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2018 (8) TMI 2026 - AT - Income TaxCharacterization of income - power subsidy receipt as capital in nature or revenue - subsidy received from the Government of Andhra Pradesh as an incentive for setting up of a new industry in the eligible area - HELD THAT:- On perusal of the G.O.Ms.No.178, dated 21.06.2005 it is clear that the subsidy is granted as an incentive for setting up of a new industry in the State of Andhra Pradesh in the eligible area. No doubt, the subsidy is in the form of reduction / concession in the power tariff which is obviously on revenue account. The Hon’ble Supreme Court in the case of Sahney Steel & Press Works Ltd [1997 (9) TMI 3 - SUPREME COURT] had decided that if the monies are given to the assessee for assisting them in carrying out their business operations after commencement of production such subsidy must be treated as a assistance for the purpose of trading which can be brought to tax as revenue receipt. The said proposition in the case of Sahney Steel & Press Works Ltd (supra) was distinguished by the Hon’ble Apex Court in the case of Ponni Sugars and Chemicals Ltd [2008 (9) TMI 14 - SUPREME COURT] The object behind the grant of subsidy is important to determine the nature of the subsidy. In the present case, the scheme specifically provides that the incentives are given to promote industrial investment to all new eligible industrial units. Therefore, we have no hesitation to conclude that the object behind the grant of subsidy is only to promote the setting up of new industry and therefore having regard to the ratio laid down by the Hon’ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd [2008 (9) TMI 14 - SUPREME COURT] and CIT vs. Chaphalkar Brothers [2017 (12) TMI 816 - SUPREME COURT] he subsidy amount granted is capital in nature and cannot be brought to tax. The fact that the subsidy is in the form of concession of the power tariff is not relevant to decide the nature of the subsidy in the light of settled proposition of law that it is the quality of payment that is decisive of the character of the payment and not the method of the payment or its measure. Appeal filed by the assessee is allowed.
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