Brakes India Limited v Joint Commissioner of Income Tax Business receipt — Capital or revenue receipt — Power tariff subsidy — Assessee appended a note in its income stating that received industrial power tariff concession under notification issued by the Tamil Nadu Government and claimed same to be capital receipt and was to be deducted from business income — AO held that purpose of power tariff concession was to enable those who set up high tension industries in notified area to carry on their business profitably and subsidy provided by the Government was not for meeting any capital costs of setting up of a business and therefore, power tariff concession received was clearly a revenue receipt and no deduction was called for — CIT(A) affirmed findings of AO holding that incentive was basically related to HT power consumption when production commenced — Tribunal held that power subsidy was of revenue in nature, especially when subsidy has gone to reduce electricity bills, rejecting assessee’s contention that subsidy was received by assessee prior to commencement of production and hence was a capital receipt — Held, for purpose of claiming power subsidy, notification imposes several conditions and it is not contingent upon industry merely being established in a notified area — Notification clearly states that unit should have reached the particular percentage for claiming tariff concession — Subsidy is given subject to strict compliance of conditions given in notification — Receipt has to be treated as revenue receipt, as it is contingent upon the commencement of production and to enable assessee to run the business more profitably since it went towards reduction of electricity bills — Further in its books of accounts assessee treated receipt of incentive as revenue and credited the same to “Power and Fuel Account” — Assessee treated subsidy as “revenue receipt” and not for setting up of new industry, but for day-to-day operations — Thus power tariff subsidy received by assessee was revenue in nature — Assessee’s appeal dismissed
Posted on: Thu, 13 Mar 2014 12:57:51 +0000
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