2019 (9) TMI 1154 - HC - Income Tax

Characterization of income - subsidy received - revenue or capital receipt - HELD THAT:- This Court notices that the Punjab and Haryana High Court took into account the previous binding ruling of the Supreme Court in Commissioner of Income Tax vs. Ponni Sugars & Chemicals Ltd. & Ors. [2008 (9) TMI 14 - SUPREME COURT] and Sahney Steel & Press Works Ltd. & Ors. vs. Commissioner of Income Tax [1997 (9) TMI 3 - SUPREME COURT] . In these circumstances, the Court is of the opinion that the amount was received as capital stream and therefore, not taxable.

Focus Marketing Scheme - apparently the Central Government gave the subsidy to enhance indian export potential in the international market. It was not granted to meet the cost of expenditure to meet the competition of the Indian textile market. ITAT took note of judgment in Ponni Sugars & Chemicals Ltd.(supra) and held that the amount was not an export incentive, but rather capital receipt and therefore, not taxable. This Court is of the opinion that there is no infirmity with the reason.

As far as the electricity subsidy is concerned, the third ground i.e. electricity subsidy under the Rajasthan Investment Promotion Scheme was held to be a capital receipt by the CIT(A).

It was held that this was granted in larger public interest and it was linked to capital interest, a similar scheme was that the amounts received in the similar scheme have to be capital receipt by a Division Bench of this Court in Commissioner of Income Tax, Ajmer vs. Shree Cement [2017 (8) TMI 1336 - RAJASTHAN HIGH COURT] . This Court notices that the ratio of the rulings in Ponni Sugars & Chemicals Ltd.(supra) and Sahney Steel & Press Works Ltd. & Ors. (supra), applied. Consequently, we find no infirmity with the approach of the ITAT on this aspect as well.