Bajaj Auto Limited Vs DCIT (Bombay High Court)
Bombay High Court held that incentive/ subsidy received under sales tax scheme, granted by the State Government under both the 1979 as well as 1983 Schemes, is capital receipt and hence not chargeable to tax.
Facts- The issue involved in the present appeal is that whether an incentive received in sales tax liability under a Scheme formulated by the State Government would be on capital account, exempt to taxation, or on revenue account, liable for taxation.
Conclusion- The incentives/subsidy granted by the State Government under both the 1979 as well as 1983 Schemes were for the purpose of setting up of new industrial units. The incentive/subsidy was not granted for the purpose of enabling the Assessees to run the business more profitably. After applying the “purpose test” it is clear that the incentive provided to the Assessee under both the Schemes was for promoting setting up of new industrial units in developing areas of the State. The incentive was aimed at promoting industrialization in the State. Thus, held that the incentive/subsidy received by the Assessees under 1979 Scheme and 1983 Scheme were on the capital account not chargeable to tax.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
