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2018 (6) TMI 1238 - HC - Income TaxTreatment of a subsidy pursuant to a scheme promulgated by the State Government - revenue receipt or a capital receipt - Held that:- As decided in Principal Commissioner of Income Tax Vs. Shyam Steel Industries Limited [2018 (5) TMI 702 - CALCUTTA HIGH COURT] since the scheme provided for an incentive for enlarging the manufacturing facility or acquiring more equipment, however the money may have been paid or adjusted in terms of the scheme, the same had to be regarded as a capital receipt. The distinction that was made was that a revenue receipt would be when money is received for the day to day running of an assessee but a capital receipt would be one which goes towards funding the capital assets of a company like the enhancement of its manufacturing facility or the acquisition of more advanced equipment and the like. - Decided in favour of assessee Deduction of the interest paid on obtaining a loan u/s 36 - Held that:- Both the Commissioner (Appeals) and the Appellate Tribunal noticed an agreement between the assessee, the National Dairy Development Board and the West Bengal Cooperative Mill Producers Federation Limited to set up a joint venture company for the production of milk. The assessee is engaged in the business of the manufacture and sale of fruit juice and like products. The setting-up of a joint venture company with a Central Government agency and a State Government entity cannot be said to be beyond the purview of the business operations of the assessee. Thus the amount of interest paid in respect of the funds borrowed by the assessee had to be regarded as a payment made for the purpose of the business of the assessee and a permissible deduction under Section 36(1)(iii) of the Act.
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