or to use it for meting other expenditure. Emphasis is laid upon para. 6 of G.O. Ms. 455, where it is stated :
'The subsidies, refunds and other financial concessions granted under this G.O. shall be deemed to be a development grant for each unit. Therefore, in order to ensure that this development grant is used only for the purpose intended, every application shall be accompanied by an affidavit to the effect that the amount applied for will be wholly and solely for the development of the unit. Misutilisation will, apart from other consequences, entail loss of eligibility for the continuance of th subsidies and other financial concessions for future years under this G.O. and the subsidies, refunds and financial concessions already granted may be summarily recovered.' 26. Mr. Anjaneyulu wants to read the words 'development of the units' as expansion and therefore, says that the said refund amount cannot be treated as a revenue receipt. We are unable to read the word 'development' as meaning 'expansion' only. The word 'develop' is defined by the Concise Oxford Dictionary as follows :
'Unfold, reveal, bring or come from latent to active or visible state; make or become fuller, more elaborate or systematic or bigger; make progress; come or bring to maturity.' 27. Similarly, the meaning of 'development' are :
'gradual unfolding, fuller working out, growth; evolution, wellgrown state; stage of advancement.' 28. In the Compact Edition of the Oxford English Dictionary, volume I,at page 707, the following meanings are given for the word 'development' :
'A gradual unfolding, a bringing into a fuller view; a fuller discovery or working out of the details of anything as a plan, a scheme, a plot of a novel.
(c) The bringing out of the latent capabilities (of anything); the fuller expansion of any principle or activity;
(4) gradual advancement through progressive stages; growth from within;... '
29. It, therefore, cannot be said that the said refunds were made only for the expansion of the unit. They were made with a view to strengthen the unit financially so that it can be run efficiently, and can become strong and grow. It is well-known that in the initial stages of any industrial unit, it has to face a number of problems, sometimes referred to as 'teething problems'. Very often, they are not able to avoid suffering losses in the initial years. It is for this reason that a number of benefits are given at this stage of development like tax holiday, initial depreciation on machinery and so on. The Subsidy in questions is also of such a nature and cannot be treated as one exclusively meant for expansion of the unit. The word 'development' used in para 6. of the G. O. has not been defined. The said paragraph only means that the money shall not be diverted to any other unit or for any other purpose except for developing, improving and strengthening the unit concerned. In Seaham Harbour Dock Company's case 16 TC 333 (HL) the subsidy was not given exclusively for the purpose of expansion of the dock, but it was given for the specific purpose of relieving unemployment, which was no part of the business or trade of the assessee. In this case, however, there is no room or basis for dissociating the subsidy from the business of the assessee, inasmuch as the subsidy is given for development of the business and not for any other unrelated purpose.
30. The learned standing counsel for the Department places strong reliance upon a decision of the Bombay High Court in Dhrangadhra Chemical Works Ltd. v. CIT : 106ITR473(Bom) . We may briefly note the facts of the case.
31. During the years 1950-51 and 1951-52, there was a glut in the market for soda ash because of large imports. In spite of levying countervailing duties, the landed cost of imported soda ash was lower than the cost of production of the soda ash in the country. There were only two plants in India, manufacturing soda ash, viz., the assessee in the said case, Dhrangadhra Chemical Works and Tata Chemicals Ltd. On the basis of the recommendations of the Tariff Board, the Government resolved on February 22, 1950, to allow a subsidy of Rs. 1 per cwt. on soda ash produced by these two companies and sold on or after the said date, provided the Government was satisfied that the companies actually sold the soda ash at the fair selling price recommended by the Tariff Board. When the assessee-company ultimately received the said subsidy, the ITO sought to bring the same to charge as income for the relevant assessment year. On a reference, it was held by the Bombay High Court, following the observations in Ostime v. Pontypridd and Rhondda Joint Water Board  28 TC 261; 14 ITR(suppl) 45, that (p. 481 of 106 ITR) :
'... Where subsidies or grants are given by the Government to assist a trader in his business, they are, generally speaking, payments of a revenue nature. They are supplementary trade receipts and not capital payments although they might be called advances or might be subject to contingency of repayment. It is clear from the recommendations of the Tariff Board, which were partially accepted by the Government by its resolution dated February 22, 1950, that the object underlying the grant of subsidy was to enable the assessee-company and Tata Chemicals Ltd. to carry on their business of soda ash profitably... Such receipt under the tests laid down by Viscount Simon is clearly a revenue receipt and has to be taken into account in arriving at the income, profits and gains of the business.' 32. We have already pointed out that a subsidy to assist the business of an undertaking can be given in several ways. The method adopted in Dhrangadhra Chemicals' case : 106ITR473(Bom) is one such. In the case before us too, the subsidy is given for strengthening and improving the industrial undertaking so that it can work properly and grow. This is another method. But in both cases the subsidy is given to assist the business of the undertaking. We are, therefore, of the opinion that the receipt of the said subsidy or refund, as it may be called, is of a revenue nature and cannot be called a capital receipt in the hands of the assessee.
(iv) We shall now deal with the main and primary submission of Mr. Y. V. Anjaneyulu, the learned counsel for the assessee, that the said refund cannot be treated as income at all in the hands of the assessee as the said expression is understood in the income-tax law. The contention is that the said amount is not a return for either the capital, labour or skill of the assessee and that it is a mere bounty born out of generosity of the State. We have already touched upon the latter aspect of the above contention. We shall now deal with the submission that the receipt of the said amount does not constitute income in the hands of the assessee. Counsel places strong reliance upon the following well-known passage from CIT v. Shaw Wallace & Co.  2 Comp Cas 276 at p. 280 :
'The object of the Indian Act is to tax 'income', a term which it does not define. It is expanded, no doubt, into 'income', profits and gains', but the expansion is more a matter of words than of substance. Income, their Lordships, think, in this Act connotes a periodical monetary return 'coming in' with some sort of regularity, or expected regularity, from definite sources. The source is not necessarily one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. Thus income has been likened pictorially to the fruit of a tree, or the crop of a field. It is essentially the produce of something which is often loosely spoken of as 'capital'. But capital, though possibly the source in the case of income from securities, is in most cases hardly more than an element in the process of production.' 33. According to this passage, there are four essential features of income, viz., (i) it must be a return; (ii) it must be received with a certain regularity; (iii) it must come in periodically; and (iv) it must come through a definite source. Counsel contends that though the subsequent decisions of the Privy Council and the Supreme Court have done away with the second and third requirements, the first and fourth requirements are still recognised and are considered as basic to the concept of income. The learned counsel relies upon the discussion and the reasoning contained in the decision of the Bombay High Court in Mehboob Productions Private Ltd. v. CIT : 106ITR758(Bom) in this behalf and commends the same for our acceptance.
34. In Raghuvanshi Mills Ltd. v. CIT : 22ITR484(SC) the Supreme Court has observed that the observations of the Privy Council in Shaw Wallace's case  2 Comp Cas 276 with respect to the meaning of the word 'income' should be read with reference to the facts of that particular case. Indeed, the Privy Council had pointed out in Gopal Saran Narain Singh (Maharajkumar) v. CIT  3 ITR 237 that the word 'income' is not limited by the words 'profits and gains' and that 'anything which can properly be described as income is taxable under the Act unless expressly exempted.'
35. There is another major reason why we cannot accept the proposition that the element of return is an essential ingredient of every income. If this were so, then the dicta of Viscount Simon in Ostime (H. M. Inspector of Taxes) v. Pontypridd and Rhondda Joint Water Board  28 TC 261; 14 ITR (Supp) 45 (HL) as also the decision of the Bombay High Court in Dhrangadhra Chemical Works Ltd. v. CIT : 106ITR473(Bom) should be wrong and this is not suggested by Mr. Anjaneyulu. Indeed, the observations of Viscount Simon show that even by 1946, the proposition was well established that subsidies made to an undertaker to assist him in carrying on the undertaker's trade or business are revenue receipts. Now, it cannot be suggested that a subsidy made by the State to an industrial undertaking is in the nature of a return for the capital, labour or skill employed in the industry. The subsidy can, by no stretch of imagination, be treated as a return for the investment made by the entrepreneur. For example, the grant made by the State to Dhrangadhra Chemicals Ltd. cannot, by any test, be called a return for the management, labour, skill or investment made by the industrial under-taking. But yet such subsidies have been held to be incom. We are, therefore, unable to agree with Mr. Y. V. Anjaneyulu that unless a receipt is in the nature of a 'return', it cannot be treated as income, nor would we try to define the expression 'income' which the Legislature has itself advisedly refrained from doing. For these reasons, we respectfully disagree with the judgment of the Bombay High Court in Mehboob Productions Private Ltd. v. CIT : 106ITR758(Bom) in so far as the learned judges say that, for constituting income, the receipt must necessarily be in the nature of a 'return' for the labour, and/or skill bestowed and/or capital invested by him. For this reason, we also think it unnecessary to refer to the various cases considered by the Bombay High Court in Mehboob Productions' case. Suffice it to observe that no other case has been brought to our notice which lays down that for a receipt to constitute income, it must necessarily be in the nature of return.
36. Now, looked at from the above standpoint, it would follow that items Nos. 2 and 3 comprised in the amount concerned herein undoubtedly constitute income in the hands of the assessee. So far as item No. 1 is concerned, it is no doubt a refund of sales tax on purchase of machines and the amount spent for purchase of machines is undoubtedly in the nature of a capital receipt. But it must be remembered that the refund is being made after the undertaking has commenced production and with a view to facilitate the development of the unit. It is not a subsidy given for setting up the plant, but subsidy given for efficient and profitable running of industry and its growth. We, accordingly, hold that all the three items constitute the income of the assessee chargeable under s. 28 of the Act.
37. In this view of the matter, it is not necessary for us to consider whether the amount refunded represented refund of sales tax paid by the assessee or whether it is a contribution and grant made by the State adopting the basis of sales tax only as a measure. Once we hold that the subsidy constitutes income in the hands of the assessee, the said distinction, if any, becomes merely academic.
(II). The next question is whether the three items comprised in the said refunded amount or any of them fall within the four corners of s. 41(1). Section 41(1) of the I.T. Act reads as follows :
'41. (1) where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and, accordingly, chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not.' 38. The contention of the learned standing counsel for the Department is that items Nos. 2 and 3 comprised in the said amount do definitely fall within s. 41(1) inasmuch as, admittedly, these two items were claimed as deduction in the previous assessment years and were now refunded to the assessee concerned herein. So far as the first item is concerned, it was not claimed or allowed as a deduction and, therefore, it is conceded, it stands on a different footing. On the other hand, the contention of Mr. Y. V. Anjaneyulu, the learned counsel for the assessee, is that for s. 41(1) to apply, the refund of sales tax must be as sales tax. He submits that s. 41(1) contemplates a case where sales tax may have been refunded in a subsequent assessment year as a result of appeal, revision or other proceeding. Mr. Anjaneyulu submits that in this case the assessee's liability to sales tax was neither altered nor rescinded. In this behalf, he also submits that the amount refunded to the assessee was not paid by the sales tax department nor from the sales tax account of the state but from a different head of account altogether. It is pointed out that the amount paid to the assessee was debitable to '35-Industries-C. Grants in aid-Contribution-schemes included in the IV Five Year Plan-XIV-B Grants towards Incentives to Industries.'
39. We are unable to agree with the contention of Mr. Anjaneyulu. There are no words in sub-s. (1) of s. 41 which support such a contention. Sub-s. (1) is couched in very wide terms. It says that if the assessee had obtained 'any amount in respect of such loss or expenditure or some benefit in respect of such trading liability, by way of remission or cessation thereof', the amount so obtained shall be deemed to be profits and gains of his business. The words 'any amounts' and 'in respect of' need to be noticed. In view of this language, it is not possible to agree with Mr. Anjaneyulu that unless sales tax paid by the assessee was refunded as sales tax and/or as a result of the proceedings under the said Act, the refund cannot be deemed to be income within the meaning of 41(1). We see no reasons not to give full effect to the fiction enacted by s. 41(1). This is also the decision of this court in Panyam Cement's case : 117ITR770(AP) , the facts of which we have referred to hereinbefore. It was observed (at p. 777) :
'In the present case, the assessee had paid the electricity charges at the original rate in full and claimed an allowance in respect of the said expenditure. In pursuance of the policy of the Government to supply electricity at a concessional rate of 20% less, the above amounts were paid to the assessee towards the expenditure incurred by him in regard to electricity charges and hence they should be deemed to be profits and gains of the business. All the requirements of s. 41(1) of the I.T. Act have been fulfilled.' 40. It must be noticed that even in Panyam Cement's case : 117ITR770(AP) the subsidy was given not by the Electricity Board but by the Government and yet it was held that the subsidy made by the Government falls within s. 41(1).
41. Mr. Anjaneyulu then argued that what is refunded is not sales tax but a subsidy measured in terms of the sales tax paid. This is again an argument which is merely academic. Section 41(1) creates a fiction; what is not income in the ordinary sense of the term is deemed to be income under this provision. Once the amount received by the assessee falls within the four corners of s. 41(1), it is immaterial under what name the amount is received. Mr. Anjaneyulu relied upon Senairam Doongarmall v. CIT : 42ITR392(SC) to contend that the measure and method of payment is not decisive of the character of the receipt. That was a case where the tea estate including certain factories and buildings were requisitioned for defence purposes by the military authorities. Though the possession of the assessee was not disturbed, the manufacture of tea was stopped completely. For the years 1944 and 1945, the assessee was paid compensation under the Defence of India Rules calculated on the basis of the out-tern of tea that would have been manufactured by the assessee during the said years. The question arose whether the amounts of compensation so received were revenue receipts taxable in the hands of the assessee. It was held by the Supreme Court that (p. 397) :
'It is the quality of the payment that is decisive of the character of the payment and not the method of the payment or it measure, and makes it fall within capital or revenue.' 42. Then they considered the character of the payment in that case with reference of the principles emerging from decide case and held that because the business of the assessee, viz., production of tea was stopped altogether and business being carried on by it was discontinued, the amounts received cannot be treated as income from trade or business notwithstanding the fact that payment was made to compensate the assessee and the measure was the out-turn of tea which would have been manufactured by the assessee but for the intervention of the state. It was emphasised that it was not a case in which the business continued; in such a case, it was observed that the amount paid could be treated as one conceived to bring up the profits to normal level. We are unable to see how the principle of the said decision applies here. The ratio of the Supreme Court's decision is : once the business of the assessee was completely stopped, the amount received cannot be treated as its income from business, notwithstanding the method or manner of payment. This is also the principle of the decision in Simpson v. Executors of Boner Maurice  14 TC 580 (CA). In this case, a British subject who held certain securities, etc., in Germany, received at the end of the war-he having died meanwhile, his executors received the amounts-certain amounts by way of compensation in terms of the Peace Treaty. The compensation paid was calculated in terms of the interest the said securities would have earned in the normal course. (During the war years, the interest was not remitted). The Court of the Appeal held that what was received was compensation in terms of the Peace Treaty, and not interest and, hence, not taxable, notwithstanding the fact that the measure adopted for determining the quantum of compensation was the interest that would have accrued.
43. The next case relied upon is S. R. Y. Sivaram Prasad Bahadur v. CIT : 82ITR527(SC) , wherein it was held that interim payments under s. 50(2) of the Madras Estates (Aboolition and Conversion into Ryotwari) Act, 1948, received every year by a former holder of an estate during the period between the taking over of the estate and final determination and deposit of compensation under the Act, are of a capital nature and not liable to income-tax. Firstly, this case does not arise under, nor does it consider, s. 41(1). Secondly, the nature of the payments fell to be determined in the light of the provision of the Madras Act under which the payments were made. We may point out that, in another case arising under the Hyderabad Jagir Abolition Regulations, in Raja Rameshwara Rao v. CIT : 49ITR144(SC) , the Supreme Court held that the interim payments received constitute income. Be that as it may, the cases cited by Mr. Anjaneyulu do not deal with, and were not decided with reference to, s. 41(1) and, therefore, are of no help to him in this behalf.
44. We are, therefore, of the opinion that items Nos. 2 and 3 comprised in the said amount do squarely fall within s. 41(1) and must be treated as gains of business.
45. III. Lastly, Mr. Anjaneyulu relied upon circular No. 142 of the Central Board of Direct Taxes, dated August 1, 1974. The circular is found printed at p. 151 of the statutes section in  95 ITR. It reads as follows :
'Subject : Taxability of subsidy - Revenue receipt or capital receipt '10 percent. Central outright grant or subsidy Scheme, 1971' -Clarification- Regarding.
46. The Board had occasion to consider whether the amount of subsidy received under 10% Central Outright Grant of Subsidy Scheme for industrial units to be set up in certain selected backward districts/areas would constitute revenue receipt or capital receipt in the hands of the recipient for the purpose of income-tax.
2. I am directed to say that the payment of subsidy under the scheme is primarily given for helping the growth of industries and not for supplementing their profits. Under the scheme, the quantum of subsidy is determined with reference to the fixed capital and not the profits. The working capital has been specifically excluded from the computation of fixed capital for this purpose. One of the conditions for the grant of the subsidy is that the undertaking must remain in production at least for a period of five years after it goes into production. Since the subsidy is intended to be a contribution towards capital outlay of the industrial unit, the Board are advised that such subsidy can be regarded as being in the nature of capital receipt in the hands of the recipient.
3. Contents of this Circular may kindly be bought to the notice of all the officers working in your charge.
(Sd.) T.P. Jhunjhunwala, Secretary, Central Board of Direct Taxes, (F. No. 204/25/74-ITA-II).'
47. A perusal of the circular makes it clear that it was issued with respect to a particular scheme, viz., 10% Central Outright Grant of Subsidy Scheme of 1971. It is not a circular applicable to all types of subsidy schemes. This much is conceded by Mr. Anjaneyulu also. But what he argues is that inasmuch as our scheme is in the same terms as the Central Scheme of 1971, the principle of the said circular should be applied. We are unable to accede to this contention. We cannot extend the scope of the circular by analogy. Secondly, on a perusal of the Central Scheme of 1971 we find that the scheme concerned therin was not in the same terms as the State Scheme with which we are concerned herein. The subsidy under the Central Scheme was available only to the industrial units with a capital of less than fifty lakhs whereas the State scheme is applicable to units with a capital up to five cores. The circular was applicable only to those industrial units which were located throughout the State. To those industries which are located in the specified districts/areas called 'selected districts/areas' where as the State scheme is applicable to industries locsted throughout the state. To those industries which are located in the specified backward districts, certain additional incentives are provided under the State scheme. paras 5 to 7 of the Central Scheme would show that it prescribed a particular procedure which had to be followed by the industrial units for availing of the benefits thereunder which is at variance with the procedure prescribed under the state scheme. Moreover, the Central Scheme did not provide for refund of sales tax or other taxes and charges paid but provide for an outright grant to the extent of 10% of the estimated fixed capital investment. We are therefore, of the opinion that the said circular is absolutely of no help to the assessee herein.
48. We may incidentally refer to another controversy raised though not fully debated before us. It was contended that the circular issued by the Central Board of Direct Taxes is binding upon the assessing authorities and has also got to be followed by the courts, notwithstanding the fact that the said circular may run counter to the provisions of the Act.
49. The power to issue circulars by the Central Board of Direct Taxes is derived from s. 119(1) of the Aact, which reads as follows :
'The Board may, from, time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board :
50. Provided that no such orders, instructions or directions shall be issued -
(a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or
(b) so as to interfere with the discretion of the Appellate Assistant Commissioner or the Commissioner (Appeals) in the exercise of his appellate functions'
51. The power is conferred upon the Board 'for the proper administration of this Act' and it would follow that this power has to be exercised consistent with and within the four corners of the Act. In other words, the Board is given the power to fill in the details or to prescribe procedures where the Act and the Rules are silent. But the said power can never be constructed as one enabling the Board to issue circulars overriding, modifying or in effect amending the provisions of the act. Mr. Anjaneyulu argues that the circulars which are favourable to the assessees are binding but not those which are against the interests of the assessees. Again we are unable to discern any principle behind such a distinction. The power conferred by the Board by s. 119 cannot be put on a higher footing than the rule making power and it is well-settled that the rule-making authority cannot travel beyond the four corners of the Act, nor can it makes authority cannot travel beyond the four corners of the Act, nor can it make a rule contrary to the provisions of the Act. Indeed in Jalan Trading Co. Private Ltd. v. Mill Mazdoor Sabha : (1966)IILLJ546SC , the provision empowering the Central Government to remove doubts or difficulties in giving effect to the provisions of the Act was struck down as amounting to delegation of the legislative power to executive authority which is impermissible. However, Mr. Anjaneyulu has brought to our notice a decision of the Supreme Court in Ellerman Lines Ltd. v. CIT : 82ITR913(SC) where at page 921, the Supreme Court observed as follows :
'Now, coming to the question as to the effect of instructions issued under section 5(8) of the Act, this court observed in Navnit Lal C. Javeri v. K. K. Sen, Appellate Assistant Commissioner, : 56ITR198(SC) :
'It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under section 5(8) of the Act. This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their shareholders as a result of genuine transactions of loans, and the idea was not to affect such transactions and not to bring them within the mischief of the new provision.'
The directions given in that circular clearly deviated from the provisions of the Act, yet this court held that the circular was binding on the Income-tax Officer.'
52. On the basis of the last sentence in the above passage, Mr. Anjaneyulu contends that even though a circular of the Central Board runs counter to the provisions of the Act, still it has to be followed and applied. We are unable to give effect to such extreme contention, which, in our opinion, does not flow from the decision of the Supreme Court. Indeed, the Madras High Court in A. L. A. Firm v. CIT : 102ITR622(Mad) has also held that the said decision cannot be understood as suggested by the learned counsel. Mr. Anjaneyulu brought to out notice certain other decisions as supporting his contention. But we do not think it necessary to go into this question at any depth, since it is not necessary for the purpose of the present case. We only wish to indicate our dissent from the extreme proposition advanced by the learned counsel for the assessee, which is supported neither by principle nor by any authority.
53. Lastly, Mr. Anjaneyulu urged upon us the following consideration. He said that if we hold that the subsidy concerned herein constitutes income and is, accordingly, includible in the assessable income of the assessee, more than half of it would be taken away by the State in the shape of taxes and that this may have never been the intention of the state while extending this subsidy. Firstly, the subsidy is given by the State Government while the income-tax is levied by a statute made by Parliament. Secondly, in construing a taxing statute, we are expected to go strictly by the letter of law and are not to be swayed by considerations, viz., whether the assessee is suffering hardship or that he is getting away with a bonanza. The language of the enactment is the guide to its intention and in view of the well-established proposition that subsidy given to an undertaking to assist or improve its business constitutes income of such an undertaking, we have no other option but to hold that the amount concerned herein does constitute income in the hands of the assessee for the relevant assessment year and has to be assessed as such.
54. The question referred to us is, accordingly, answered in the following terms :
On the facts and in the circumstances of the case, the amount of Rs. 14,655 received by the assessee from the Government of Andhra Pradesh for the relevant accounting period was liable to be included in the total income assessable for the assessment year 1974-75.
55. We answer the reference in favour of the Department.