Income Tax Appellate Tribunal - Mumbai
Joint Commissioner Of Income Tax (Osd) ... vs Dicitex Home Furnishing Limited, ... on 12 August, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
"SMC" BENCH, MUMBAI
BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER
ITA no.917/Mum./2018
(Assessment Year : 2013-14)
Jt. Commissioner of Income Tax (OSD)
................ Appellant
Circle-9(3)(1), Mumbai
v/s
Dicitex Home Furnishing Ltd.
306, Shop no.2
Kakad Air Conditioned Market ................ Respondent
Kalbadevi Road, Mumbai 400 002
PAN - AACCM7535R
Revenue by : Shri S.K. Bepari
Assessee by : Shri Rahul Bagaria
Date of Hearing - 10.09.2018 Date of Order - 12.09.2018
ORDER
Aforesaid appeal has been filed by the Revenue challenging the order dated 30th November 2017, passed by the learned Commissioner (Appeals)-16, Mumbai, for the assessment year 2013-14.
2. The only dispute in the present appeal relates to deletion of addition made of ` 1,89,31,664, by the Assessing Officer treating the interest subsidy received by the assessee as revenue in nature. 2
Pankaj Enterprises
3. Brief facts are, the assessee a company is engaged in the business of manufacturing and trading of cloth and yarn. For the assessment year under dispute, the assessee filed its return of income on 29th November 2013, declaring loss of ` 1,64,63,997 under the normal provision and book profit of ` 36,75,358, under section 115JB of the Income Tax Act, 1961 (for short "the Act"). During the assessment proceedings, the Assessing Officer noticed that the assessee has availed Technology Upgradation Fund Scheme (TUFS) formulated by the Government of India and received interest subsidy of ` 1,87,58,554. However, the assessee did not offer the interest subsidy as income by treating it as capital receipt. When the Assessing Officer called upon the assessee to explain why the interest subsidy should not be treated as revenue receipt, the assessee furnished an elaborate submission justifying its claim that the interest subsidy received is of capital nature. In support of such contention, the assessee relied upon a decision of the Tribunal, Mumbai Bench, in SVG Fashion Ltd. v/s DCIT, ITA no.296 AND 4154/Mum./2012 dated 23rd December 2015. However, the Assessing Officer did not find merit in the submissions of the assessee and treating the interest subsidy received by the assessee as revenue in nature added back to the income. Being aggrieved of such addition, the assessee preferred appeal before the first appellate authority. 3
Pankaj Enterprises
4. The learned Commissioner (Appeals) after considering the submissions of the assessee and noticing the fact that he himself has deleted such addition made by the Assessing Officer in the assessment year 2012-13 by following the decision of the Tribunal, Mumbai Bench, in assessee's own case for assessment year 2011-12, deleted the addition made by the Assessing Officer.
5. At the outset, the learned Authorised Representative submitted that the issue is covered by the decision of the Tribunal, Mumbai Bench, in assessee's own case for assessment year 2011-12 and 2012-13.
6. The learned Departmental Representative though agreed that the issue is decided in favour of the assessee by the Tribunal in the preceding assessment year, however, he relied upon the observations of the Assessing Officer.
7. I have considered rival submissions and perused the material on record. Undisputedly, identical additions relating to interest subsidy was made by the Assessing Officer in assessment years 2011-12 and 2012-13, by treating them as revenue receipt. However, the learned Commissioner (Appeals) accepting assessee's claim of capital receipt deleted the additions made by the Assessing Officer. When the 4 Pankaj Enterprises Department challenged the decision of the learned Commissioner (Appeals) before the Tribunal, the Co-ordinate Bench while deciding the issue in ITA no.4375 and 2147/Mum./2015, dated 23 rd September 2016, upheld the decision of the learned Commissioner (Appeals) holding as under:-
"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:
In the light of the foregoing, it has been felt necessary to make operational a focussed and time-bound Technology Upgradation Fund Scheme (TUFS) which would provide a focal point for modernisation efforts through technology upgradation in the industry. The main feature of the TUF Scheme would be a 5% reimbursement on the interest actually charged by the identified financial institutions on the sanctioned projects."
7.1 Now we shall turn to the decision relied on by the ld. DR. In Sahney Steel and Press Works Ltd. (supra), the following has been held:
"The payments in the nature of subsidies were made only after the industries have been set up. Payments were not made for the purpose of setting up of the industries. The payments were to be made only if and when the assessee commenced its production. The said payments were made for a period of five years calculated from the date of commencement of production in the assessee‟s factory. The subsidies were operational subsidies and not capital subsidies.
Therefore, such subsidies could only be treated as assistance given for the purpose of carrying on of the business of the assessee and the same were of revenue character."
7.2 We then turn to the decisions relied on by the ld. Counsel of the assessee. In the case of Sham Lal Bansal (supra), the assessee was engaged in manufacture and sale of woollen 5 Pankaj Enterprises garments. He received subsidy for a payment of loan taken for building and plant and machinery under the Credit Linked Capital subsidy 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 Ministry of Textile adopted the TUFS scheme, envisaging technology upgradation of the industry. Under the scheme there were two options, either to reimburse the interest charged by the lending agency on purchase of technology upgradation or to give capital subsidy on the investment in compatible machinery. In the instant case, the assessee had taken term loans for technology upgradation and subsidy was released under agreement with Small Industry Development Bank of India. [Para 6] For determining whether subsidy payment was „revenue receipt‟ or „capital receipt,‟ character of receipt in the hands of the assessee has to be determined with respect to the purpose for which subsidy is given by applying the purpose test. [Para 7] The matter was covered by judgment of the Supreme Court in CIT v. Ponni Sugars & Chemicals Ltd. [2008] 306 ITR 392 /174 Taxman 87 against the revenue and, therefore, no substantial question of law arose.
7.3 In Ponni Sugars and Chemicals Ltd. (supra) ,it was held that the test is the character of receipt in the hands of the assessee, so that where the object of the subsidy is to enable to the assessee to run the business more profitably, it would be taxable, but where it is to enable the assessee to set up a new unit or expand its existing unit it should not be taxable.
7.4 In M/s SVG Fashions Ltd. (supra), the issue before the ITAT „E‟ Bench Mumbai, was whether the interest subsidy granted under TUF Scheme was revenue or capital in nature. The Tribunal followed the judgment in Ponni Sugars and Chemicals Ltd. (supra) and directed the AO to treat the subsidy as capital in nature. We 6 Pankaj Enterprises 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 international market and over all long- term viability of the industry, the Ministry adopted the TUF Scheme envisaging technology upgradation of the industry and therefore the subsidy received in that regard was capital in nature.
8. The present factual matrix is to be tested on the anvil of the above enunciation of law. In the light of the decision in the case of Sham Lal Bansal, M/s SVG Fashions Ltd. and Gloster Jute Mills Ltd. referred here-in-above and the facts being similar, we uphold the order passed by the ld. CIT(A) for the A.Y. 2011-12 and A.Y. 2012-13."
8. Facts being identical, respectfully following the decision of the Co-ordinate Bench, as referred to above, I uphold the order of the learned Commissioner (Appeals) on the issue. Grounds raised are dismissed.
9. In the result, Revenue's appeal is dismissed.
Order pronounced in the open Court on 12.09.2018 Sd/-
SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 12.09.2018 7 Pankaj Enterprises Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary (Sr. Private Secretary) ITAT, Mumbai