TMI Blog2019 (5) TMI 1782X X X X Extracts X X X X X X X X Extracts X X X X ..... GLOSTER JUTE MILLS LTD. [ 2018 (8) TMI 1474 - CALCUTTA HIGH COURT] that considering the objective of the TUF Scheme the interest received under TUF Scheme is capital in nature. Grounds of appeal raised by the Revenue are, therefore, dismissed. Interest u/s 244A - Claim shall not be granted on the amount of refund due to the assessee in relation to interest reimbursement under TUFS (Technology Upgradation Fund Scheme) - assessee has vehemently argued that it was entitled to interest on refund - HELD THAT:- In the present case, the Ld.CIT(A) has given the direction of no interest being granted on refund, without giving the assessee any opportunity of hearing and considering the forceful arguments of the assessee before us based on decisions of Courts as cited above, we hold ,that the issue needs reconsideration. Further noting the interpretation of the relevant section dealing with interest on refunds i.e. section 244A of the Act, as above, we are in agreement with the DR that the issue needs to be considered in the factual matrix of the case before us. We therefore consider it fit to restore the issue back to the CIT(A) to consider the same afresh. The Ld.CIT(A) is directe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the CIT(A) in holding that the interest reimbursement under TUF Scheme was a capital receipt and the assessee contesting the order of the CIT(A) holding that no interest be granted to the assessee on the refund of tax on account of holding interest reimbursement under TUFS as non taxable. We shall first be dealing with the appeals of the Revenue. The grounds raised in all the appeals was identical and read as under: 1. Whether on the facts and circumstances of the case and in law, the Ld.C1T(A) was justified in treating the reimbursement of interest under TUF scheme of the Ministry of Textiles, Government of India, as capital receipt instead of revenue receipt without giving an opportunity to assessing officer to examine the claim of the assessee? 2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was justified in treating the reimbursement of interest under TUF scheme of the Ministry of Textiles, Government of India, as capital receipt instead of revenue receipt without examining in the order the character/purpose of the subsidy receipts in the hand of assessee? 3. Whether on the facts and circumstances of the case and in law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner claimed interest expense only to the extent of the amount incurred by it. 6. The assessee also relied upon certain judicial decisions in support of its contention that considering the objective of the scheme, the interest reimbursement under TUF Scheme was capital in nature, as reproduced in para 4 of the CIT(A) s order as under: 4. In the present appellate proceedings, a forceful plea was made for treating the subsidy in the form of interest reimbursement amounting to ₹ 6,91,78,340/- as capital receipt on the strength of the following judicial precedents: (i) CIT Vs. Sham Lai Bansal, ITA No. 472/2010 (P H), (ii) DOT Vs. Sutlej Textiles Industries Ltd., ITA No. 5124/2013 (IT 80, Delhi), (iii) CNV Textiles P. Ltd. Vs. DCIT, ITA No. 746/2014 (ITAT, Chennai), (iv) CIT Vs. Rasoi Ltd.,[2011] 335 ITR 438 (Calcutta High Court), (v) Shri Balaji Alloys Vs. CIT [2011] 333 ITR 335 (J K High Court), (vi) CIT Vs. Ponni Sugars Chemicals Ltd.,[2008] 306 ITR 392 (Supreme Court). 7. Finding merit in the contentions of the assessee the Ld.CIT(A) allowed the assesses claim holding that the issue was covered by the decision of the jurisdictional High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract hereinbelow the relevant portion of the aforesaid decision in extenso: 2. Two questions are sought to be raised by the Revenue in this appeal. The first is as to whether the money received under a Central Government subsidy by the assessee had to be regarded as capital receipt or a revenue receipt. 4. Accordingly, it is only the first question that needs to be gone into. The Commissioner (Appeals) read the relevant scheme and was of the opinion that the subsidy received had to be regarded as a revenue receipt. Before the Commissioner (Appeals) several judgements were cited including the judgement of this Court CIT V. Balrampur Chini Mills Ltd.,[1999] 238ITR 445/105 taxman 200 (Cal), and the decisions of the Supreme Court Sahney Steel Press Works Ltd.,[1997] 228 ITR 253/94 taxman 368 and CIT V. Ponni Sugars Chemicals Ltd.,[2008] 174 taxman 87/306 ITR 392 (SC). 5. In Balrampur Chini Mills Ltd., this court held that it is the purpose of the scheme that has to be assessed before determining whether the subsidy ought to be treated as a revenue receipt or a capital receipt. It also held that if the subsidy was given for the running of the business of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncements on the subject, the order of the appellate Tribunal does not require to be revisited. On the strength of the terms of the scheme and its purpose, the subsidy received there under had only to be regarded as a capital receipt and not a revenue receipt. [Emphasis supplied]. 9. In view of the aforesaid, this appellate authority cannot be detained any longer in treating the reimbursement of interest under the TUF scheme of Ministry of Textiles, Government of India, as capital receipt, ex cathedra. 8. Before us the Ld. counsel for assessee relied upon the factual contentions made before the Ld.CIT(A), the judicial decisions relied upon before him and also on the findings of the Ld.CIT(A). 9. The Ld. DR, on the other hand, vehemently argued that the interest subsidy/reimbursement received by the assessee was revenue in nature though he was unable to rebut/controvert the factual contentions and was also not able to draw our attention to any judicial decision contrary to that cited by the assessee and followed by the Ld.CIT(A) while allowing the assessee s claim. 10. We have heard both the parties and have also gone through the order of the Ld.CIT(A). The issue before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure following the proposition laid down by the apex court for determining the nature of subsidy in the case of Sawhney steels(supra) and Ponni Sugars(supra). The Ld. DR has been unable to bring to our notice any contrary decision either of the Hon'ble Jurisdictional High Court or the Hon'ble Apex Court on this issue nor was the decisions relied upon by the Ld.CIT(A) distinguished before us. 13. In view of the same, we have no hesitation in upholding the order of the CIT(A) that considering the objective of the TUF Scheme and judicial decisions of the Hon'ble Jurisdictional High Court and Hon'ble High Court of Calcutta , the interest received under TUF Scheme is capital in nature. Grounds of appeal raised by the Revenue are, therefore, dismissed. In effect, all the appeals of the Revenue are dismissed. 14. We shall now take up the appeals of the assessee .The grounds raised by the assessee in all its appeals was identical challenging the order of the CIT(A) stating that no interest be paid on the refund granted to the assessee on account of holding that the interest received under TUF Scheme was not taxable. Ground of appeal raised by the assessee reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority. It needs no assertion to state that the authorities below the Hon'ble Tribunal never committed any error of judgement insofar as the treatment and consequent taxability of interest reimbursement was concerned. In the circumstances, should the present order result in a refund of excess tax wrongly paid, there cannot be an accretion to the said refund with the applicable interest, normally payable under the provisions of section 244A of the Act. It is being specifically recorded here that the appellant company itself was solely responsible for paying excess tax by treating the interest reimbursement as taxable receipt and, therefore, would not be entitled for interest on refund of such tax. It is ordered accordingly. 16. Before us the Ld. counsel for assessee challenged this order of the Ld.CIT(A) on three grounds; i) that the Ld. CIT(A) had exceeded his jurisdiction by holding so since the I.T.A.T. had remanded only the issue of treatment of interest received under TUF Scheme to him and the interest on refund so generated had not been referred to him by the I.T.A.T., ii) that while holding so, the CIT(A) had given no opportunity of hearing to the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest and entitlement to interest on excess tax are determined by the statutory provisions of the Act. Interest payment is a statutory obligation and non-discretionary in nature to the assessee. In tune with the aforesaid general principle, Section 244A is drafted and enacted. The language employed in Section 244A of the Act is clear and plain. It grants substantive right of interest and is not procedural. The principles for grant of interest are the same as under the provisions of Section 244 applicable to assessments before 01.04.1989, albeit with clarity of application as contained in Section 244A. 31. The Department has also issued Circular clarifying the purpose and object of introducing Section 244A of the Act to replace Sections 214, 243 and 244 of the Act. It is clarified therein, that, since there was some lacunae in the earlier provisions with regard to non-payment of interest by the revenue to the assessee for the money remaining with the Government, the said section is introduced for payment of interest by the Department for delay in grant of refunds. A general right exists in the State to refund any tax collected for its purpose, and a corresponding right exists ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed at the appellate stage would not ipso facto imply that the assessee was responsible for causing the delay in the proceedings resulting into refund. We may refer the decision of the Kerala High Court in case of Commissioner of IncomeTax V/s. South Indian Bank Ltd., reported in (2012) 340 ITR (Ker) in which the assessee had raised a belated claim for deduction which was allowed by the Commissioner (Appeals). The Revenue, therefore, contended that for such delay, interest should be declined under Section 244A of the Act. In the said case also, the assessee had not made any claim for deduction of provision of bad debts in the original return. But before completion of the assessment, the assessee had made such a claim which was rejected by the Assessing Officer. The Commissioner allowed the claim and remanded the matter to the Assessing Officer. Pursuant to which, the assessee became entitled to refund. Revenue argued that the assessee would not be entitled to interest in view of Section 244A(2). In this context, the Court held in Para.6 as under : 6. Sub-section (2) of section 244A provides that the assessee shall not be entitled to interest for the period of delay in issu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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