S. 2(24)

CIT v Deutsche Post Bank Home Finance Ltd. (ITA No. 312 OF 2012 (dtd 2.7.2012) (Delhi HC) Background: Assessee is a 100% subsidiary of one BHW Holding AG, Germany (‘Holding Company’) and is engaged in the activity of housing finance. By two letters dated 24.09.2004 and 04.02.2005, the Holding Company granted subvention assistance to the assessee to an extent of Euro two million i.e. equivalent to Rs. 11,22,38,874/-. This was done on the evaluation of the Holding Company, that the assessee was likely to incur losses which would be substantially if not entirely eroded. The AO held that the subvention receipt was by way of casual receipt in order to assist the assessee to continue its business operation and therefore rejected the assessee’s contention. The assessee preferred an appeal to the CIT(A) who accepted the assessee’s contention holding that the money received could not be taxed as it was akin to a gift, and Gift Tax had been abolished. The Revenue appealed to the ITAT. The ITAT held as under:

Funding by Holding Co to recoup future losses is not taxable – Delhi HC