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March 2017

51. Income- Transport subsidy – whether income or capital- A. Y. 2001-02 – Transport subsidy to stimulate industrial activity in backward region is capital receipt and not income

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

Shiv Shakti Floor Mills P. Ltd. vs CIT; 390 ITR 346
(Gauhati):

For the A. Y 2001-02, the assessee had claimed the transport
subsidy received by it to stimulate industrial activity in backward region to
be capital receipt and not income. The Assessing Officer treated the subsidy as
income and made addition to the total income. The Tribunal upheld the addition.

On appeal by the assessee, the Gauhati High Court reversed
the decision of the Tribunal and held as under:

“The transport subsidy received by the assessee was intended
to stimulate industrial activity in the backward region, to generate employment
opportunities and bring about development in the North Eastern States and it
was not meant to provide higher profit for the entrepreneur. It was intended to
encourage investment in difficult and far flung states and the sum received as
subsidy could not be treated as revenue receipt.”

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