Judgment :- N.V. BALASUBRAMANIAN, J. The assessee is a company manufacturing tappets, can shafts, etc. The assessee, during the previous year relevant to the asst. yr. 1978-79, obtained a refund of a sum of Rs. 1, 23, 300 and also a sum of Rs. 1, 76, 873 from the Tamil Nadu State Electricity Board relating to the period commencing from 1st February, 1975, to 30th September, 1975, totalling in all a sum of Rs. 3, 00, 173. Out of the said sum of Rs. 3, 00, 173 a sum of Rs. 2, 32, 794 related to the earlier accounting years, and the balance of Rs. 67, 379 related to the accounting year ending on 31st December, 1977, relevant to the asst. yr. 1978-79. The assessee got the refund as concessional rate of levy was extended to the industrial undertaking of the assessee on the ground that it was a small-scale industry. In the statement filed by the assessee along with its return of income for the asst. yr. 1978-79, the assessee offered the sum of Rs. 2, 32, 794 being the refund of electricity charges relating to the earlier assessment years. As regards the balance of Rs. 57, 379, it was found that the normal charges towards the consumption of electricity payable at the ordinary tariff rate was Rs. 3, 26, 828 and after adjusting the refund of Rs. 67, 379 and the concessional rate enjoyed for the period from October to December, 1977, amounting to Rs. 8, 676, the balance of Rs. 2, 50, 773 was debited as electricity charges for the current year. In the adjustment statement the assessee claimed that the sum of Rs. 2, 32, 794 was not a revenue receipt but was only a capital receipt. The assessee also claimed that sum of Rs. 67, 379 was also a capital receipt. The ITO did not accept the claim of the assessee and held that the sum received by the assessee represented the refund of the excess amount paid by it towards electricity charges which was allowed as a deduction in the computation of income for earlier assessment years and the refunded amount was its income under the provisions of s. 41(1) of the IT Act, 1961 (hereinafter to be referred to as 'the Act'). The CIT(A) confirmed the order of the ITO and dismissed the appeal preferred by the assessee. 2. The CIT(A) confirmed the order of the ITO and dismissed the appeal preferred by the assessee. 2. The assessee carried the matter in appeal to the Tribunal and the Tribunal held that the assessee had received the amount on the basis of circulars issued by the State Industries Promotion Corporation of Tamil Nadu Ltd. (SIPCOT) and according to the Tribunal, instead of Government paying directly to the assessee the money, the Government devised a scheme to implement the grant which allowed the assessee to retain a certain portion of money with them which represented the difference between the amount payable under the normal rate of electricity and concessional tariff rates. The Tribunal, therefore, held that the assessee paid the normal tariff during the relevant period and the Government had to pay the subsidy in cash and instead of paying the amount directly, it routed the same through the Electricity Board which adopted the form and language of refund of a portion of the normal tariff. The Tribunal held that there was no cessation of liability because of the receipt of the money from the Electricity Board and that the payment received represented cash subsidy and it cannot be regarded as a payment under s. 41(1) of the Act. The Tribunal was also of the view that the amount received is a capital receipt and held that the refund of excess electricity charges was not liable to be treated as the income of the assessee. 3. Aggrieved by the order of the Tribunal, the Revenue obtained a statement of case on the following two questions of law for our consideration under s. 256(1) of the Act, "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the refund of Rs. 3, 00, 173 received by the assessee from the State Electricity Board being the excess charges collected from the assessee is not to be treated as income under s. 41(1) of the IT Act, 1961 ? 2. Whether on the facts and in the circumstances of the case, the Tribunal's view that the amount received by the assessee from the State Electricity Board is subsidy of capital nature and not receipt falling under s. 41(1) of the IT Act, 1961, is based on valid and relevant and is sustainable in law ?" 4. 2. Whether on the facts and in the circumstances of the case, the Tribunal's view that the amount received by the assessee from the State Electricity Board is subsidy of capital nature and not receipt falling under s. 41(1) of the IT Act, 1961, is based on valid and relevant and is sustainable in law ?" 4. Learned counsel for the Revenue submitted that the Government paid the subsidy to the assessee and it was paid after the commencement of the business of the assessee with an avowed object to help the assessee to carry on its business and the amount was not paid by the Government for setting up an industrial undertaking. Learned counsel for the Revenue placing reliance on the decision of the Supreme Court in the case of Sahney Steel & Press Works Ltd. vs. CIT and the decision of the Andhra Pradesh High Court in the case of Panyam Cements & Mineral Industries vs. CIT submitted that the amount received was a revenue receipt and he also submitted that the amounts received are taxable as income under s. 41(1) of the Act. 5. Notice was served on the assessee and there is no representation on behalf of the assessee before us. 6. We have carefully considered the submissions of the learned counsel for the Revenue. In our opinion, the amount received by the assessee consists of two portions. As far as the sum of Rs. 2, 32, 794 representing the remission of electricity charges relating to earlier accounting years is concerned, we are of the opinion that it is liable to be treated as income of the assessee under s. 41(1) of the Act. The essential conditions for applicability of s. 41(1) of the Act are that the amount should have been allowed as a deduction in the computation of income for an earlier assessment year and there was a remission of the liability in the subsequent assessment year. It is seen that the amount of electricity charges paid by the assessee was granted as a deduction in computation of the business income in its earlier assessment years and the assessee during the previous year relevant for the assessment year in question, received the amount as reimbursement of the expenditure incurred by way of remission or cessation of its liability. It is incorrect to state that there was no remission of its liability by the payment of the amount by the Tamil Nadu Electricity Board. The assessee had earlier incurred its liability for its electricity consumption towards the State Electricity Board at a certain percentage of tariff rate and the Board by granting the concessional rate had foregone itself its right to receive the difference between the normal and concessional rate of levy and to that extent there was a cessation or remission of the assessee's liability. The assessee made, the electricity payment in discharge of its liability to the Electricity Board in the earlier years and when the electricity tariff rate was reduced and the assessee was given the concessional rate, in our opinion, there was, to that extent, a cessation or remission of its trading liability. Therefore, the amount received by the assessee, even assuming that it was a capital receipt, is liable to be taxed under provisions of s. 41(1) of the Act. The view of the Tribunal that there was no cessation of the liability and the amount received by the assessee cannot be regarded as payment under s. 41(1) of the Act is not legally sustainable as the mere nomenclature given for the payment, though styled subsidy, is not conclusive and the real nature of the transaction has to be seen. In our view, by this process, there is a cessation of assessee's liability towards Tamil Nadu Electricity Board and the provisions of s. 41(1) of the Act are wide enough to catch the receipt of the amounts in question by the assessee. 7. We are of the opinion that for considering the question of applicability of the provisions of s. 41(1) of the Act, the motive of the Tamil Nadu Government or the State Electricity Board or the objective behind the payment is not of much importance and the only relevant question that has to be examined is whether by the grant of the concessional rate of electricity, the assessee was relieved of its liability to pay the electricity charges at the normal rate that was in force during the years in question. The question can also be viewed from a different angle. The question can also be viewed from a different angle. The assessee would not have paid the electricity charges at normal rate, had the scheme granting concessional levy of rate been in force at the time of payment and the assessee would have paid electricity charges at concessional rate. We hold that because the concession was later extended to the rate of levy would make no difference as regards its ultimate liability of the assessee towards its electricity charges and its liability was only to the extent to which it was liable to pay on the basis of the concession scheme applicable and it was nothing more or nothing less. We hold that all the requirements of s. 41(1) of the Act are fully satisfied to treat the refund amount as the income of the assessee and hence, the Tribunal was not justified in holding that it is not a payment falling under s. 41(1) of the Act. We therefore, hold the assessment of the sum of Rs. 2, 32, 794 as income of the assessee by the ITO invoking the provisions of s. 41(1) of the Act is quite justified and calls for no interference. 8. Insofar as the remaining amount representing the remission of the electricity charges for the current year, namely, the sum of Rs. 67, 379 is concerned, a doubt has arisen whether the sum was allowed as a deduction in the computation of income of the assessee for the assessment year in question. It is seen from the statement of the case that the assessee had adjusted the refund of Rs. 67, 379 and debited the balance of Rs. 2, 50, 773 as electricity charges for the current year which means that the assessee did not claim deduction of the sum and was not allowed the deduction of the said sum. Therefore, the requisite conditions for the applicability of s. 41(1) of the Act are not satisfied as there was no deduction granted by the ITO in the determination of the income of the assessee. 9. Learned counsel for the Revenue submitted that in any event the amount would represent the subsidy and, therefore, it is an income for the purpose of the Act. 9. Learned counsel for the Revenue submitted that in any event the amount would represent the subsidy and, therefore, it is an income for the purpose of the Act. Learned counsel for the Revenue relied upon a decision of the Supreme Court in the case of Sahney Steel & Press Works Ltd. vs. CIT (supra) and the decision of the Andhra Pradesh High Court in Panyam Cements & Mineral Industries vs. CIT (supra). In our view, the decisions relied upon by the learned counsel for the Revenue are not applicable to the facts of the case. It is seen that in the two cases relied on by the learned counsel, the subsidy was granted by way of grant given by the Government, and in that context, the question arose whether the amount received was liable to be treated as income of the assessee for the purpose of the Act. However, on the facts of the case, the amount received by the assessee was only a refund of the electricity charges paid by the assessee by way of concessional tariff extended by the Tamil Nadu Government. When the Government desired to extend concessional tariff to a small scale industrial undertaking, it cannot be said that there was a grant or subsidy given by the Government. We are of the view that the amount received by the assessee represented the refund of the electricity charges already paid by it and the amount received cannot be regarded as subsidy at all. The subsidy in our opinion, is granted by the Government in many forms. At times, it may be a outright grant; sometime it may be by way of concession. The question whether the subsidy is taxable or not would depend on the facts of the case. In the decisions decided by the apex Court as well as by the Andhra Pradesh High Court, there was an outright grant of subsidy. The Government may grant subsidy in the form of subsidised price and in those cases it cannot be held that the difference between the market value of the commodity and subsidised price would represent the assessee's income. The Government may grant subsidy in the form of subsidised price and in those cases it cannot be held that the difference between the market value of the commodity and subsidised price would represent the assessee's income. Applying the principle, the Government provided the concessional rate of electricity to the small scale industries in the State with a view to promote the industrialisation in the State and on that account, it cannot be held that the difference in the amount between the normal value and the subsidised rate of electricity was the amount received by the assessee as subsidy and is liable to be taxed as income under the provisions of the Act. Further, the amount received was not given as deduction in the computation of income of the assessee and the provisions of s. 41(1) of the Act are not applicable and the sum of Rs. 67, 379 is not liable to be treated as income of the assessee. We therefore, hold that insofar as the sum of Rs. 67, 379 is concerned, it cannot be treated as the income of the assessee for the purpose of the IT Act. 10. Accordingly, we hold that insofar as the assessment of the refund the sum of Rs. 2, 32, 794 received by the assessee from the Electricity Board is concerned. It was rightly treated as income under s. 41(1) of the Act but the sum of Rs. 67, 379 is not its income for the purpose of the IT Act. Accordingly, we answer the questions of law referred to us in the manner indicated above. However, in the circumstances of the case, there will be no order as to costs.