Manali Petrochemical Ltd. v. Dy. CIT (2023) 201 ITD 317 (Chennai)(Trib.)

S. 2(24)(xviii) : Income-Assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession or reimbursement-Subsidy was given to setting up a new biomass co-generation system or to promote existing systems and its benefits – Capital subsidy – Directed to reduce from cost of asst acquired out of said subsidy and allow depreciation.[S. 4, 32, 43 (1)

The assessee was engaged in the business of manufacturing and trading of petrochemical products. The assessee received a capital subsidy from the Government of India through Tamilnadu Energy Development Agency, and such subsidy was been given for the purpose of implementation of a program on ‘Biomass Co-generation in Industries’. The subsidy could be utilised for three purposes, including deployment of biomass co-generation systems, promotion of decentralised/distributed power generation through the supply of surplus power to the grid and creation of awareness of the potential and benefits of alternative modes of energy generation in the industry. Revenue treated this receipt as a revenue receipt and made an addition to the income of the assessee. Upon an appeal to ITAT, it was held that the subsidy received from the Government of India was directly linked to an investment made in setting up a new power plant and, hence, was to be considered as a capital receipt. However, it also directed the assessee to reduce the subsidy amount from the cost of the asset as per S. 43. (AY. 2013-14)