COURT: Bombay High Court
CORAM: Milind D. Jadhav J, Ujjal Bhuyan J
SECTION(S): 28(iv)
GENRE: Domestic Tax
CATCH WORDS: subsidy, waiver of loan
COUNSEL: P. C. Chhotaray, P. C. Tripathi, Subhash S. Shetty
DATE: March 5, 2020 (Date of pronouncement)
DATE: June 26, 2020 (Date of publication)
AY: 1984-85
CITATION:
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Section 28(iv): The Dept’s argument that the waiver of a loan constitutes an operational subsidy which is taxable is not correct. There is a fundamental difference between “loan” and “subsidy” & the two concepts cannot be equated. While “loan” is a borrowing of money required to be repaid back with interest; “subsidy” is not required to be repaid back being a grant. Such grant is given as part of a public policy by the state in furtherance of public interest. Therefore, even if a “loan” is written off or waived, which can be for various reasons, it cannot partake the character of a “subsidy”. The waiver of a loan cannot be brought to tax u/s 28(iv) of the Act.
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