Held that the taxability of a receipt given by way of subsidy essentially has to be determined with regard to the purpose for which the subsidy is granted. The manner in which the concession is given is not material. If the intent of the concession or rebate is the development of the rural economy and upliftment of backward areas, it would be in the nature of a capital receipt not liable to tax. Forfeited amount received in respect of preference shares which is credited in capital reserve account is capital in nature. (AY. 2003-04,2006-07 to 2008-09)
Jindal Steel and Power Ltd. v. Add. CIT (2022) 97 ITR 516 (Delhi) (Trib.)
S. 4 : Charge of income-tax-Capital or revenue-Subsidy-Incentive to encourage development of rural economy-Exemptions from payment of Sales tax/Entry Tax/Electricity dues-Capital receipt-Forfeited amount received in respect of preference shares-Credited receipt in capital reserve account-Capital receipt. [S. 5, 28(i)]