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2016 (3) TMI 726 - ITAT DELHI

2016 (3) TMI 726 - ITAT DELHI - TMI - Treatment to subsidy received - revenue v/s capital receipt - Held that:- Hon’ble Supreme Court in CIT vs. Ponni Sugars and Chemicals Ltd. (2008 (9) TMI 14 - SUPREME COURT ), wherein held that the character of the receipt of a subsidy in the hands of the assessee under a scheme has to be determined with respect to the purpose for which the subsidy is granted. In other words, one has to apply the purpose test. The point of time at which the subsidy is paid is .....

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ading the textile industry and the purpose and object was for capital investment, as such, is clearly a capital receipt as per the case laws relied upon by the ld. AR before us. Therefore, we direct that the receipt to be treated as receipt of capital nature and not to be taxed in the hands of the assessee. - Decided in favour of assessee - ITA No.4698/Del./2011 - Dated:- 5-2-2016 - SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER For The Assessee : Shri Anil Chopra FCA & .....

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s of ₹ 1,79,12,287/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter the Act ) and thereafter, the assessment was completed u/s 143(3) of the Act on 24.12.2009 computing loss at ₹ 99,37,978/- as against returned loss of ₹ 1,79,12,287/- as declared by the assessee after making certain addition/disallowance. On appeal, the ld. CIT (A) partly allowed the appeal. 4. Now the assessee, being aggrieved, is in appeal before us by taking the following groun .....

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gradation Fund Scheme (TUF Scheme) against the purchase of new machinery as revenue receipt. Under the purpose test, the said capital subsidy constitutes a capital receipt as held by Hon ble Apex Court in the case of CIT vs. Ponni Sugars & Chemicals Ltd. reported in 306 ITR 392 (SC). The disallowance has been made on erroneous views and / or non-appreciation of the facts or law involved without properly considering the material and case law on record. As such too the same is unwarranted and .....

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idy for cast, the very nomenclature of the subsidy was additional incentive in the form of 10% capital subsidy for the processing machinery and also relied on the judgment of the Hon ble Supreme Court in the case of CIT vs. Ponni Sugars and Chemicals Ltd. - 306 ITR 392 (SC) and also CIT vs. Triumala Bricks and Tiles Factory - 217 ITR 547 (AP). The AO observed that the case laws relied upon by the assessee are not applicable in the present case of the assessee on the facts of the case and after r .....

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e treated as Revenue receipt or capital receipt. According to appellant it is a capital receipt because of the particular scheme of the Govt. Conversely according to the Ld AO it is Revenue receipt and nothing but profit supplement to be offered as income from the relevant period. The appellant in its favour has given some case laws, equal number of decisions were also given by the Ld AO. 2.3 According to me, this is essentially a question of fact. The grant was received from the Textile Ministr .....

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the matter is that this is a profit substitute as rightly observed by the Ld AO and he has referred decisions which are identically suitable for the case under review. Some of the catena of cases referred by him are listed below :- Merinopli & Chemicals Ltd v CIT (1994) 209 ITR 508 (Cal) V.V.S.V. Meenakshi Achi v CIT (1996) 60 ITR 253 (SC) Saroja Mills Ltd v CIT (1997) 220 ITR 626 (Mad) There are also other cases referred by him and it is no need to mention a" the cases. From the facts .....

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eived is a Revenue receipt and the action of the AO does not require interference of any sought from this office. 7. Assailing the aforesaid order of the ld. CIT (A), the ld. AR for the assessee submitted that this is a scheme from textile Ministry for modernization of textile industries and the scheme is known as Credit Linked Capital Subsidy under TUFS (Technology Upgradation Fund Scheme). He submitted that under this scheme, the Government gives the fund straightway to the designated bank and .....

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t once only during the relevant period. He submitted that there was no assistance from the Government either in AY 2006- 07 or in 2008-09. He further submitted that the scheme indicates that the assessee would get 10% of the total P&M installed during the year. He submitted that the assessee s case is squarely covered by the decision of Hon ble Supreme Court in the case of Ponni Sugars & Chemicals Ltd reported in 306 ITR 392 (SC) wherein the Hon ble Supreme Court has held that, The chara .....

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cheme is to enable the assessee to set up a new unit or to expand an existing unit then the receipt of the subsidy would be on capital account. He also relied on the decision of CIT vs. Tirumala Bricks & Tiles Factory reported in 217 ITR 547 (AP), wherein it was held that subsidy for setting up/ expansion of plant is a capital receipt. The ld. AR further submitted that the case laws relied upon by the AO pertain to revenue subsidy in the form of reimbursement of specified revenue expenditure .....

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He categorically submitted that the aforesaid Apex Court decision is a binding and a recent one and in any case, the Hon ble High Court decisions cited by Ld. AO of earlier dates could not override the aforesaid recent Hon ble Supreme Court decision, which is in assessee s favour. He, however, submitted that in any case, the Hon ble High Court decisions relied by the AO are clearly distinguishable and are not applicable to the facts of this case. Further, he relied on the CBDT Circular No.142 da .....

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w on this issue. 9. We have heard both the sides and perused the materials. The sole issue that is before us is whether the receipt of ₹ 74,02,161/- from Ministry of Textile by the assessee was a capital receipt or a revenue receipt. Both the authorities below have held the receipt as revenue receipt and added the same to the income of the assessee. Before us, the ld. AR pointed out that the subsidy was received from the Ministry of Textile for the purchase of plant and machinery and it wa .....

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a) and contended that a receipt of such nature which is given directly to the bank cannot be termed as revenue receipt and ought not to have been added to the income of the assessee. We find force in the contention of the ld. AR that in a similar case, the Hon ble Punjab & Haryana High Court in CIT vs. Sham Lal Bansal (supra), the facts being similar, wherein the assessee received subsidy for repayment of loan taken for building and plant and machinery under the Credit Linked Capital Subsidy .....

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