INCOME TAX ACT, 1961

Section 2(47)(v)

Income - Capital or revenue receipt - Capital subsidy from goverment -

Assessee was engaged in manufacturing and selling of Industrial/Medical Gases. It received capital subsidy from the governments which was taken directly to the Capital Reserve in the balance-sheet stating that it was a capital receipt and hence, not chargeable to tax. CIT(A) held that the subsidy was of capital nature. He however, invoked Explanation 10 to section 43(1) and directed that the amount of such subsidy should be reduced from the cost of assets for the purpose of depreciation. Held: In view of newly inserted section 145B, subsidy falls within the definition of 'income' under section 2(24) and resultantly chargeable to tax in the year of receipt as per section 145B(3) in all cases, except where Explanation 10 to section 43(1) gets magnetized, in which eventuality, it will go to reduce the cost of assets. Since such amendments were not applicable to the year under consideration, CIT(A) was not justified in directing to exclude the amount of subsidy allowed to the assessee by the Government from the cost of assets for the purposes of allowing depreciation.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14

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