Sales Tax Subsidy Classification and Tax Implications The ITAT ...

Sales Tax Subsidy Deemed Capital Asset: Depreciation Recalculation Ordered Under Section 43(1) Explanation 10

April 21, 2025

Case Laws Income Tax AT

Sales Tax Subsidy Classification and Tax Implications The ITAT upheld the capital nature of a sales tax subsidy received from state governments. The tribunal directed the Assessing Officer (AO) to recalculate depreciation by reducing the subsidy amount from fixed asset costs under Explanation 10 to Section 43(1). The SC previously affirmed the subsidy's capital classification. The tribunal rejected revenue's contentions regarding book profit computation under Section 115JB, emphasizing that the AO lacks authority to modify book profits absent fraud or non-compliance with Companies Act provisions. The subsidy, directly credited to capital reserve and not impacting profit and loss account, cannot be adjusted in book profit calculations. Appeals filed by revenue were dismissed, and the Co-ordinate Bench's directions for depreciation re-computation were upheld.

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Sales Tax Subsidy Classification and Tax Implications The ITAT ...

Sales Tax Subsidy Deemed Capital Asset: Depreciation Recalculation Ordered Under Section 43(1) Explanation 10

April 21, 2025

Case Laws Income Tax AT

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