Law:

Section:

Section 28(1) of the Income-tax Act, 1961 - Business income - Chargeable as - Government of Maharashtra formulated a scheme of granting financial assistance to firm producers producing new film in Marathi language - Said scheme was formulated in public interest to encourage growth of Marathi film industry - Whether having regard to nature, scope and objective of subsidy granted under said scheme and fact that same was granted to assist assessee film maker to acquire capital asset and not to supplement trade receipts or recoup expenditure already incurred, receipt of subsidy in question constituted capital receipt not liable to tax - Held, yes FACTS The assessee was a producer of motion pictures in Marathi language. By a Government resolution the Government of Maharashtra sanctioned its subsidy scheme for grant of financial assistance to Marathi film producers for their ensuing ventures. The rules governing of subsidy scheme made it clear that the various instalments of the subsidy or grant, it, were directed to be released only after completion of a part of the new film. The assessee applied for financial assistance to the Government of Maharashtra for production of a new picture. By a resolution of the Government of Maharashtra financial assistance was released in favour of the assessee in the sum of Rs. 2,10,085 for assisting the assessee in production of the new Marathi picture. The said subsidy was released to the assessee so as to assist him to acquire a new capital asset in order to meet part of the cost of the new film. The ITO held that the said sum of Rs. 2,10,085 received by the assessee from the Government of Maharastra constituted a revenue receipt and was, therefore, taxable. On appeal, the Commissioner held that the said amount was not taxable, the subsidy in question was granted to the assessee for production of a new film and was thus a part of the capital outlay. On second appeal the Tribunal held that the receipt of the said subsidy in the hands of the recipient constituted a revenue receipt and was taxable as income of the assessee. On reference : HELD Having regard to the nature of the subsidy announced by the Government of Maharashtra, its…

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