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2016 (3) TMI 726 - ITAT DELHITreatment to subsidy received - revenue v/s capital receipt - Held that:- Hon’ble Supreme Court in CIT vs. Ponni Sugars and Chemicals Ltd. (2008 (9) TMI 14 - SUPREME COURT ), wherein held that the character of the receipt of a subsidy in the hands of the assessee under a scheme has to be determined with respect to the purpose for which the subsidy is granted. In other words, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. If the object of the subsidy is to enable the assessee to run the business more profitably then the receipt is on the revenue account. On the other hand, if the object of the assistance under the subsidy scheme is to enable the assessee to set up a new unit or to expand an existing unit then the receipt of the subsidy would be on capital account. We find that in the facts of this case, where the subsidy was given on the capital account in the form of capital cost to encourage upgrading the textile industry and the purpose and object was for capital investment, as such, is clearly a capital receipt as per the case laws relied upon by the ld. AR before us. Therefore, we direct that the receipt to be treated as receipt of capital nature and not to be taxed in the hands of the assessee. - Decided in favour of assessee
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