Tribunal rules subsidies as capital receipts, not revenue income, in landmark decision.

The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal regarding subsidies received, affirming them as capital receipts. The subsidies were deemed not meant to meet asset costs, thus Explanation 10 was found not applicable, leading to the rejection of reducing them from the block of assets. The Tribunal upheld the CIT(A)'s decision and applied the "purpose test" from a previous case, ultimately determining the subsidies as capital receipts rather than revenue income.

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Issues:
Cross appeals by assessee and Revenue against CIT(A) order for AY 2014-15.

Analysis:
1. Nature of Subsidy Received:
- Assessee received subsidies for various units, disputed as revenue or capital receipt.
- AO treated subsidies as revenue income, citing Sahney Steel case.
- CIT(A) held subsidies as capital receipts, directed AO to reduce from block of assets per Explanation 10 of Sec.43(1).
- Tribunal upheld CIT(A) decision, applying "purpose test" from Ponni Sugars case.

2. Revenue's Appeal (ITA No.1118/PUN/2017):
- Revenue contended subsidies were revenue in nature.
- Tribunal referred to Co-ordinate Bench decision in assessee's favor for AY 2013-14.
- Held subsidies aimed at industrial development, not revenue, dismissing Revenue's appeal.

3. Assessee's Appeal (ITA No.1042/PUN/2017):
- Assessee challenged CIT(A) direction to reduce subsidies from block of assets.
- Tribunal found subsidies not meant to meet asset costs, thus Explanation 10 not applicable.
- Upheld Co-ordinate Bench decision, reversing CIT(A) direction.

In conclusion, Tribunal allowed assessee's appeal and dismissed Revenue's appeal, affirming subsidies as capital receipts and rejecting reduction from block of assets.

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