Change in the nature of Accounting treatment of Subsidy received in past doesn’t permit Revenue to examine taxability of such receipt in the year of such change by re-opening the Assessment:

Assessee received subsidy in the year 1995 which was shown in its Balance-sheet in the Subsidy Account. In FY 2003-04,itwas transferred to Partner’s capital account without any specific mention of this amount in the break-up given. Notice u/s 148 was issued for AY 2004-05on the pretext that the amount of subsidy, being business income of the assessee, escaped the assessment. The Hon’ble High Court held that the “Taxable event” did not arise during AY 04-05. If such subsidy invited tax, assessee ought to have been taxed in the previous asst. year corresponding to the previous year in which such subsidy was received. Merely because assessee changed the nature of treatment of such subsidy received in 1995 for accounting purpose, it would not permit the Revenue to examine the taxability of such receipt in Asst. Year 2004-05. Accordingly, the notice u/s 148 was quashed.

[CHIMANLAL AND SONS - SCA 16846 of 2011 - GHC]