SC: electricity subsidy linked to power bills is taxable income
The Supreme Court ruled on October 7 that an electricity subsidy linked to power charges is taxable. The court said such a subsidy is a revenue receipt when it cuts business costs.
A bench of Justice Prashant Kumar Mishra and Justice Shree Chandrashekhar gave the ruling. The case involved Mepco Industries and a subsidy of Rs 16,20,745 under a Puducherry government scheme.
The court applied the ‘purpose test’. It said the nature of a subsidy depends on why it is given, not its timing or form. The scheme did not ask the company to buy assets. It only reduced electricity costs for manufacturing.
The ruling relied on earlier judgments in the Sahney Steel and Ponni Sugars cases. The court said a subsidy that helps a business run more profitably is taxable. One that helps set up or expand a unit is not.
Companies receiving power-cost subsidies should review their tax filings. The order could affect similar cases across states.
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