Subsidy of capital nature

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Asawari Malhotra (Querist)
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14 June 2013 I read in a book that subsidy of capital nature provided by the government is not taxable under Income-tax Act .. But if the government exempts you from paying interest for a loan taken for buying a fixed asset.. Will it be a capital subsidy or a revenue one ? Cause fixed asset is a capital asset but paying periodic interest is a revenue expenditure .. Pls explain in detail.. Thanks..

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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15 June 2013 Is there any requirement to quantify or to classify such amount?
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The loan can be treated as interest free loan.
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However, for academic purpose, till the asset is put to use, the notional amount of interest should be considered as a capital subsidy and thereafter till the repayment takes place, it would be treated as revenue subsidy.
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