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TMI Blog2016 (9) TMI 1269X X X X Extracts X X X X X X X X Extracts X X X X ..... ised being similar, they were heard analogously and are disposed of by a common order. 2. The first ground raised by the Revenue in this appeal is that the ld. CIT(A) erred in deleting the addition made by the Assessing Officer (AO) on account of interest subsidy amounting to Rs. 2,84,21,657/- for the A.Y. 2011-12 and Rs. 2,48,57,810/- for the A.Y. 2012-13 treating the same as capital receipt by relying on the Supreme Court decision in the case of Sahney Steel and Press Works Ltd. vs. CIT 228 ITR 253 (SC), without countering the findings of the AO in Para 5.5 of the assessment order that assessee had received subsidy in the form of 5% reduction in the rate of interest and interest being a revenue expenditure allowable under the Act, any su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete a project is production incentive or operational subsidy and is not capital subsidy and hence as per the AO, it is chargeable to tax as revenue receipt. He also relied upon the decision of Hon'ble Supreme Court in the case of CIT vs. P. J. Chemicals (1994) 210 ITR 830 (SC) wherein the dispute was whether the capital subsidy went to reduce the actual cost of plant and machinery for the purpose of depreciation. He noted that the ratio of the above decision has since been negatived by inserting Explanation -10 below section 43(1) by the Finance (No. 2) Act, 1998 w.e.f. 01.04.1999. The AO also found that the assessee has transferred Rs. 2,84,21,657/- during the A.Y. 2011-12 and Rs. 2,48,57,810/- during the A.Y. 2012-13 from the P & L a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on the order of the ld. CIT(A). Specific reference was made by him to the decision in the case of (i) CIT vs. Sham Lal Bansal (supra) (ii) M/s SVG Fashions Ltd. vs. DCIT-4(3), ITAT, Mumbai 'E' Bench (ITA No.8565/M/2010 & ITA No. 296/M/2012 dated 23/12/2005) and (iii) Gloster Jute Mills Ltd vs. ACIT (2014) 33 ITR (Tribunal) 322 (Kol). 7. We have considered the rival submissions and perused the relevant material on record. We begin with the scheme as formulated by the Textile Ministry, Government of India for the benefit of the textile industry in India. The salient feature of the scheme especially to the character of the incentive/subsidy of TUFS is to be inferred from its 'Objective ' as stated at the preamble which is produced below: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsidy Scheme under TUFS of Ministry of Textile and claimed the same as capital receipt. The AO, however, treated the same as a revenue receipt and added to the income of the assessee. On appeal, the Commissioner (Appeals) upheld the plea of the assessee and same was confirmed by the Tribunal observing that the objective of the subsidy scheme was to enhance the technology apparatus of the assessee by assisting in acquiring machinery and the subsidy so received was utilized for repayment of loans taken by the assessee to set up the new unit, as was the intention of the subsidy. The Hon'ble High Court held the following: "To sustain and improve the competitiveness and overall long term viability of the textile industry, the concerned M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l followed the judgment in Ponni Sugars and Chemicals Ltd. (supra) and directed the AO to treat the subsidy as capital in nature. We may mention here that similar TUF Scheme is in dispute in the instant appeal. 7.5 In Gloster Jute Mills Ltd. (supra), the assessee received subsidy from the Central Government under the TUF Scheme by way of interest refund. In computing the assessable income, the assessee deducted the amount on the ground that the subsidy was capital in nature. The AO held that the subsidy was revenue in nature and had to be added to the total income of the assessee as a revenue receipt. The Commissioner (Appeals) confirmed this. On appeal, the ITAT held that in order to sustain competitiveness in the domestic as well as inte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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