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2018 (2) TMI 2024 - AT - Income TaxDisallowance on account of sale of tax subsidy and refund of interest on Term Loan - nature of receipt - revenue or capital receipt - HELD THAT:- Hon'ble Supreme Court in case of CIT Vs. Pooni Sugars & chemicals Ltd [2008 (9) TMI 14 - SUPREME COURT] has held that character of the receipt in the hands of the assessee has to be ascertained looking at the purpose for which the subsidy is provided. Therefore, Hon'ble Supreme Court held that for ascertaining the true character of the subsidy the purpose of the subsidy i.e. “purpose test” needs to be looked into. Hon'ble Supreme Court further stated that source of the subsidy, time of the subsidy is not relevant. According to the Hon'ble Supreme Court if the object of the subsidy scheme was to enable the assessee to run the business more profitably then the receipt was on revenue account - if the object of the subsidy was to set a new unit or to expand existing unit then such receipt is on capital account. Hence, it was held that the object for which the subsidy is given necessarily determines the nature of the subsidy. The form or the mechanism through which the subsidy is given is irrelevant. The ld CIT(A) has decided the issue based on the above decision of the Hon'ble Supreme Court. The ld CIT(A) has discussed the whole issue in para No. 4 of his order wherein, he has decided the issue as per the guidelines the decision of the Hon'ble Supreme Court. In view of this we do not find any infirmity in the order of the ld CIT(A) in holding that subsidy received by the assessee is capital in nature. Appeal of the revenue is dismissed.
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