Case Law Details
DCIT Vs Orbit Exports Ltd. (ITAT Mumbai)
We find that assessee had also received interest subsidy under TUF scheme of Rs.56,54,913/- and interest subsidy of Rs.29,18,192/- from Government of Gujarat and Maharashtra. We find that this subsidy originally was offered as revenue receipt by the assessee in its return of income, which was sought to be treated as a capital receipt by the assessee by way of a separate letter dated 19/02/2016 during the course of assessment proceedings. There is absolutely no discussion made by the ld.AO in the entire assessment order regarding receipt of interest subsidy and its treatment being revenue are capital in nature and hence, before the ld.CIT(A), we find that by placing reliance on the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Pruthvi Brokers and Shareholders reported in 349 ITR 336 (Bom), the assessee made a plea that the interest subsidy that was erroneously offered as revenue receipt by the assessee in the return of income should have to be treated as capital receipt as the said subsidy was also given for setting up new unit by the assessee.
We find that this interest subsidy also was given to the assessee under the TUF scheme and the Government of Gujarat / Maharashtra for the purpose of setting up of new unit and the amount of subsidy alone was measured as the small percentage of the total interest paid by the assessee. Again by placing reliance on the decision of the Hon’ble Supreme Court in the case of Ponni Sugars referred to supra which held that the purpose of subsidy is to be seen than the measurement of said subsidy, we find that the ld. CIT(A) had categorically observed that the object of the TUF subsidy was to increase the competitiveness in the textile industry and not to increase the profits and hence the said interest subsidy deserves to be treated only as a capital receipt. Similarly, we have also observed that the interest subsidy given under the State Government scheme was also meant for promoting the industry in the area which also deserves to be treated only as a capital receipt. We find that the ld. CIT(A) had also placed reliance on the decisions of the Hon’ble Punjab and Haryana High Court in the case of CIT vs. Sham Lal Bansal reported in 200 Taxman 14 (P & H) and the Coordinate Bench decision of Kolkata Tribunal in the case of DCIT vs. Gloster Jute Mills Ltd., reported in 67 SOT 21 (Kolkata Tribunal) which was later approved by the Hon’ble Calcutta High Court in GA No.3980 and 3981 of 2014 dated 18/06/2018. We also find that the Hon’ble Rajasthan High Court in the case of PCIT vs. Nitin Spinners Ltd., in Income Tax Appeal No.31/2019 dated 19/09/2019 had under similar facts and circumstances held these receipt of subsidies to be capital receipts by placing reliance on the decision of the Hon’be Punjab and Haryana High Court, the Hon’ble Calcutta High Court and the Hon’ble Supreme Court in the case of Ponni Sugars referred to supra. In view of the aforesaid observations and going by the purpose of giving interest subsidy to the assessee in the facts and circumstances of the instant case and respectfully following the aforesaid judicial precedents, we do not find any infirmity in the order of the ld. CIT(A) granting relief to the assessee. Accordingly, the grounds raised by the revenue are dismissed for A.Y.2013-14.
At the cost of repetition, we would like to state that the decision rendered herein for A.Y.2013-14 would apply with equal force for A.Y.2014-15 also except with variance in figures.
FULL TEXT OF THE ITAT JUDGEMENT
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