July 2023
Income — Capital or revenue receipt — Interest — Funds received for project from capital subsidy, debt and equity — Funds placed with banks during period of construction of project — Interest earned thereon capital in nature.
22. Principal CIT vs. Brahmaputra Cracker & Polymer Ltd
[2023] 454 ITR 202 (Gau):
A. Ys. 2011-12, 2014-15 and 2015-16
Date of order: 12th April, 2023
Section 4 of ITA 1961
Income — Capital or revenue receipt — Interest — Funds received for project from capital subsidy, debt and equity — Funds placed with banks during period of construction of project — Interest earned thereon capital in nature.
The assessee received a capital subsidy from the Ministry of Chemicals and Fertilizers for setting up Integrated a Petro-Chemical Complex. The assessee maintained a separate bank account for such capital subsidy and any excess amount not being utilised was temporarily parked in short-term deposits in banks and interest was earned thereupon. The assessee made these deposits in accordance with the guidelines of the Department of the Public Enterprises. Clarifications were received from the Ministry of Chemicals and Fertilizers indicating that the interest earned on the aforesaid deposits shall be treated as a part of the capital subsidy and will reduce the part of capital subsidy sought from the Government. The assessee claimed these receipts as capital receipts in the return of income. The AO treated these receipts as revenue receipts chargeable to tax.
The CIT(A) allowed the appeal of the assessee. The Tribunal dismissed the appeal of the Department.
The Gauhati High Court dismissed the appeal fil
