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2019 (3) TMI 914 - HC - Income TaxDiversion of Income - Capital Subsidy for infusion of additional capital by the appellant in the joint venture company as per the terms of Letter of Intent - business link or services rendered by the Assessee to the UK based Company RSA - Nature of receipt - revenue or capital receipt - HELD THAT:- The Agreement between the two parties in question clearly stipulated that both intended to set up a new joint venture company to enter into the insurance sector and since, for making the investment in the share capital, the Indian Company SFL the Assessee before us fell short of money, the UK Company RSA gave the capital subsidy to the Assessee Company to contribute its share in the share capital of the joint venture company in terms of the Letter of Intent. 74% of the total subscription share capital was to be invested by the Indian Companies including the Assessee company and only 26% of share capital was to be invested by the RSA (UK Company). There is no material on record to show that the said capital subsidy received by the Assessee Company during the year in question was diverted by the Assessee company for any other purpose except for being invested in the share capital of the joint venture company. This money has not been utilised as subscribing the share capital of the UK Company, RSA itself though the Assessee Company SFL. There is no evidence on record brought by Revenue to establish that the insurance business of the joint venture company had already started and the said remittance of ₹ 2,11,75,000/- was made by the UK company RSA against any such services rendered by the Assessee Company SFL to the said UK based Company RSA. Therefore, we are unable to accept the contention of the Revenue that the said subsidy or remittance was received for any business link or services rendered by the Assessee to the UK based Company RSA. It is undoubtedly, a capital receipt in the hands of the Assessee Company and cannot be brought to tax as Revenue Receipt, particularly in the face of the finding of the Assessing Authority himself that the subsidy or remittance so received from RSA had been invested by the Assessee Company in the share capital of the joint venture Company M/s. Royal Sundaram Alliance Insurance Company Limited. - Decided in favour of assessee.
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