2001 (11) TMI 24 - HC - Income Tax

Capital Or Revenue Receipt, Goverment Company - Whether, on the facts and in the circumstances of the case, the grants received from the Government by the assessee-company, which is a 100 per cent. Government company, to enable the company to function, was a capital or revenue receipt? - we are of the opinion that the matter seems to be covered by a decision of the apex court in the case of Sahney Steel and Press Works Ltd. v. CIT. In the said decision, the apex court held that the subsidies not having been granted for production of or bringing into existence any new assets as such the same are of revenue character. As indicated hereinabove, even in the instant case, the grants-in-aid have been made by the Central Government for the purpose of functioning of the company and not for bringing into existence any new assets. In that view of the matter, the aforementioned reference is accordingly answered in favour of the Department

Summary

The High Court of Delhi ruled that grants received by a government company for functioning purposes are considered revenue receipts, not capital receipts. The court referenced a previous apex court decision to support this ruling. The assessment of the grants as income was upheld, and the appeals were dismissed.