Capital subsidy liable to be excluded from computation of book profit

Sunrise Biscuit Co. Pvt. Ltd. Vs ITO (ITAT Gauhati)

VAT subsidy received by the Assessee – subsidy received for substantial expansion of the undertaking – subsidy is capital in nature – capital subsidy liable to be excluded from the computation of books profit

Facts- The assessee has received subsidy of INR 8,78,84,902/- from the Industrial Promotion Policy of Assam Government. Assessee contented that subsidy is capital in nature and therefore not exigible to income tax.

Conclusion- We find merit in the claim of the assessee that the VAT subsidy received by it for undertaking substantial expansion at their unit was in the nature of capital receipt not liable to tax, since the object of granting of subsidies was to bring about industrial development, encourage fixed capital investment and generate employment in the State of Assam.

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