Income tax on subsidy?

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad)   (8229 Points)

20 February 2012  

Dear friends,

 

Government of Maharashtra has announced Package Scheme of Incentives 2007 under which subsidy is given to new units and also for expansion in backward areas.  The maximum amount of subsidy is restricted to specified percentage of fixed capital investment made.  However, entire amount is not given in one stroke.  It is given over a period of years and the amount is limited to specified percentage of VAT collected during each year.  Whether such subsidy will be treated as capital receipt or revenue receipt and as such whether it will be taxable under Income Tax Act?

 

Thanks in advance.