Courts Supreme Court
Supreme Court: purpose test decides if subsidy is taxable revenue
The case concerns whether an electricity subsidy of Rs. 16,20,745/- received by M/s.
Mepco Industries Ltd. from the Government of Pondicherry for the Assessment Year 1997-98 is a taxable revenue receipt or a non-taxable capital receipt.
Who it concerns: Appellant: M/s. Mepco Industries Ltd.; Respondent: Commissioner of Income Tax, Madurai; Bench: Justice Prashant Kumar Mishra.
What the court decided
- The Court examined the 'purpose test' to determine the character of the subsidy, citing precedents such as Sahney Steel and Ponni Sugars.
- The Court analyzed the specific scheme of the Government of Pondicherry, noting the subsidy was tied to power charges and paid after production commenced.
- The provided text ends before stating the final judgment or operative order of the Court in this specific appeal.
Also in the document
- The Court clarified that the 'purpose test' is the governing standard, where the object of the scheme (e.g., running business profitably vs. setting up a new unit) determines if the receipt is revenue or capital.
- The Court noted that the time of payment, source, and form of the subsidy are not decisive factors in determining its character.
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The original document
Supreme Court of India — orders & judgments
Court order · 7 Oct 2026
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