INCOME TAX ACT, 1961

Section 4

Income - Capital or revenue receipt - Interest subsidy under Technology Upgradation Fund Scheme (TUFS) - Objective of giving subsidy being to upgrade technology level by eligible unit by induction of state-of-the-art or near state-of-the-art technology

Assessee-company received interest subsidy under Technology Upgradation Fund Scheme (TUFS). AO taxed the same.Held: Though subsidy in question under TUF Scheme was given in the form of reimbursement of interest, however, purpose of giving incentive was to encourage capital investment by eligible unit in the form of specified machinery in order to induct state-of-the-art or near-state-of the art technology or at least a significant step up form present technology level to a substantially higher one going by this purpose of interest subsidy as specified under TUF Scheme, was a receipt of capital in nature. Accordingly, issue was restored to AO for the limited purpose of verifying the issue of utilization of amount of subsidy in question by the assessee. If it was found that subsidy amount in question was utilized by the assessee for the purpose of meeting of interest liability on loans and advances taken by it to set up its plant and machinery, subsidy incentive would be considered as a capital receipt not chargeable to tax.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

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