TMI Blog2014 (7) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... Ministry of Textile adopted the TUFS scheme, envisaging technology upgradation of the industry - For determining whether subsidy payment was ‘revenue receipt’ or ‘capital receipt’, character of receipt in the hands of the assessee had to be determined with respect to the purpose for which subsidy is given by applying the purpose test - in order to sustain competitiveness in the domestic as well as international markets and overall long-term viability of the industry, the concerned Ministry adopted the TUFS scheme envisaging Technology Upgradation of the Industry - the subsidy received in this regard falls into capital field – Decided in favour of Assessee. Set off of unabsorbed depreciation - Unabsorbed business from 100% EOU – Held that:- CIT(A) rightly followed the decision of the Tribunal of the same assessee in the earlier assessment year, the business loss and depreciation loss in respect of the 100% EOU unit shall be set off against the profits of other units – Decided against Revenue. - ITA No.766,687/Kol./2010 - - - Dated:- 2-7-2014 - Mahavir Singh And Shamim Yahya, JJ. For the Appellant : Shri Imlimeren Jamir, JCIT, Sr. DR For the Respondents : Shri Soumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry invests in certain specified plants machinery, factory building, captive power plant etc. using funds borrowed from certain banks/financial institutions, then out of the interest paid on such borrowed funds, 5% is refunded by the Govt. Thus it can be seen that the objective of this scheme may be to encourage the eligible industries to invest in upgradation of technology but the assistance/incentive given does not have any direct relation with the cost of acquisition of such plant machinery etc. Rather, the subsidy/incentive/assistance given in the form of sharing/ reimbursing 5% of the interest which is paid on the funds borrowed for acquiring the plant and machinery. Thus, it can be seen that the subsidy given has a very remote connection with the cost of acquisition of plant machinery. Therefore, it cannot be said that through this subsidy Govt. has met a part of the cost of plant machinery used for upgrading the technology. Rather, the Govt. has met a part of the interest paid by the assessee which is very much a revenue expenditure and is debited by the assessee in the P L a/c. as such. As per the decision of Hon ble Supreme Court in the case of Sahani Steels (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2004) 88 ITD 273 (Mum.)(SB); CIT vs.- Chaphalkar Brothers (2013) 351 ITR 309 (Bom.); CIT vs.- Birla VXL Ltd. (2013) 90 DTR 376 (Guj.)(HC); Hydro Carbons Chemicals vs.- ACIT (ITA No.1982-86/Kol/09 dated 29.04.2011); Indo Rama Synthetics (I) Ltd. vs.- ACIT (2012) 33 CCH 526 (Del.)(ITAT). 8. Ld. Departmental Representative, on the other hand, relied upon the orders of the authorities below. 9. We have carefully considered the submissions. We find considerable cogency in the submissions of the ld. Counsel of the assessee. We find that identical issue under the Technology Upgradation Fund Scheme (in short TUFS ) of Ministry of Textiles was considered by the Hon ble Punjab Haryana High Court in ITA No.472 of 2010 vide decision dated 17.01.2011. Hon ble High Court has considered and held the issue as under: - 2. The assessee is engaged in manufacture and sale of woolen garments. It received subsidy for repayment of loan taken for building, plant and machinery under the Credit Linked Capital Subsidy Scheme under Technology Upgradation Fund Scheme (TUFS) of Ministry of Textiles, Government of India. The assessee claimed the said subsidy t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t after commencement of production for repayment of loan. In such situation, the amount should have been treated as revenue receipt, as per judgment of the Hon ble Supreme Court in Sahney Steel Press Works Ltd. Ors. v. CIT (1997) 228 ITR 253. 5. We are unable to accept the submission. 6. The purpose of scheme under which the subsidy is given, has been discussed by the Tribunal. To sustain and prove the competitiveness and overall long term viability of the textile industry, the concerned Ministry of Textile adopted the TUFS scheme, envisaging technology upgradation of the industry. Under the scheme, there were two options, either to reimburse the interest charged on the lending agency on purchase of technology upgradation or to give capital subsidy on the investment in compatible machinery. In the present case, the assessee has taken term loans for technology upgradation and subsidy was released under agreement dated 12.7.2005 with Small Industry Development Bank of India. The relevant clause of the agreement under which the subsidy was given is as under:- Para 8. - to prevent misutilization of capital subsidy and to provide an incentive for repayment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 722/- and unabsorbed business of ₹ 39,18,762/- from 100% EOU against the taxable income of the asses see from other units . 13. In this case, the assessee during the year under consideration had three different units of income as under: - Sl. No. Unit Profit before taxation (1) DTA Rs.7,96,69,247/- (2) 100% EOU Rs.91,66,484 (Loss) (3) Power Plant Rs.45,93,612/- Rs.7,50,96,375/- The above-stated loss of EOU was arrived at after charging of the depreciation of ₹ 52,47,722/-. The commercial production at the EOU started in the previous year relevant to the AY 2004-05. In that year also, the assessee suffered loss. In the computation of income, the assessee set off the loss from EOU with the profit of other units. The Assessing Officer disallowed unabsorbed depreciation of ₹ 52,47,722/- and business loss of ₹ 39,18,762/- for the textile unit of the assessee on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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