2018 (5) TMI 702

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.... capital receipt, irrespective of the purpose of the scheme under which such incentive or subsidy is made available to a business unit. The appeal is at the instance of the Department. There was a difference of opinion between the judicial member and the accountant member on the Appellate Tribunal. The judicial member relied on the dictum in the Supreme Court judgment reported at 228 ITR 238 (Sahney Steel & Press Works v. CIT). The accountant member, however, relied on a more recent decision of the Supreme Court reported at 306 ITR 392 (CIT v. Ponni Sugars & Chemicals Ltd.) to hold that the purpose of the grant of the subsidy would be the overwhelming consideration in ascertaining whether the subsidy or the money was to be treated as a c....

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....t to repay the term loans obtained for setting up the unit or expanding it. Indeed, the relevant passage from paragraph 14 of the judgment in Ponni Sugars would tempt the dictum rendered therein to be confined to the manner of use of the subsidy as the law as recognised by the Supreme Court is couched in the following words: "...That test is that the character of the receipt in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. In other words, in such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we ....

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....t of capital expenditure which may have been obtained by an assessee, the real purpose of the scheme has to be seen as augmenting the capital resourses by a new or expanded unit and not to allow a lower cost of the daily functioning of an existing unit. The difference may be in degrees but the words of a scheme and the real purpose thereof have to be discerned in assessing whether the incentive or the subsidy thereunder has to be regarded as a capital receipt or a revenue receipt. There may be a scheme, for instance, that permits every entity of a certain class to lower charges for consumption of power, irrespective of the unit being a new unit or it having expanded itself. In such a scenario, the incentive would have to be invariably re....