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2020 (2) TMI 720 - AT - Income TaxNature of income - characterization of income - interest subsidy received - revenue or capital receipt - HELD THAT:- Technology levels were benchmarked in terms of specified machinery for each sector of the Textile Industry. It is thus clear that even though the subsidy in question under TUF Scheme was given in the form of reimbursement of the interest, the objective of giving the said subsidy was to upgrade its technology level by the eligible unit by induction of state-of-the-art or near-state-of-the-art technology and such technology level was benchmarked in terms of specified machinery for each sector of the Textile Industry. The purpose of giving incentive in the form of interest subsidy under the TUF Scheme thus was to encourage capital investment by the eligible unit in the form of specified machinery in order to induct state-of-the-art or near-state-of the-art technology or at least a significant step up from the present technology level to a substantially higher one. In our opinion, going by this purpose of the interest subsidy as specified under the TUF Scheme, the amount of interest subsidy in question received by the assessee was a receipt of capital in nature. Utilization of the amount of incentive in question for the purpose of meeting the interest liability of the Company on loans and advances taken by it to set up its plant and machinery - HELD THAT:- Hon’ble Calcutta High Court has directed us to examine or investigate before arriving at any conclusion as regards the nature of the interest subsidy whether capital or revenue, it is observed that neither the Assessing Officer nor the ld. CIT(Appeals) has given any finding on this aspect. In this regard, the ld. D.R. has submitted that this matter requires verification and an opportunity may be given to the Assessing Officer to verify the same from the relevant record. We are inclined to accept this contention of the ld. D.R. and since assessee has also not raised any objection in this regard, we restore this issue to the file of the Assessing Officer for the limited purpose of verifying the issue of utilisation of amount of subsidy in question by the assessee. If it is found by the Assessing Officer on such verification that the subsidy amount in question was utilized by the assessee for the purpose of meeting the interest liability on loans and advances taken by it to set up its plant and machinery, the subsidy incentive could be considered as a capital receipt not chargeable to tax. Otherwise, as observed by the Hon’ble Jurisdictional High Court, it has to be treated as a revenue receipt.
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