X ltd is a manufacturing co. and went into production in the financial year 1998-99in the North East Region and claimed deduction u/s 80 IB till financial year 2002-03 and was allowed the same. During the financial year2003-04 it sold out its all assts & loss on sale of asset of Rs. 5 lakhs was claimed as business loss and was allowed. From financial year2003-04 it changed its business manufacturing to transportation. During the financial year 2006-07 it received 30% state special capital subsidyof Rs. 6.50 Lakhs and it credited the same to the capital subsidy reserve.
As there is no fixed assets sec 43 is also not applicable. According to the scheme of state govt. the subsidy is given as incentive but is measured with reference to investment in fixed assets . Whether the said Capital Subsidy will be taxable in the Assessment year 2007-08? If so, under which head & under which sec? If not why
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