Government grant

On appeal before the Supreme Court by the Tax Officer, it was noted that the character of subsidy/Grant is to be determined based on the “purpose test” 

It was clearly laid out that the object of the subsidy /Grant was for development of industrial growth in a particular sector and to generate more employment in the State.

So Government Grant received by startup is capital receipt and not taxable

Based on the purpose test of subsidy, it's a capital receipt and hence not Taxable.