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2013 (10) TMI 650 - HC - Income TaxNature of Receipt Capital OR Revenue Receipt - Whether a certain subsidy received by the respondent assessee under the scheme framed by the Government of Haryana under Chapter IV-C of Haryana General Sales Tax Rules, 1975 should be treated as a capital receipt or a revenue receipt Held that:- The subsidy though computed in terms of sales tax deferment or waiver, in essence it was meant for capital outlay expended by the assessee for set up of the unit in case of a new industrial unit and for expansion and diversification of an existing unit - such subsidy was available only to a new industrial unit or a unit undertaking expansion or diversification - Fixed capital investment has been defined as to include various investments in land under use, new construction, plant and machinery etc. - The entitlement was related to percentage of fixed capital investment. Following Sahney Steel and Press Works Ltd. and others v. Commissioner of Income-tax [1997 (9) TMI 3 - SUPREME Court] - The subsidy given was on revenue account because it was given by way of assistance in carrying on of trade or business - the subsidy given was to meet recurring expenses - The subsidies were granted year after year only after setting up of the new industry and only after commencement of production and, therefore, such a subsidy could only be treated as assistance given for the purpose of carrying on the business of the assessee. The character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test - The point of time at which the subsidy is paid is not relevant - The source is immaterial - The form of subsidy is immaterial - The main eligibility condition in the scheme is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units - it is the object for which the subsidy/assistance is given which determines the nature of the incentive subsidy - The form of the mechanism through which the subsidy is given is irrelevant there was no error in view of the Tribunal Decided against Revenue.
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