Hon’ble Tribunal held that the purpose of the subsidy scheme by the Government of Uttar Pradesh was to attract people to invest and take part in industrialization of certain areas in the State. The scheme nowhere stated that it is for the benefit of generating product purchases from the town/district of Uttar Pradesh. In light of the CIT v. Ponni Sugars and Chemicals Ltd. (2008) 306 ITR 392 (SC), since the objective of the scheme was to enable expansion or modernization of existing units, it is capital in nature. (AY. 1995-96 to 1998-99)
Grasim Industries Limited v. ACIT (2018) 193 TTJ 25 (UO) (Mum.)(Trib.)
S. 4 : Charge of income-tax – Capital or revenue -Sales tax subsidy – Purpose of sales tax subsidy scheme was to attract people to invest and take part in industrialization of certain areas in the State, either by setting up new unit or expanding existing unit – Subsidy was a non-taxable capital receipt. [S. 28(i)]