PCIT Vs Nitin Spinners Ltd. (Supreme Court of India)
The Revenue filed an appeal under Section 260A of the Income Tax Act, 1961 challenging the order of the Income Tax Appellate Tribunal (ITAT), contending that three subsidies received by the assessee, a textile manufacturer, during the assessment year 2013–2014 were taxable as income rather than capital receipts. The disputed amounts comprised ₹7,08,60,525 received under the Technology Upgradation Fund Scheme (TUFS), ₹1,67,84,009 received under the Focus Market Scheme, and ₹26,52,890 received as Electricity Duty Subsidy. The assessee had treated all three receipts as capital receipts.
The Technology Upgradation Fund subsidy was received pursuant to a scheme of the Union Textile Ministry. Under paragraph 8 of the agreement dated 12.07.2005 governing the subsidy, the capital subsidy was to be treated by the bank or financial institution as a non-interest-bearing term loan. The repayment schedule for the term loan was to be determined excluding the subsidy amount, and after a lock-in period of three years, the subsidy was to be adjusted against the beneficiary’s term loan account on a pro-rata basis. The agreement also stated that there would be no apparent or real financial loss to the borrower because a corresponding concession was extended to the loan amount.
