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December 2017

23 Income or capital receipt – A. Y. 2004-05 – Sales tax subsidy – Is capital receipt

By K. B. Bhujle, Advocate
Reading Time 1 mins

23.  Income or capital receipt – A. Y. 2004-05 –
Sales tax subsidy – Is capital receipt 

CIT vs.
Nirma Ltd.; 397 ITR 49 (Guj):

Dealing with the nature of
sales tax subsidy the Gujarat High Court held as under:

i)   The
character of the subsidy in the hands of the recipient whether revenue or
capital will have to be determined having regard to the purpose for which the
subsidy is given. The source of fund is quite immaterial.

 

ii)   Where
a subsidy though computed in terms of sales tax deferment or waiver, in essence
was meant for capital outlay expended by the assessee for setting up the unit
in the case of a new industrial unit and for expansion and diversification of
an existing unit, it would be a capital receipt.

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