J.V. Gupta, J.
1. In this reference, arising out of the assessee's applications under Section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as ' the Act '), the following two questions of law have been referred to this court :
' (i) (a) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the subsidy of Rs. 11,969 received by the assessee from the Government constituted a revenue receipt to be taxed as such (assessment year 1965-66)
(b) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the subsidy of Rs. 12,815 received by the assessee from the Government constituted a revenue receipt to be taxed as such (assessment year 1967-68)
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the amount of Rs. 6,104 representing admission fee charged by the assessee-co-operative society from its members constituted a taxable receipt '
2. The facts giving rise to these questions of law are : The assessee is a co-oporative society registered under the Co-operative Societies Act, which is running a store of consumables primarily for its members and shareholders. The society did not succeed in its venture and approached the Govt. for subsidy which was given, at Rs. 15,719 (Rs. 2,500 for delivery van, Rs. 1,250 for equipment, Rs. 11,969 for managerial and rental expense es) for the first year, i.e., assessment year 1965-66, and Rs. 12,815 on account of managerial expenses, for the second year, i. e., assessment year 1967-68. The dispute, therefore, relates to Rs. 11,969 only as far as the assessment year 1965-66 is concerned and to Rs. 12,815 for the assessment year 1967-68. The assessee's case for both the years in question before the revenue authorities was that the subsidy was a receipt of casual and nonrecurring nature and was hence exempted from tax. The ITO did not accept this contention. The assessee went up in appeal and the AAC allowed the appeal, on the ground that, in his opinion, the receipt of subsidy was of the nature of casual and non-recurring receipt and was thus not taxable. In support of this view, certain authorities are referred in his order, annex. ' B '. The revenue went up in second appeal before the Tribunal and contended that the case law on which the AAC allowed the appeal, is not relevant as it did not even touch upon the issues involved in these two cases. However, the learned Tribunal allowed the departmental appeals, with the following observations :
' After hearing both the parties and going through the cases relied upon by both the parties, we are of the view that the AAC did not correctly apply his mind to the issue before him. The subsidy or the grant given by the Govt. was an incentive, as the assessee calls it, so that the assessee may pass through its initial stages of struggle. The receipt was a revenue receipt not to be returned to the Government at any future date. When an assessee receives an amount of such a nature, it can neither be casual nor non-recurring in nature but is positively revenue receipt which is taxable. After all, keeping in view the concern of the Government to encourage co-operatives, such subsidies are given so that the co-operatives may be in a position to carry on their business very effectively and more successfully resulting in more profitability. Such subsidies are boosters to thebusiness and as they are not returnable or refundable either in cash or by adjustment, they are revenue receipts to be taxed as such. We, therefore, hold that the subsidies in the two assessment years assessed by the ITO had been rightly assessed and the AAC's order is, therefore, reversed and that of the ITO restored to this extent for both the years.'
3. The learned counsel for the assessee has urged that, in view of Section 10(3) of the Act, any receipt which is of a casual and non-recurring nature, is to be excluded while computing the total income of the assessee. According to him, the subsidies given by the Govt, are boosters to the co-operative movement and are not returnable or refundable and under no circumstances it can be held that these two amounts constitute a revenue receipt as contemplated by Section 10(3), applicable for the relevant years which read as under :
' 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included--......
(3) any receipts which are of a casual and non-recurring nature, unless they are-
(i) capital gains, chargeable under the provisions of Section 45 ; or
(ii) receipts arising from business or the exercise of a profession or occupation ; or
(iii) receipts by way of addition to the remuneration of an employee.'
4. The learned counsel further contended that these subsidies are payments in the nature of a gift and the Govt. was under no legally binding obligation to pay the same. It was given voluntarily depending on the whims of the Govt. The payment was made without any consideration, and, therefore, the same falls under the exemption of Section 10(3) being receipts of a casual and non-recurring nature. In support of his contention, he relied upon H. H. Maharani Shri Vijaykuverba Saheb of Morvi v. CIT : 49ITR594(Bom) and H. H. Maharaja Rana Hemant Singhji v. CIT and tried to distinguish the authorities referred to in the order of the Tribunal,, such as, Meenakshi Achi v. CIT : 60ITR253(SC) , Bengal Textiles Association v. CIT : 39ITR723(SC) and Ratna Sugar Mills Co. Ltd. v. CIT : 33ITR644(All) . It may be stated here that the abovesaid authorities relied upon by the assessee do not relate to any business concern. However, his main argument is that the said two subsidies paid by the Govt. to the assessee, being of casual and non-recurring nature, are exempt under Section 10 of the Act. In Lola Indra Sen, In re : 8ITR187(All) the word ' casual ' is said to mean (p. 200) :
'(1) Subject to, depending on or produced by chance; accidental, fortuitous.
(2) Occurring and coming out at uncertain times, not to be calculated on, uncertain, unsettled.
(3) Subject to chance or accident.'
5. The word ' recurring ' connotes the idea of repetition and of occurring more than once. The learned counsel also cited Groz-Beckeri Saboo Ltd. v. CIT in support of his contention.
6. On the other hand, the learned counsel for the revenue has again relied upon all these cases which were cited before the Tribunal and has argued that as the assessee is a commercial concern (being engaged in trading activities), liable to pay sales tax and is earning profits (as is clear from the order of the ITO, annex, ' A '), it is not exempt because of proviso (ii) to Sub-section (3) of Section 10. In support of his contention, he also cited Panyam Cements and Mineral Industries Ltd. v. Addl. CIT : 117ITR770(AP) , wherein the assessee engaged in the manufacture of cement, had claimed deduction in respect of electrical charges paid by it and the Government issued an order directing that concession be granted on power tariff in respect of certain industries, including that of the assessee and, therefore, the assessee received Rs. 1,54,561 and Rs. 51,821 for two assessment years but still it was observed thus (p. 776) :
' 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 that how it could be called a windfall or casual receipt.'
7. It was further held therein thus (p. 776) :
' Having regard to the facts of the present case, we are clearly of the opinion that the receipt in the instant case can be included in the total income as it is not a casual or a non-recurring receipt. Even assuming it is considered as a casual and non-recurring receipt under Section 10(3) of the I.T. Act, if such a receipt arises from business then it could be included in the total income of the assessee. As stated earlier, the assessee would not have been entitled to this subsidy but for its carrying on the business. Therefore, it follows that the subsidy received by the assessee arose from the business carried on ,by the assessee.'
8. While making these observations, the learned judges of the Andhra Pradesh High Court relied upon the decision of the Supreme Court in Meenakshi Achi's case : 60ITR253(SC) .
9. The learned counsel further cited H. R. Sugar Factory (P.) Ltd. v. CIT : 77ITR614(All) , wherein to enable the sugar factories in Uttar Pradesh to start early crushing during the ensuing session, the Central Government allowed to such factories which start crushing earlier, a concession of four annas per maund on cane crushed and on that account the assessee received Rs. 40,419 from the Govt. but still even if the receipt wasof a casual nature, the case was held to be not covered by Section 4(3)(vii) of the Indian I.T. Act, 1922 (equivalent to Section 10(3) of the Act of 1961), and the receipt was held to be taxable.
10. After hearing the learned counsel for the parties, we are of the opinion that the view taken by the Tribunal is correct. The assessee being a trading concern, the amount paid in the form of subsidy by the Govt., though as an incentive to the co-operative movement, will be a revenue receipt and will be liable to tax. In this case, we have to see the character of the receipt. If it is coming to recoup the revenue expenditure, it will take the same colour and will be deemed to be a revenue receipt in the hands of the assessee. It is the purpose for which it is given which is material and that is the determining factor. Having found that the said subsidy was given to meet the managerial and rental expenses in order to reduce the cost of the expenses on that account, the subsidy receipt would be due to the actual expenses of the assessee and this amount would constitute income for the relevant assessment year. In this view of the matter, the answer to the first question is in the affirmative, i.e., in favour of the revenue and against the assessee.
11. As regards the second question, the Tribunal allowed the departmental appeal with the-following observations :
' The members by paying admission fee of Re. 1 per member did not have any right on the co-operative society unless they become members by paying another Rs. 10 per member which has rightly been taken towards the capital of the co-operative society. The admission fee in the hands of the co-operative society is a receipt in return whereof no right is conferred on the member unless he paid another sum of Rs. 10 as membership fee. Therefore, the admission fee did not confer any mutual benefit. We are, therefore, of the view that in view of the Supreme Court judgments in Delhi Stock Exchange Association Ltd. v. CIT : 41ITR495(SC) , CIT v. Calcutta Stock Exchange Association Ltd. : 36ITR222(SC) and CIT v. Royal Western India Turf Club Ltd. : 24ITR551(SC) , the assessee has no case and the Appellate Assistant Commissioner was not right in accepting the assessee's contention in this behalf. The order of the Appellate Assistant Commissioner is reversed and that of the Income-tax Officer is restored.'
12. The learned counsel for the assessee referred to Section 28 of the Act, which provides that any income derived by a trade, professional or similar association, from specific services performed for its members, shall be chargeable to income-tax under the head ' Profits and gains of business or profession '. His argument is that since no specific services are rendered by the assessee, i.e., the co-operative society, to its members pacing admission fee of Re. 1per member, the same will not be covered by the said provision and thus could not be taxed as such.
13. On the other hand, the learned counsel for the revenue, submitted that the. element of mutuality was lacking and since the assessee is a trading concern and doing business, the nature of the receipt in question was decisive of its taxability. In this connection, he relied upon Delhi Stock Exchange Association Ltd. v. CIT : 41ITR495(SC) , wherein it has been held that, as the body of trading members who paid the entrance fee, and the shareholders among whom the profits were distributed Were not identical and the element of mutuality was lacking, the company carried on a business whose profits were taxable, and, therefore, the admission fees received from the members were taxable in its hands. He also relied upon the Supreme Court authority in CIT v. Calcutta Stock Exchange Association Ltd. : 36ITR222(SC) , wherein it was held that the assessee had three sources of income, namely, (1) subscription realised from the members ; (2) subscription levied for the introduction of assistants ; and (3) fees levied for agreeing to put the names of certain companies on the quotation list, and income realised from all these sources was held to be realised during the course of the trading activities of the assessee.
14. After hearing the learned counsel for the parties, we are of the opinion that the Tribunal was right in holding that the admission fee in the hands of the co-operative society is a receipt in return whereof no right is conferred on the membels unless they further pay a sum of Rs. 10 as membership fee. Therefore, the admission fee did not confer any mutual benefit. The members by paying Re. 1 as admission fee, did not acquire any right on the co-operative society, unless they pay another sum of Rs. 10 per member. That being se it has rightly been taken towards the income of the assessee. In this view of the matter, the answer to this question is also given in the affirmative, i.e., in favour of the revenue and against the assessee.
15. We are, therefore, of the opinion that both the questions referred to this court should be answered in the affirmative. However, the parties will bear their own costs.
R.N. Mittal, J.
16. I agree.