Tax not leviable on Subsidy from State Govt under ‘Capital Investment Subsidy’

ACIT Vs Pasadensa Foods Ltd (ITAT Delhi) It is seen, as an admitted position, that the subsidy of Rs. 2.50 crore was given for setting up of unit in West Bengal and the same has been characterized as `Capital investment subsidy’. The Hon’ble Supreme Court in Sahney Steel and Press Works vs. CIT (1997) 228 ITR 253 (SC), has held that the operational subsidy which is received after commencing the business is taxable income. The Hon’ble Apex Court has further laid down in this case that the purpose of subsidy should be examined. If such subsidy is for encouraging the establishment o...