Power Subsidy Tied to Operating Costs Is Taxable Revenue

India’s Supreme Court has ruled that an electricity subsidy linked to a manufacturer’s actual power charges is a taxable revenue receipt rather than a capital receipt.

In Mepco Industries v Commissioner of Income Tax, decided on 7 October 2026, the Court applied the “purpose test” to the scheme’s immediate design. Because the payment reimbursed operating expenditure after production, it supported the business’s day-to-day costs instead of financing creation of a capital asset.

The Court rejected the argument that the State’s broader industrial-development objective converted the payment into capital support. It dismissed the company’s appeal, reinforcing that tax character turns on how a subsidy operates in the recipient’s hands.