Subsidy Received under Grain Distillery Scheme is Capital Receipt: ITAT [Read Order]

In a series of cross-appeals, The Income Tax Appellate Tribunal (ITAT) Pune on April 4^th, ruled that subsidy received under Grain Distillery Scheme should be classified as Capital Receipt.

The assessee, M/s. Alkoplus Producers Pvt. Ltd., is engaged in the manufacturing of extra neutral alcohol from grain (jawar). The only issue raised by the Revenue in its appeal was against the direction of the Commissioner of Income Tax (Appeals) [CIT(A)] to treat the subsidy received by the assessee from Government of Maharashtra under Grain Distillery Scheme, as a capital receipt. The assessee thus was aggrieved by the decision of the CIT(A) in holding that the amount of the subsidy should be reduced from the cost of assets for the purposes of depreciation. The assessee received subsidy of Rs.6,30,40,000/- during the year under the same scheme as continuing from the preceding year. The Assessing Officer (AO) treated the amount as of revenue character. The CIT(A) held the amount to be in the nature of capital receipt but also applied Explanation 10 to section 43(1).

Judicial Member Vikas Awasthy and Vice President R.S. Syal while dismissing the appeal of the Revenue and other cross objections of the assessee in different matters related held, “A common submission has been made by both the sides that the facts and circumstances of the instant appeals are mutatis mutandis similar to those of the preceding year. Following the view taken herein above, we uphold the action of the ld. CIT(A) in treating the subsidy as a capital receipt and overturn his view on the question of application of Explanation 10 to section 43(1) of the Act to the facts of the instant case.”