The Hon’ble Delhi High Court dismissing the Revenue appeal held that subsidy received was an incentive given by the State Government to establish an industrial unit in backward area for the purpose of generation of employment for local inhabitants hence the said subsidy should be treated as capital receipt. The measure for calculating the subsidy, which was 25% of the fixed capital cost cannot determine the purpose for which the subsidy was given and thus as directed by Ld CIT(A) was adjusted proportionately against the cost of the assets. The Hon’ble Delhi High Court upholding the view taken by the Hon’ble Tribunal held that since subsidy in this case was not intended as a payment to meet, directly or indirectly, a part of cost of assets hence no adjustment is warranted and therefore should not be reduced from the cost of acquisition. (AY.2004-05)