Sales Tax Subsidy Capital receipt

The Ahmedabad Bench of the Income Tax Appellate Tribunal reaffirmed that sales tax incentives received by Ambuja Cements Limited under various State industrial incentive schemes constituted capital receipts not liable to tax. 

Applying the settled “purpose test” laid down by the Supreme Court, the Tribunal held that the incentives were intended to promote industrial development, investment and employment generation in backward areas rather than to supplement the assessee’s operational profits. 

Consequently, the Revenue’s appeal challenging the exclusion of the subsidy from taxable income was dismissed.