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.
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