Bombay HC Rules Subsidies To Bajaj Auto, RIL As Capital Receipt, Not Taxable

The Bombay High Court has ruled in favour of Bajaj Auto Ltd. and Reliance Industries Ltd., holding that incentives and subsidies they received under Maharashtra government schemes were capital receipts and not liable to income tax.

The case pertained to the 1979 and 1983 Maharashtra schemes which provided sales tax incentives to promote industries in backward areas. The court observed that these benefits were for setting up industries and not for enhancing business profits, and thus, they fall under capital account.

Bajaj Auto had received sales tax exemption for three years starting 1986. RIL received similar waivers for its unit at Patalganga. The income tax department had earlier treated these as revenue receipts.