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TMI Blog2025 (3) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... ence taxable, unless used to determine the actual cost of an asset. This amendment sought to end disputes by making all subsidies taxable unless they fell under an exclusion category. Appeal of the Revenue is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... at the subsidy granted falls under the test of revenue subsidy by observing as under : "6. Submission of the assessee is duly considered. The taxation of the subsidy depends on the purpose for which it is given. If it is given for running day to day business, then it is revenue receipt and if it is given to meet capital cost then it is capital receipt. So in any case, a subsidy can be either a capital subsidy or a revenue subsidy. When the subsidy is given year on year after setting up of undertaking to assist the assessee in carrying out its trade or business then such subsidy is of revenue nature. Besides such subsidy should not be given for setting up the plant but it should be given for efficient and profitable running of industry and its growth. In the instant case, it is seen that assessee states that the subsidy as received is for developing integrated cold chain facility for dairy units and it is a capital subsidy. Assessee further states that provisions of explanation 10 to section 43(1) are not applicable. Assessee states that it is not a revenue subsidy but a capital subsidy wherein the provisions of explanation 10 to section 43(1) are not applicable. 6.1. In the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not given subsidy for setting up of Industry nor towards cost of cold chain facility. 6.4. For the reasons mentioned above subsidy granted to the assessee is to encourage the business by giving providing integrated and complete cold chain and preservation infrastructure facilities without any break. This in turn will yield more profits to the assessee. Hence the subsidy granted falls under the test of revenue subsidy." 3.4. He further noted that the subsidy in question was not given to the assessee for establishment of business i.e. it was not meant to be used prior to commencement of commercial business so as to make the same as capital one i.e. in the form of fixed assets but it was given to the assessee after they commenced the business i.e. for running the business. If the assessee is given any subsidy for running their business, then such subsidy is never regarded as capital but it is regarded as revenue receipt. Distinguishing the various decisions relied before him by the assessee-company, the Assessing Officer treated the subsidy received by the assessee as revenue in nature and brought the same to tax by adding the same to the total income of the assessee within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Halls in the rural areas, it could not be termed as revenue receipt. 15. Similarly, in CIT v. Ponni Sugars & Chemicals Ltd. [2008] 174 Taxman 87/306 ITR 392, the Hon'ble Supreme Court has held as under :- "14. In our view, the controversy in hand can be resolved if we apply the test laid down in the judgment of this Court in the case of Sahney Steel and Press Works Ltd. (supra). In that case, on behalf of the assessee, it was contended that the subsidy given was up to 10% of the capital investment calculated on the basis of the quantum of investment in capital and, therefore, receipt of such subsidy was on capital account and not on revenue account. It was also urged in that case that subsidy granted on the basis of refund of sales tax on raw materials, machinery and finished goods were also of capital nature as the object of granting refund of sales tax was that the assessee could set up new business or expand his existing business. The contention of the assessee in that case was dismissed by the Tribunal and, therefore, the assessee had come to this Court by way of a special leave petition. It was held by this Court on the facts of that case and on the basis of the analys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat case, it was held that the payment received by assessee under the scheme was not in the course of a trade but was of a capital nature. In Ponni Sugars case (supra), the incentive conferred was in the nature of higher free sale sugar quota and allowance to collect excise duty even on the sale price of free sale sugar. The purpose obviously was to promote the concerned business. 16. Reference can also be made to a decision in Karnataka Municipal Data Society v. ITO [2016] 76 taxmann.com 167/389 ITR 441 wherein the Karnataka High Court has held that the amount given by the Government for a specified purpose and the government having control on its expenditure cannot be said to be income accrued to the assessee. 17. ITAT has definitely not considered the matter in the above noted context. The fact that the assessee received only one time grant with a specific purpose which nowhere suggested scope of profit generation or revenue for the assessee, the amount received by the assessee by way of grant-in-aid thus could not be termed to be revenue receipt. Substantial questions of law Nos. (c) and (d) are accordingly decided in favour of the assessee and against the revenue. 18. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time of hearing filed a copy of the decision of Hon'ble jurisdictional Bombay High Court in the case of Serum Institute of India Private Limited, Pune vs. Union of India & Others vide Writ Petition No.3735 of 2021 Order dated 04.12.2023 and submitted that the Hon'ble High Court after considering the decisions of Hon'ble Supreme Court in the case of Sahney Steel & Press Works Ltd., vs. CIT 228 ITR 253 (SC), CIT vs. Ponni Sugars and Chemicals Ltd., 306 ITR 392 (SC), CIT vs. Chaphalkar Brothers 400 ITR 279 (SC), CIT vs. Shree Balaji Alloys 7 ITR-OL 50 (SC) and various other decisions has held that if the subsidy's purpose was to help the assessee to run the business more profitably or meet daily business expenses, then it is to be considered as a revenue receipt and thus taxable. Conversely, if the subsidy is aimed at setting up a new unit or expanding an existing unit, then it was deemed to be a capital receipt and not taxable. 6.1. He submitted that the Finance Act, 2015, significantly altered the landscape by introducing sub-clause (xviii) to Section 2(24) of the Act, according to which, any assistance in the form of subsidy, grant, cash incentive, duty drawback, waiver, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2015, significantly altered the landscape by introducing sub-clause (xviii) to Section 2(24) of the Act. This amendment defined any assistance in the form of subsidy, grant, cash incentive, duty drawback, waiver, concession, or reimbursement provided by the Central or State Government as income, hence taxable, unless used to determine the actual cost of an asset. This amendment sought to end disputes by making all subsidies taxable unless they fell under an exclusion category;" 7.1. Similarly, at para-33 of the order the Hon'ble High Court observed as under : "33. The chronology of events is pivotal in assessing the merits of petitioner's arguments against the constitutional validity of Section 2(24)(xviii) of the Act. When petitioner applied for the subsidy, the amendment to the Act specifically the inclusion of sub-clause (xviii) to Section 2(24), had been in effect for more than two years. This timeline is not merely incidental but is of substantive significance for several reasons. Firstly, petitioner, being engaged in business activities, is presumed to have conducted due diligence and engaged in careful planning, which wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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