Income Tax Appellate Tribunal - Delhi
Dcit Central Circle-31, New Delhi vs Bsl Limited, Bhilwara on 23 May, 2023
THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'A', NEW DELHI
Before Dr. B. R. R. Kumar, Accountant Member
Sh. Yogesh Kumar US, Judicial Member
ITA No. 1923/Del/2020 : Asstt. Year: 2014-15
ITA No. 1924/Del/2020 : Asstt. Year: 2015-16
DCIT, Vs. BSL Ltd.,
Central Circle-31, 26, Industrial Area, PO Box No. 17,
New Delhi-110055 Gandhi Nagar, Bhilwara,
Rajasthan-311001
(APPELLANT) (RESPONDENT)
PAN No. AABCB0639G
Assessee by : None
Revenue by : Sh. Kanv Bali, Sr. DR
Date of Hearing: 27.02.2023 Date of Pronouncement: 23.05.2023
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of ld. CIT(A)-23, New Delhi dated 27.11.2019.
2. Since, the issue involved in both the appeals are similar, they were heard together and being adjudicated by a common order.
3. In 1923/Del/2020, the Revenue has raised the following grounds of appeal:
"1. That on the facts and in the circumstances of the case, the ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.3,18,78,827/- (made on account of disallowance of claim of interest subsidy of Rs.3,18,78,827/- under TUFS as capital receipt), 2 ITA Nos. 1923 & 1924/Del/2020 BSL Ltd.
without appreciating the detailed reasons given in the assessment order and without appreciating the fact that the matter is sub judice in assessee own case for A.Y. 2008-09. On similar issue in the case of M/s Nitin Spinners Ltd., Department has filed SLP in Hon'ble Supreme Court."
4. The matter stands adjudicated by the order of the Co- ordinate Bench of ITAT in assessee's own case in ITA No. 2105/KOL/2014 vide order dated 14.02.2020. For the sake of ready reference, the entire order is reproduced as under:
IN THE INCOME TA X APPELLATE TRIBUNAL, KOLKATA 'A' BENCH, K OLKATA Before Shri P.M. J agtap, V ice-President and Shri Satbeer Singh Go dara, J udicial Member I.T.A . No . 2105/K OL/2014 Assessment Year: 2008- 2009 Deputy Commissioner of Income Tax,..........................................Appellant Circle-10, Ko lkata, Aayakar Bhawan, 3rd F loor, P-7, Chowringhee Square, Kolkata-700069
-Vs.-
M/s.BSL Limited. ..............................................Re sponde nt 151, Sarat Bo se Road, Kolkata-700020 [PAN:AABCB0639G] Appearances by:3 ITA Nos. 1923 & 1924/Del/2020
BSL Ltd.
Shri S.D. Verma, Advocate & Shri Sanjeev K adel, FCA, fo r the Appellant Shri Dhrubaj yoti Roy, JCIT, for the Responde nt Date of concluding the he aring : Fe bruary 10, 2020 Date of prono uncing the orde r : February 14, 2020 O R D E R Per Shri P.M. Jagtap, Vice-President:-
This appeal is preferre d by the Revenue against the order o f ld. Commissioner of Income Tax (Appeals)-XII, K olkata dated 01.09.2014 and in the solitary ground raised the rein, the Re venue has challenged the action o f the I d. CJT(Appe als) in directing the Assessing Officer to tre at the interest subsidy re ceived by the assessee as capital receipt not chargeable to tax.
2. T he assessee in the present case is a Company, which file d its return of Income for the year under consideration on 25.09.2009 declaring a loss o f Rs.10,58,28,082/-. In the assessment originally ITA No. 2105/K OL/2014 Assessme nt Year: 2008- 2009 M/s. BSL Limite d comple te d under sectio n 143( 3) vide an order date d 01.09.2010, the total loss o f the assessee was determined by the Assessing Office r at Rs.8,96,39,082/- . The said assessment was subsequently set aside by the ld. CIT vide an orde r dated 08.12.2010 passed unde r section 263 with a dire ction to the Assessing Officer to complete the asse ssment afresh o n certain issues as pointed out in the order unde r section 263. In co mpliance with the order o f the Id.
CIT passe d under section 263, a fre sh assessment was made by the Assessing Officer vide an order dated 22.12.2011 determining the total loss of the assessee-company at Rs.7,13,55,082/- after making addition of Rs.1,82,84,000/- on account of the interest income.
4 ITA Nos. 1923 & 1924/Del/2020BSL Ltd.
3. Against the o rder passe d by the Assessing Officer under se ctio n 143(3) re ad with section 263, an appeal was filed by the assessee before the ld. CIT(Appeals). During the course of appellate proceedings befo re the ld. CIT(Appeals) , additio nal ground was raise d by the assessee claiming that the intere st subsidy of Rs.3,04,53,559/- receive d by it under Technology Upgradation Fund Scheme (TUFS in short) during the year unde r consideration was liable to be treate d as capital rece ipt not chargeable to tax inste ad of reve nue rece ipt charge able to tax as offe red by the assessee in its return of income. The said additional ground along with the submissions made by the assessee in support o f its case on the issue raise d there in was fo rwarde d by the ld. CIT(Appeals) to the Assessing Officer seeking the latter' s remand re port. In the remand report submitted to the ld. CIT( Appeals), the Assessing Officer strongly objecte d to the admission o f the additional ground raised by the assessee by submitting that the issue raised the rein was no t the subject matte r of eithe r the original assessment made unde r section 143(3) or even the fresh assessm ent made under section 143(3) read with section 263. The ld. CIT(Appeals), ho wever, did not find the objectio n raised by the Assessing Officer to be sustainable and afte r discussing this aspect in detail in the light o f various judicial prono uncements, he admitte d the ITA No. 2105/KOL/2014 Assessment Year: 2008- 2009 M/s. BSL Limite d 3 additional gro und raise d by the assessee. In the remand repo rt, the claim of the assessee as made in the additio nal ground for treating the inte rest subsidy received unde r TUFS as capital receipt was also challenge d by the Assessing Office r by relying mainly on the decision o f the Hon'ble S upreme Court in the case of Sahne y Steel & Press Works Limite d [228 ITR 253]. The I d. CIT(Appeals), however, fo und that the issue raised by the assessee-company in the additio nal gro und was squarely covered in favo ur o f the asse ssee on merit by the decision o f the Ko lkata Be nch o f IT AT in the case of DCIT -vs- M/s. Gloste r Jute Mills Limite d (ITA No . 766/K OL/2010 date d 02.07.2014) , 5 ITA Nos. 1923 & 1924/Del/2020 BSL Ltd.
where in the interest subsidy rece ived by the assessee unde r the same TUFS was he ld to be capital re ceipt by the Tribunal after taking into conside ration the decisio n of the Hon'ble Supre me Court in the case of S ahne y Steel & Press Works Limite d (supra). He accordingly followed the said decision o f the Tribunal and directed the Assessing Office r to tre at the inte rest subsidy rece ived by the asse ssee company unde r the TUFS as capital receipt not chargeable to tax. Aggrie ved by the order of the ld. CIT(Appeals) giving relie f to the assessee on this issue , an appeal was prefe rre d by the Reve nue before the Tribunal. The said appe al was dismissed by the T ribunal vide its appe llate order dated Se pte mber 18, 2017 by following the decision rendered by the Coordinate Bench of this Tribunal in the case of M/s. Gloster Jute Mills Limited (ITA No. 766/K OL/2010 dated 02.07.2014) , wherein a similar issue relating to the assessee's claim of treating the interest subsidy received under TUFS as capital receipt no t charge able to tax had been allowe d by the Tribunal. The said order of the Tribunal dated Se ptember 18, 2017 was challenge d by the Re venue in the appeal file d before the Hon' ble Calcutta High Court and Their Lordships of Ho n'ble Calcutta High Court as pe r the judgment de livere d on 27.03.2019 in I.T.A . No. 15 of 2019 set aside the orde r of the Tribunal and re manded the matter back to the Tribunal by obse rving as under:-
"We have exam ine d the impugned order of the Tribunal. The Tribunal has simply refe rred to the subsidy scheme without specifying the scope, purpo rt o r ITA No. 2105/KOL/2014 Assessment Year: 2008- 2009 M/s. BS L Limited 4 the details of it. S imply because the subsidy scheme has been declared by the Tribunal to be capital receipt in the case of o ther asse ssees, it pronounced the decision in this case that it was to be treate d as such.
In our view, that was not the corre ct approach. The subsidy scheme had to be analysed threadbare . The question whether the subsidy 6 ITA Nos. 1923 & 1924/Del/2020 BSL Ltd.
incentive was be ing utilize d for the purpo se of meeting the inte rest liability o f the co mpany on loans and advances taken by it to set up its plant and machinery had to be investigated and a firm conclusion ought to have be en arrived at. Only if it was so utilized, possibly, the subsidy ince ntive could be described as a capital rece ipt. Othe rwise it had to be tre ate d as a revenue rece ipt.
In those circumstances, we remand the matter back to the Tribunal to decide this particular issue upo n hearing the parties and by a reasone d order within three months from the date o f communication of this order".
Hon'ble High Court of Calcutta thus remande d the matter back to the Tribunal with a directio n to decide the issue involve d in the assessee's case afresh after e xamining/ analysing the concerned subsidy scheme and utilization o f subsidy incentive for the spe cific purpose.
4. As per the orde r/direction o f the Hon'ble Calcutta High Court, the case has been fixed for hearing afresh and arguments of both the sides have been heard. It is obse rved that the interest subsidy in question was received by the assessee unde r Techno lo gy Upgradation Fund Scheme (TUFS in short) o f the Ministry o f Te xtiles and the objective and sco pe of the said S cheme as well as the eligibility criteria for assistance as given in the Resolutio n dated 31.03.1999 published in the Official Gazette o f I ndia is e xtracted below:-
"Objective:-
The Indian textile industry occupies a unique position in the Indian economy in te rms of its contributio n to industrial production, employment and exports. In spite of a strong fibre and production base , for various histo rical re asons, this industry suffers from severe techno logical o bsolescence and lack of economies o f scale. While 7 ITA Nos. 1923 & 1924/Del/2020 BSL Ltd.
relatively high co st of state-of-the -art techno logy and structural anomalies in the industry have been major contributory facto rs, ITA No. 2105/KOL/ 2014 Assessment Year: 2008-2009 M/s. BSL Limite d 5 perhaps the single most important factor inhibiting techno logy upgradation has been the relative ly high cost of capital, eve n in re al terms, in India, especially fo r an industry usually squeeze d fo r margins. Given the significance of this industry to the overall health of the Indian economy, its emplo yment po tential and the huge histo rical backlog of technolo gy upgradatio n, particularly in the context of the liberalisation of the natio nal industrial and trade policy and glo balisatio n of te xtile track, it has been emphasise d by experts that in o rder to sustain and impro ve its competitive ness and overall lo ng te rm viability, it is essential fo r the te xtile industry to have access to timely and ade quate capital at inte rnatio nally comparable rates of inte rest in o rde r to upgrade its te chnolo gy le vel.
In the light of the foregoing, it has been felt necessary to make operational a focused and time-bound Techno logy Upgradation F und Scheme(TUFS) which would pro vide a focal point for modernization effo rts through technology upgradatio n in the industry. The main feature of the TUF Scheme would be a five perce nt reimbursement on the inte rest actually charge d by the identifie d financial institutio ns on the sanctione d projects.
Resolution:
It is, the refo re, resolved that a Technology Upgradation Fund Scheme be made operational fo r the textile, j ute and cotto n ginning & pressing industries w.e.f. 1.4.1999 fo r a period o f 5 ye ars i.e ., up to 31st March 2004, which was subsequently e xtended up to 31.3.2007. T he scheme will pro vide a re imbursement of five percentage points on the inte rest charge d by the lending age ncy on a project of techno logy upgradation in conformity with this resolution.8 ITA Nos. 1923 & 1924/Del/2020
BSL Ltd.
With effect from 1s t J anuary, 2002, an o ption has be en provided to the Small Scale Textile and J ute Industries to avail of e ither 12 percent Credit Linked Capital Subsidy (CLCS-TUFS) or 5 perce nt inte rest reimburse ment unde r Technology Upgradation Fund Scheme. The rate o f 12 percent has bee n incre ased to 15 percent w.e .f. 13.01.2005.
With e ffect from 6t h November, 2003, an additional o ptio n has bee n provide d to the powerloom units to avail of 20% capital subsidy unde r TUFS in lie u of 5% interest reimbursement / 15% CLCS-TUFS on investment in TUF compatible specified machine ry subject to a capital ceiling o f Rs. 60 lakh and ceiling on capital subsidy is Rs.12 lakh. The capital ceiling fo r machinery has bee n increase d from Rs.60 lakh to Rs.1 crore and the ceiling on capital subsidy has also been increased fro m Rs.12 lakh to Rs.20 lakh w.e.f. 13.01.2005.
An additional ince ntive of 10% capital subsidy over and above the 5% interest subsidy has been provide d fo r the specified textile processing machinery during a pe riod of one year from 20' A pril, 2005 to 19t h April, 2006, which was subsequently extended upto 31.03.2007, i.e., co-terminus with T UFS.
ITA No. 2105/K OL/2014 Assessme nt Year: 2008- 2009 M/s. BSL Limite d 6 The scope of the scheme, e ligibility criteria and o peratio nal parameters are define d belo w:
1. SCOPE OF THE SCHEME The following will be co vered under the Technology Upgradation Fund Sche me:-
a) Cotto n ginning and pressing.
b) Textile industry covering:-
(i) Silk ree ling and twisting.
(ii) Wool sco uring and combing.
9 ITA Nos. 1923 & 1924/Del/2020
BSL Ltd.
(iii) Synthetic filament yam texturising, crimping ancl
twisting.
(iv) Spinning.
(v) Viscose Staple F ibre (VSF) and Viscose Filame nt
Yarn.(VFY).
(vi) Weaving, knitting including no n-wovens, fabric
embroide ry and te chnical te xtiles.
(vii) Garment/made-up manufacturing
(viii) Processing of fibres, yams, fabrics, garments and
made-ups.
c) Jute industry.
II. ELIGIBILITY CRITERIA FOR ASSIS TANCE
1. DEFINITION OF TECHNOLOGY UPGRADATI ON Technology
Upgradation would ordinarily mean induction of state-of-the- art or near- state-of- the -art technolo gy. But in the widely varying mosaic of techno logy obtaining in the Indian te xtile industry, at least a significant step up from the present techno logy leve l to a substantially higher one fo r such trailing segments would be essential. Accordingly, techno logy levels are benchmarked in terms of specifie d machine ry fo r each sector of the te xtile industry.
Machine ry with technology le vels lower than that specified will not be permitted fo r funding under the TUF Scheme.
2. ELIGIBLE MACHINERY Installation of the follo wing types of machine ry in a ne w unit or in an existing unit by way of replacement of existing machinery and / or expansion will be eligible for coverage unde r TUF scheme :
2.1 Cotton Ginning and Pressing -
2.2 Spinning/S ilk Reeling & Twisting/ Woo l Scouring & Combing/S ynthetic filament yam Te xturising, Crimping & Twisting 10 ITA Nos. 1923 & 1924/Del/2020 BSL Ltd.
2.3. Manufacturing of visco se filament yarn and viscose staple fibre
-
2.4. Weaving / Knitting including no n-wovens and Technical Textiles-
_ 2.5 Garment / Made-up manufacturing ITA No. 2105/K OL/ 2014 Assessment Year: 2008-2009 M/s. BSL Limited 7 2.6 Processing of fibre / Yarn / Fabrics / Garments / made-ups 2.7 J ute industry 2.8 Energy saving & process control equipments for vario us secto rs 2.9 Machine ry e ligible unde r 20% CLCS- TUFS fo r po werloom sector 2.10. Machine ry eligible under 10% capital subsidy for pro cessing sector Note Vide circular No.2 (2004- 2005 series) dated 27t h May, 2004, the machine ry eligible for one se gment has been m ade e ligible for other segments/activity also unle ss its eligibility is specifically restricte d for a particular segment.
1. GENERAL ELI GI BILITY CON DITION S 3.1 TYPE OF UNITS :
(1) Existing unit with or without expansio n and ne w units.
(2) Existing units can modernise and / or expand with the state-of-
the-art technolo gy.
(3) New units must se t up the ir entire facilities only with the appropriate e ligible technology.
(4) A unit can undertake one or m ore activities liste d at ISCOPE OF THE SCHEME hereinbe fore unde r the scheme . However, multiple activities can be undertaken only in an integral manner, i.e ., by way of forward or backward integratio n. It is, ho weve r, clarifie d that weaving / knitting and garment manufacturing o r we aving / knitting and processing o r garment manufacturing and processing will be conside red as inte gral activities.
(5) Textile / Jute units with 100% foreign equity.
11 ITA Nos. 1923 & 1924/Del/2020BSL Ltd.
3.2 TY PE OF TEXTI LE MACHINERY ELI GIBLE :
(I) Under the TUF Scheme, generally only new machine ry will be permitted.
(2) Howe ver, the following imported second hand machinery are also eligible unde r T UF S:
a) Auto-coners upto 5 years' vintage with a residual life of minimum 10 ye ars;
b) Air jet, Projectile , Rapie r and Waterje t shuttlele ss looms fitted with or witho ut electro nic jacquard / electro nic dobby ITA No. 2105/K OL/ 2014 Assessment Year: 2008- 2009 M/s. BS L Limite d 8 and with or without high speed direct beam warper with creel and/o r sectional warping machine with auto stop and tension contro l of upto 10 years' vintage and with a residual life of minimum 10 years. However, the vintage pe riod o f 10 years has been increased to 15 years with e ffect from 22 n d Fe bruary, 2005".
5. I f the re levant TUF Scheme is analyze d with particular re ference to its o bjective and sco pe as we ll as the eligibility crite ria for assistance , it beco mes amply clear that the subsidy was give n to the eligible Textile Unit in orde r to upgrade its technology level so as to sustain and improve its competitiveness and o verall long-term viability. Acco rdingly, the Scheme was framed to make operational a focused and time-bound Techno logy Upgradation, which wo uld provide a fo cal point fo r modernisatio n effo rts thro ugh technolo gy upgradation in the industry. The main feature of the TUF Scheme was a five perce nt re imbursement on the interest actually charge d by the identifie d financial institutions on the sanctioned projects. I t is pertinent to note that options were also provide d in the Scheme to the Small Scale Textile and Jute Industries as well as to the Powerloom Units to avail capital subsidy to the extent of certain 12 ITA Nos. 1923 & 1924/Del/2020 BSL Ltd.
fixed perce ntage of the investment in TUF compatible specifie d machine ry. As per the definition o f "Technolo gy Upgradatio n" given in the Scheme, what it meant was induction of state-of-the- art o r near-state-of the-art techno logy and what it envisaged was at le ast a significant step up from the present techno logy leve l to a substantially higher one fo r such trailing se gments. Accordingly, techno logy leve ls were benchmarke d in te rms of specified machine ry for each secto r o f the Te xtile Industry. I t is thus clear that even though the subsidy in question under TUF Scheme was given in the form of re imburse ment of the inte rest, the objective of giving the said subsidy was to upgrade its technology le vel by the eligible unit by induction o f state-of- the-art o r near-state-of-the- art technology and such techno logy le vel was be nchmarke d in terms of specifie d machine ry fo r each sector of the Textile Industry. The purpose of giving incentive in the form o f interest subsidy unde r the TUF Scheme thus was ITA No. 2105/KOL/2014 Assessment Year: 2008- 2009 M/s. BSL Limited to encourage capital investment by the eligible unit in the form of specifie d machinery in o rder to induct state-o f-the-art o r near-state-o f the-art technolo gy or at le ast a significant step up from the present techno logy leve l to a substantially higher one. In our opinion, going by this purpose of the inte rest subsidy as specifie d under the TUF Scheme, the amount of inte rest subsidy in question re ceive d by the assessee was a receipt of capital in nature.
6. As re gards the issue of utilizatio n of the amount of ince ntive in question fo r the purpose of meeting the inte rest liability o f the Company on loans and advances taken by it to set up its plant and machine ry, which the Hon'ble Calcutta High Court has directed us to examine or investigate befo re arriving at any conclusion as regards the nature o f the interest subsidy whethe r capital o r revenue, it is observe d that neither the Asse ssing Office r nor the ld. CIT(Appe als) has give n any finding on this aspect. In this regard, the ld. D.R. has 13 ITA Nos. 1923 & 1924/Del/2020 BSL Ltd.
submitted that this matter requires verificatio n and an oppo rtunity may be given to the Assessing Officer to verify the same from the relevant reco rd. We are inclined to accept this conte ntio n o f the ld. D.R. and since the ld. Counsel fo r the assessee has also not raise d any objection in this regard, we restore this issue to the file of the Assessing Officer for the limite d purpose of verifying the issue of utilisation o f amo unt o f subsidy in question by the assessee. I f it is found by the Asse ssing Officer on such ve rification that the subsidy amount in questio n was utilize d by the assessee fo r the purpose o f meeting the inte rest liability on lo ans and advances taken by it to set up its plant and machine ry, the subsidy incentive co uld be conside red as a capital receipt not chargeable to tax. Otherwise , as observe d by the Hon'ble Jurisdictional High Court, it has to be treated as a re venue rece ipt."
5. In the result, the appeals of the Revenue are treated as allowed for statistical purpose.
Order Pronounced in the Open Court on 23/05/2023.
Sd/- Sd/-
(Yogesh Kumar US) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 23/05/2023
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR