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| The Tax Publishers2020 TaxPub(DT) 3817 (Mum-Trib) INCOME TAX ACT, 1961
Section 4
Where purpose of sales tax subsidy received by assessee under Subsidy Scheme of Government of U.P., was to enable the assessee to set-up a new unit or to expand the unit, the receipt of such subsidy would be treated as a capital receipt not taxable to tax.
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Income - Capital or revenue receipt - Sales-tax subsidy received under Subsidy Scheme of Government of U.P. - Subsidy provided for enabling assessee to expand/modernize its existing unit
AO held that sales tax subsidy received by assessee-company under subsidy scheme of Government of U.P. was a revenue receipt. He was of the view that the said subsidy was intended for the assessee's business and its profitability was an operational subsidy, hence, it was in the nature of revenue receipt. However, CIT (A) held that the said subsidy was in the nature of capital receipt. Aggrieved, Revenue was in appeal. Held: On examination of the U.P. Government Subsidy Scheme under which the assessee received the sales tax incentive, it was found that the purpose of the subsidy scheme was to attract people to invest and take part in industrialization of certain areas in the State. Further, the subsidy scheme was not for the benefit of generating product purchase from the town/district of U.P. Further, the said subsidy was for enabling the assessee to expand/modernize its existing unit. Therefore, the sales tax subsidy received by the assessee would be treated as capital receipt.
REFERRED :
FAVOUR : In assessee's favour
A.Y. : 1999-2000 to 2003-04
IN THE ITAT, MUMBAI BENCH
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