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2014 (6) TMI 501 - AT - Income TaxGrant from Govt. of AP Capital receipt or not - Uplifting the poor cobblers to a higher standard of living above the poverty line Held that:- The character of the subsidy would depend on the purpose for which the same is given - If it is for promoting setting up of new Industries, then it is capital in nature - The method of determining the subsidy and the mode of distribution does not matter - the Government of AP had taken a decision to develop leather industrial parks in the state which will result in huge employment generation potential - the State government declared the Assessee as the Nodal Agency to act as a facilitator and for setting up Leather Industrial parks all over AP - Merely because a portion of the grant is paid to enable the Assessee to meet the expenses, it would not alter the character of the grant - it is the overall purpose of the grant that determines the character of the grant - The method of determination of the quantum of subsidy will not matter, similarly the various heads under which the grants were actually spent is immaterial as such expenses are only part of the overall object and purpose for which grant has been given - even if the amount of Rs. 2.03 given by the State Government is treated as grant/ subsidy, the same is a capital receipt not taxable thus, the order of the CIT(A) is upheld Decided against Revenue. Allowability of claim of loss Held that:- The figures of sale of goods, purchase and figures of opening and closing balances of stocks, the CIT(A) agreed with the plea of the assessee that there was no stoppage of business activity, and the AO mistook the plea of the assessee that the manufacturing activity was stopped as admission of stoppage of business activity - No material to the contrary has been brought on record by the Revenue thus, there was no infirmity in the conclusion of the CIT(A) Decided against Revenue. Treatment of lease rental Business income or property income Held that:- The assets that yielded the rental income are the business premises, plant and machinery of thee assessee, which were hitherto used by the assessee for its own business activity, and such leasing out was done in view of the stoppage of manufacturing activity by the assessee, just to use the idle assets for income generation purposes - No evidence has been brought on record by the Revenue to contradict these findings thus, there was no infirmity in the order of the CIT(A) Decided against Revenue.
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