The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) has held that the subsidy received under the technical upgradation fund (TUF) scheme is the capital receipt and therefore, no income tax can be levied on such grant.
The assessee treated the amount received under the technical upgradation fund scheme as capital receipt whereas the Assessing Officer held that the same amount to revenue receipt.
The Tribunal observed that where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or State Government in the form of subsidy then so much of the cost as is relatable to such subsidy shall not be included in the actual cost of the asset.
“When such subsidy cannot be directly relatable to the asset acquired, then such subsidy shall not be included in the actual cost of the asset. That is, to reduce from the cost of the asset, the subsidy should be directly or indirectly used for acquiring an asset. In the assessee’s case under consideration, no asset was being acquired by using TUF subsidy, therefore, it should not be reduced from fixed assets. However, such a TUF subsidy is to be treated capital receipt. Respectfully following the judgment of the Co-ordinate Bench we note that the subsidy received under TUF scheme is the capital receipt and therefore we delete the addition made by the Ld. CIT(A),” the Tribunal said.
Subscribe Taxscan Premium to view the Judgment
