LPG subsidy isn't taxable as it is for welfare of people; Govt. clarifies provision in Finance Bill, 2015

A subsidy is a form of financial aid or support extended to an economic sector (or institution, business, or an individual) generally with the aim of promoting economic and social policy. Subsidies come in various forms - direct one (cash grants, interest-free loans) and indirect ones (tax breaks, insurance, low-interest loans, depreciation write-offs, rent rebate etc.).

There was an unendingdispute between the revenue and the taxpayers about the tax treatment of the subsidy received from Government or any other authority. The revenue always tried to treat subsidy as revenue receipt but the assessees always opposed such treatment and wanted to treat it as capital receipt.

The Government tried to settle this dispute by proposing amendments to the Finance Bill, 2015 as passed by Lok Sabha. It has been proposed that assistance in the form of a subsidy or grant or cash incentive or duty drawback or waiver or concession, etc. (by whatever name called) by the Government or any authority or body or agency, in cash or kind to the assesse (other than one considered under Explanation 10 to Section 43(1)) would be includible in income.

In view of aforesaid amendment certain doubts had arisen on tax treatment of LPG subsidy received by individuals under direct benefit transfer. Certain tax experts were of the view that this proposal would deem such LPG subsidy as income of individuals and they would be required to pay taxes on subsidy received in their bank accounts.

In this regard, the CBDT has clarified that the proposed amendment in the Finance Bill, 2015 would not be applicable to individuals not having any income chargeable under the head "Profits and gains of business or profession" and receiving LPG subsidy or any other subsidy which is for the welfare of the individuals. Thus, it has been clarified that LPG subsidy received by Individuals would not be taxable.

ITAT follows AS-10 to include one-time vehicle tax in cost of vehicle treating it as capital expenditure

Facts:

The issue that arose in the instant appeal was:

Whether one time vehicle tax paid by the assessee was includible in cost of vehicles, (eligible to depreciation) or, was in nature of revenue expenditure, deductible under Section 37(1)?

The Tribunal held in favour of revenue as under:

1)Section 43(1) defines the term 'actual cost' as under: "Actual cost" means the actual cost of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority.

2)The definition emphasizes on the elements, which would not form a part thereof, so that the principles of commercial accounting would apply in determining the actual cost. Even otherwise, it was a trite law that in the absence of a statutory definition or mandate, the accounting prescription would prevail.

3)It is only where the law specifically provides for a particular course of action, inconsistent with the accounting mandate, that the same shall prevail and override the latter, viz., section 43B.

4)Para 20 of ‘Accounting Standard-10 - Accounting for Fixed Assets’ required that the cost of a fixed asset would comprise of its purchase price and any attributable cost of bringing the asset to its working condition for its intended use.

5)One-time tax for the lifetime of "all motor cars and omnibuses used or kept for use" in the State of Maharashtra was a tax for user, active or passive, of the motor vehicle in the territory of Maharashtra. Therefore, payment of tax, only enabled the vehicle being put to its intended use; in fact, represented a condition thereof, and would form part of its cost. - M. DINSHAW & CO. (P.) LTD. V. DY. CIT [2014] 48 taxmann.com 190 (Mumbai - Trib.)