Amount Of Subsidy Received By Assessee From RBI Cannot Be Treated As 'Interest' Chargeable U/S 4 Of Income Tax Act: Bombay High Court

The Bombay High Court has ruled that a subsidy received by an assessee from the Reserve Bank of India (RBI) cannot be treated as "interest" and taxed as such under the Income Tax Act. The case involved a company that had received a subsidy from the RBI under a specific scheme. The income tax department had sought to tax this amount as interest income under Section 4 of the Act. However, the High Court observed that the payment was clearly defined as a subsidy in the RBI's scheme and was given to achieve a specific policy objective, not as a consideration for the use of money. The court held that the nature of a receipt is determined by its character in the hands of the recipient. Since the payment was a subsidy, it should be treated as a capital receipt, not as revenue income in the form of interest.