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2015 (10) TMI 2566 - AT - Income TaxInterest subsidy - nature of receipt - revenue or capital subsidy - repayment of loan acquired for acquisition of capital assets - Held that:- In the case of Ponni Sugars and Chemicals Ltd. [2008 (9) TMI 14 - SUPREME COURT ] their lordship has held that the nature of subsidy is to be determined in respect of purpose for the subsidy is granted. The character of subsidy is to be determined with respect to subsidy is granted. In other words one has to apply the purpose test. The point of time as subsidy paid is not relevant. The source is immaterial if the object of the subsidy is to enable the assessee to run the business more profitably then the receipt is of revenue receipt. On the other hand, object of the assistance under the subsidy scheme is to enable the assessee to setup a new unit or to expend an existing unit then the receipt of the subsidy is a receipt in capital account. Their lordship has further held that after reversing the judgment of the High Court that main eligibility condition in the schemes was that the incentive had to be utilized for repayment of loans taken by the assessee to setup new units or for substantial expansion of an existing unit. Their lordship accordingly held that the subsidy received by the assessee was not in the course of trade but was of capital nature. Carefully perused the orders of the Tribunal referred by the assessee and we find that in the case of ACIT Vs. Shree Cement Ltd [2011 (9) TMI 561 - ITAT JAIPUR] an identical fact that the interest subsidy was considered to be the capital subsidy. Therefore, in the light of aforesaid judgments, we are of the view that the CIT(A) has rightly treated the interest subsidies as a capital receipt as it was received only for repayment of loan acquired for acquisition of capital assets. Accordingly, the Revenue fails on this issue.
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