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TMI Blog2014 (7) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee received subsidy from Central Government of Rs. 77,18,242/- on account of 'interest refund'. Though the assessee debited the P&L a/c. with the net amount of interest, after adjustment of the abovementioned subsidy of Rs. 77,18,242/-. In computing the assessable income the assessee deducted the said amount on the plea that the subsidy was capital in nature. 4. The Assessing Officer did not agree with the above proposition and rejected the assessee's claim that subsidy under TUFS should be treated as a scheme of capital subsidy. He opined that the subsidy was revenue in nature and had to be added in the total income of the assessee as a revenue receipt. 5. Upon assessee's appeal, in this regard ld. CIT(Appeal) affirmed the Assessing Officer's action holding as under: - "I have considered the above submissions of the A/Rs of the assessee. First of all, I agree with the AO that the assessee cannot claim the interest refund under TUFS to be capital in nature just on the ground that there was an offer to choose between TUFS & CLCS which appears to be a scheme of capital subsidy. First of all this equality between the two schemes is not applicable in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee submitted that this issue is squarely covered in favour of the assessee by the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT -vs.- Sh. Sham Lal Bansal in ITA No. 472 of 2010, wherein it had been held that interest subsidy received under TUF Scheme is capital in nature. Ld. Counsel for the assessee has further submitted that this issue is covered in favour of the assessee by the decision of the Hon'ble Apex Court in the case of CIT - vs.- Ponni Sugars & Chemicals Ltd. reported in (2008) 306 ITR 392 (SC) wherein it has been held that it is the purpose of the incentive which decides its nature and not the modality or the source thereof. That this issue is also favourably covered by the decision of Hon'ble jurisdictional High Court in the case of CIT -vs.- Rasoi Ltd. (2011) 335 ITR 438 (Cal.), wherein it has held that subsidy received for expansion of capacities, modernization and improving the marketing capabilities to tide over the crises for promotion of industry in the state is to be treated as capital in nature. That similarly, the issue is covered in the case of Shree Balaji Alloys & Ors. -vs.- CIT (2011) 333 ITR 335 (J&K) wherein it has been he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered in the aforesaid light, in our view, the facts of the instant case are on all fours comparable to those considered by the Hon'ble Supreme Court in the case of Ponni Sugars & Chemicals Ltd. (supra) and therefore, a natural corollary is that the nature of the subsidy in question is capital. Therefore, both on the issue of the objective of the scheme and on the utilization of the funds received as subsidy, the subsidy is to be viewed as capital in nature having regard to the judgment of the Hon'ble Supreme Court in the case of Ponni Sugars & Chemical Ltd. (supra). 11. Reliance placed by the Revenue on the case of Sawhney Steels and Press Works Ltd. & others (supra), in our view, is not appropriate having regard to the aforesaid features of the scheme, which are not in dispute. Moreover, in the case of Sawhney Steels and Press Works Ltd. & others (supra), it was found as a fact that the subsidy was given to meet recurring expenditure and was not for acquiring a capital asset. Whereas in the instant case, admittedly, there is no provision in the scheme to grant subsidy to meet any recurring expenditure and neither such a case has been set up by the Department. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., could not be applied in the present case, as in said case the subsidy was given for running the business. 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, as held in Sahney Steel & Press Works Ltd. & Ors. itself and reiterated in later judgment in CIT v. Ponni Sugars & Chemicals Ltd. & ors. (2008) 306 ITR 392, referred to in the impugned order of the Tribunal. 8. In view of above, since the matter is covered by judgment of the Hon'ble Supreme Court in Ponni Sugars & Chemicals Ltd. & ors. against the revenue, no substantial question of law arises". Thus we find that on identical issue the matter has been decided in favour of the assessee. In these circumstances, we are of the opinion that as held hereinabove 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. Hence, the subsidy received in this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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