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Facts
The assessee, a government company, received a grant of Rs. 7,81,40,620/- from the West Bengal Government. This grant was intended for the repayment of a loan taken for the purchase of shares in Haldia Petrochemicals Ltd. The Assessing Officer treated this grant as income and added it to the assessee's total income.
Held
The Tribunal held that the grant was in the nature of a capital receipt, as its purpose was to increase the capital of the assessee company to enable it to repay a loan. This conclusion was based on the 'purpose test' derived from Supreme Court decisions, which determines the character of a grant by its objective. The Tribunal noted that the grant was for repayment of a long-term loan, a capital item, and thus not taxable revenue income.
Key Issues
Whether the grant received by the assessee for repayment of a loan is a capital receipt or revenue income and thus taxable.
Sections Cited
2(24)(xviii), 36(1)(viia), 36(1)(vii), 145B(3)
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Income Tax Appellate Tribunal, “D” BENCH KOLKATA
Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey
आयकर अपील�य अ�धकरण, कोलकाता पीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH KOLKATA Before Shri Rajesh Kumar, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member ITA No.623 & 748/Kol/2025 (Assessment Year: 2015-16) DCIT, Circle-7(1), Kolkata………...……………..……….……….……….……Appellant vs. West Bengal Industrial Development Corporation Limited......……...…..…..Respondent 23, A N Thakur Sarani, Circus Avenue, Kol - 700017.. [PAN: AAACW3043Q] Appearances by: Shri B R Dutta, FCA, appeared on behalf of the appellant. Shri Sanat Kr. Raha, CIT- DR, appeared on behalf of the Respondent. Date of concluding the hearing : January 21, 2026 Date of pronouncing the order : February 12, 2026 ORDER Per Pradip Kumar Choubey, Judicial Member: Both the present appeals have been preferred by the assessee against an order dated 09.08.2024 of the NFAC, Delhi [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). Since both the appeals relate to the same assessee and arise from same appellate order, therefore, these appeals were heard together and we are going to dispose of these appeals by passing a consolidated order. 2. ITA No.623 & 748/Kol/2025 filed by the revenue with a delay of 139 & 159 days respectively and the revenue has filed separate petitions for condonation of the delays. After going over the said petitions, we find sufficient reasons behind such delays and consequently, the delays in filing both the appeal are hereby condoned and we proceed to dispose of the appeals on merits.
ITA No.623 & 748/Kol/2025 West Bengal Industrial Development Corporation Limited 3. ITA No.748/Kol/2025 – At the time of hearing, the ld. AR submits that the captioned two appeals were wrongly filed arose from the same order of the ld. CIT(A) dated 09.08.2024 and he wants to withdraw one appeal i.e. ITA No.748/Kol/2025. Accordingly, we permit to withdraw the present appeal as withdrawn. Accordingly, ITA No. 748/Kol/2025 is her by dismissed as withdrawn. 4. ITA No.623/Kol/2025 – Brief facts of the case are that the assessee being a company filed its return of income for AY 2015-16 declaring total income of Rs. 18,98,37,730/- with deemed total income u/s 115JB of the Act of Rs. 25,34,54,750/-. The case of the assessee was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act were issued. The case was discussed with the Ld. A.R and after that the AO added an amount of Rs. 7,81,40,620/- treated as an income of the assessee as the same was received from the State Government by way of grant. The AO has further disallowed the deduction claimed u/s 36(1)(viia) and 36(1)(vii) an amount of Rs. 1,87,66,374/- and assessed the total income of Rs. 28,64,44,724/-. 3. Aggrieved by the said order, the assessee challenged before the Ld. CIT(A) wherein the appeal of the assessee has been partly allowed as the Ld. CIT(A) has allowed the appeal of the assessee on the issue of nature of the grant but dismissed the claim of deduction u/s 36(1)(viia) and 36(1)(vii) of the Act. 4. Being aggrieved and dissatisfied with the impugned order, the revenue has preferred the present appeal against the order of the ld. CIT(A) wherein the ld. CIT(A) allowed the issue of nature of grant amounting to Rs.7,81,40,620/- by observing as under:
ITA No.623 & 748/Kol/2025 West Bengal Industrial Development Corporation Limited
ITA No.623 & 748/Kol/2025 West Bengal Industrial Development Corporation Limited
ITA No.623 & 748/Kol/2025 West Bengal Industrial Development Corporation Limited
4.1 It is pertinent to mention here that vide order dated 17.01.25 in ITA No.2064/Kol/2024 tribunal has allowed the appeal of the assessee. Which the assessee has preferred against the order of CIT(A) on the issue of deduction claimed u/s 36(1)(viia).The revenue has filed the present appeal against the order of CIT(A) on the issue of giving relief to the Assessee received on grant. The Revenue has taken the following grounds:
“1. That on the facts and the circumstances of the case and in law, the Ld. CIT (A) erred in not appreciating that the grant received by the State Government 5
ITA No.623 & 748/Kol/2025 West Bengal Industrial Development Corporation Limited was income of the assessee and therefore it is taxable under the Income-tax Act, 1961. 2. That the Ld. CIT (A) has erred in holding that the orders of the Hon'ble Supreme Court of India in the case of CIT v. Ponni Sugars & Chemicals Ltd. [2008] 306 ITR 392/174 Taxman 87 are squarely applicable in the case of the assessee overlooking the fact that the facts and circumstances concerning both these cases are altogether different. 3. That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or hearing of this appeal.” 5. Contrary to that, the ld. AR supports the impugned order thereby submitting that in fact the Assessing Officer in the course of proceedings has failed to realise that revenue receipts are recurring income used for day-to-day operations and in contrast, capital receipt are non-recurring income used for long-term investment and having a lasting impact on the organisation’s capital structure. The ld. AR further submits that it is evident from the West Bengal Government's Sanction Order for Grant-in- Aid that the said Grant is specifically for repayment of the last instalment of a long-term loan with interest thereon taken from WBIDFC for purchasing Tata's Shares in Haldia Petrochemicals Ltd with the approval of the State Government. The ld. AR also submits that from the Audited Statements of Account, it is evident that the aforesaid Grant of Rs.7,81,40,620/- has been utilised in repaying the Long-Term Borrowing of Rs.7,68,42,000/-, thus the sanctioned grant from the government of Rs.7,81,40,620/- by no means, whatsoever can be treated as revenue income. The ld. AR further submits that the ld. CIT(A) has discussed the documentary evidence, sanction order of the Govt. of W.B and placed reliance of the judgment of Hon’ble Supreme Court.
Upon hearing the submission of the respective parties and on perusal of the impugned order, it appears to us that the assessee had taken a grant of Rs.7,81,40,620/- from the government of W.B for repayment of a loan. It is an undisputed fact from the West Bengal Government's Sanction Order for Grant-in-Aid that the said Grant is specifically for repayment of the last instalment of a long-term loan with 6
ITA No.623 & 748/Kol/2025 West Bengal Industrial Development Corporation Limited interest thereon taken from WBIDFC for purchasing Tata's Shares in Haldia Petrochemicals Ltd with the approval of the State Government. It is pertinent to mention here that the assessee has also filed a copy of sanction order dated 28.05.14 for grant-in-aid and the extract of the sanction order has clearly been dealt by the ld. CIT(A) in its impugned order (as discussed above) and it is apparent from the sanction order that the purpose of the ‘grant’ was to increase the capital of the assessee company to enable it to pay off a loan, therefore, the grant was in the nature of a capital receipt. We find that the ld. CIT(A) has considered the section 145B(3) and section 2(24)(xviii) and also decision of Hon’ble Supreme Court. Going over the above discussion, we do not find any merit in the appeal of the revenue and the same is dismissed.
In the result, the appeal of the revenue is dismissed.
Kolkata, the 12th February, 2026.
Sd/- Sd/- [Rajesh Kumar] [Pradip Kumar Choubey] Accountant Member Judicial Member Dated: 12.02.2026. RS Copy of the order forwarded to: 1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- , 5. CIT(DR),
//True copy// By order Assistant Registrar, Kolkata Benches