No tax on incentives to Bajaj Auto, RIL under Maharashtra schemes, says HC
This story was originally published at 18:46 IST on 3 July 2025
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NEW DELHI – In a relief for Bajaj Auto Ltd. and Reliance Industries Ltd., the Bombay High Court Thursday held that the incentives and subsidies received by these companies under Maharashtra government schemes for encouraging the setting up of industries were capital receipt and not chargeable to income tax. In 1979 and 1983, the Maharashtra government had introduced schemes for encouraging setting up of industries in specified backward areas of the state, by providing sales tax incentives.
The high court observed the purpose of Maharashtra government's 1979 and 1983 schemes was to promote setting up of new industries and not to assist the assessee to make the business more profitable. The incentives and subsidies received under the scheme would therefore be on capital account and not on revenue account, said the high court.
In Bajaj Auto's case, the company had obtained an eligibility certificate for sales-tax exemption for a period of three years commencing from 1986. During the process of assessment proceedings, Bajaj Auto claimed that the amount of sales tax incentives should be regarded as capital receipt not liable to tax since the said incentive was received for promotion of industries in backward areas. However, the assessing officer rejected the said claim of Bajaj Auto and treated the same as revenue receipt liable to tax.
Reliance Industries operated manufacturing units at Sidhpur in Gujarat and had set up a new manufacturing unit at Patalganga in Maharashtra in pursuance of the schemes for encouraging industries in backward parts of the state. In this, Reliance Industries had received incentive in the form of sales tax waiver and was issued with the eligibility certificate under the schemes for assessment year 1985-86. The assessing officer disallowed the claims of notional sales tax liability, holding that the incentive should be treated as revenue receipt liable to income tax.
On Thursday, the shares of Bajaj Auto Ltd. ended 0.3% higher at INR 8,382.50 on the National Stock Exchange, while the shares of RIL ended flat at INR 1,517.80. End
Reported by Surya Tripathi
Edited by Akul Nishant Akhoury
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