Taxability of unspent revenue grants

AS per Income Tax Act--Supreme Court has decided the matter in respect of Tuticorin Alkali & Fertilizers Ltd, this grant is taxable as normal business income and it is not a capital reciept in the hands of assessee.

As per AS--12, if grant is related to any FIxed asset then deffer such amount upto the life of such asset and remaining balance should be shown as liability in the B/S.

And if such grant is in the nature of revenue then Dr all expenses in P& L a/c and remaining should be shown as liability in B/S.

Originally posted by : Ravi Kumar Mahaur
	AS per Income Tax Act--Supreme Court has decided the matter in respect of Tuticorin Alkali & Fertilizers Ltd, this grant is taxable as normal business income and it is not a capital reciept in the hands of assessee. As per AS--12, if grant is related to any FIxed asset then deffer such amount upto the life of such asset and remaining balance should be shown as liability in the B/S. And if such grant is in the nature of revenue then Dr all expenses in P& L a/c and remaining should be shown as liability in B/S.

But, Sir, is it not something unusual that Governmrnt is paying Income Tax on its own money?. This money is given to meet up revenue expenses for its own Company. Balance sum may be refunded to Govt. exchequre. Any further clarification?

Mr. Bhattacharya

The provisions of Income Tax Act is applicable on all kinds of companies. So the decided case as i menetioned you in my last quote is also applicable to such company.

Please make correction the case was 

[1997] 228 ITR 253 (SC)

SUPREME COURT OF INDIA

Sahney Steel and Press Works Ltd.

v.

Commissioner of Income-tax

SUHAS C. SEN AND D.P. WADHWA, JJ.

CIVIL APPEAL NOS. 2193 OF 1985 AND 10091 OF 1995

SEPTEMBER 19, 1997