Income Tax Appellate Tribunal - Chandigarh
Dcit, C-1, Ludhiana vs M/S Vardhman Textiles Limited, ... on 29 May, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "बी", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B', CHANDIGARH
ीमती दवा संह, या!यक सद"य एवं, एवं ीमती अ नपण
ू ा& ग(ु ता, लेखा सद"य
BEFORE: SMT.DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, AM
आयकर अपील सं./ ITA No.1429/Chd/2018
नधा रण वष / Assessment Year : 2002-03
M/s Vardhman Textiles Ltd., बनाम The D.C.I.T.,
Ludhiana. Range-1,
Ludhiana.
थायी लेखा सं./PAN NO: A A B C M 4 6 9 2 E
अपीलाथ /Appellant यथ /Respondent
आयकर अपील सं./ ITA No.1479/Chd/2018
नधा रण वष / Assessment Year : 2002-03
The D.C.I.T., बनाम M/s Vardhman Textiles Ltd.,
Circle-1, Ludhiana.
Ludhiana.
थायी लेखा सं./PAN NO: A A B C M 4 6 9 2 E
अपीलाथ /Appellant यथ /Respondent
आयकर अपील सं./ ITA No.1430/Chd/2018
नधा रण वष / Assessment Year : 2003-04
M/s Vardhman Textiles Ltd., बनाम The A.C.I.T.,
Ludhiana. Circle-1,
Ludhiana.
थायी लेखा सं./PAN NO: A A B C M 4 6 9 2 E
अपीलाथ /Appellant यथ /Respondent
2 ITA Nos.1429 &1479/Chd/2018
A.Y.2002-03
ITA Nos.1430 &1480/Chd/2018
A.Y.2003-04
ITA Nos.1404 &1481/Chd/2018
A.Y.2004-05
ITA Nos.1405 &1482/Chd/2018
A.Y.2005-06
आयकर अपील सं./ ITA No.1480/Chd/2018
नधा रण वष / Assessment Year : 2003-04
The D.C.I.T., बनाम M/s Vardhman Textiles Ltd.,
Circle-1, Ludhiana.
Ludhiana.
थायी लेखा सं./PAN NO: A A B C M 4 6 9 2 E
अपीलाथ /Appellant यथ /Respondent
आयकर अपील सं./ ITA No.1404/Chd/2018
नधा रण वष / Assessment Year : 2004-05
M/s Vardhman Textiles Ltd., बनाम The J.C.I.T.,
Ludhiana. Range-1,
Ludhiana.
थायी लेखा सं./PAN NO: A A B C M 4 6 9 2 E
अपीलाथ /Appellant यथ /Responden
t
आयकर अपील सं./ ITA No.1481/Chd/2018
नधा रण वष / Assessment Year : 2004-05
The D.C.I.T., बनाम M/s Vardhman Textiles Ltd.,
Circle-1, Ludhiana.
Ludhiana.
थायी लेखा सं./PAN NO: A A B C M 4 6 9 2 E
अपीलाथ /Appellant यथ /Respondent
आयकर अपील सं./ ITA No.1405/Chd/2018
नधा रण वष / Assessment Year : 2005-06
3 ITA Nos.1429 &1479/Chd/2018
A.Y.2002-03
ITA Nos.1430 &1480/Chd/2018
A.Y.2003-04
ITA Nos.1404 &1481/Chd/2018
A.Y.2004-05
ITA Nos.1405 &1482/Chd/2018
A.Y.2005-06
M/s Vardhman Textiles Ltd., बनाम The Addl.CIT,
Ludhiana. Range-1,
Ludhiana.
थायी लेखा सं./PAN NO: A A B C M 4 6 9 2 E
अपीलाथ /Appellant यथ /Respondent
&
आयकर अपील सं./ ITA No.1482/Chd/2018
नधा रण वष / Assessment Year : 2005-06
The D.C.I.T., बनाम M/s Vardhman Textiles Ltd.,
Circle-1, Ludhiana.
Ludhiana.
थायी लेखा सं./PAN NO: A A B C M 4 6 9 2 E
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Shri Subhash Aggarwal, Adv.
राज व क ओर से/ Revenue by : Shri G.S.Phani Kishore, CIT DR
सन
ु वाई क तार$ख/Date of Hearing : 16.05.2019
उदघोषणा क तार$ख/Date of Pronouncement : 29.05.2019
आदे श/ORDER
PER BENCH:
Th e captioned cross appeals r e l a te to t he same a s se s se e a n d h a v e b e e n fi le d against se p a r a t e o r d e r s p a s se d b y t h e L d . C o m m i s s i o n e r o f I n c o m e Ta x ( A p p e a l s ) -I , Lu d h i a n a , ( i n sh o r t ( "C I T( A ) " ) a l l d a te d 2 4 .9 . 2 01 8 r e l a t i ng 4 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 t o a s se s s m e n t ye a r 2 0 0 2 - 0 3 , 2 0 0 3 - 0 4 , 2 0 0 4 -0 5 a n d 2 0 0 5 -
06, p a sse d u/s 2 5 0( 6 ) of t he I n co me Ta x A ct, 1961 (h e re i n a fte r re fe rr e d to a s 'Ac t') .
It was common ground that i d e n t i ca l i s s ue was i n v o l ve d i n a l l t h e a p pe a l s . Th e se w e r e t h e r e f o r e h e a r d t o ge t h e r and are being disposed off by this common c o n s o l i d a te d o r de r.
2. A t t h e o ut s e t i t w a s p o in t e d o u t t h a t i n a l l t he c a p t i o n e d a p pe a l s , t h i s w a s t h e s e c o n d r o u n d b e fo r e u s. Th a t i n th e f i rs t r o u n d o f a p p e a l b e fo re t h e I .T. A . T. , t h e a s se s se e had r a i se d an additional ground vis-à-vis t he treatment of i n te r e s t re im b u r s e m e n t under TU F S ( Te c h n o l o g y U p gr a d a t i o n F u n d S c h e me ) , w h e t h e r c a p i t a l o r r e ve n ue i n n a t ur e , f o r a l l t h e im p u g n e d ye a r s . Th a t t h e I . T. A . T. i n i t s co n s o l i d a te d or de r d a t e d 4 . 5 . 2 0 1 8 i n I TA N o . 6 8 1 / C h d / 2 0 1 7 & O t he r s , h a d r e m a n d e d t he i s s u e t o t he f i le o f t h e L d . C I T( A ) , noting t h a t s i n ce t h e gr o u n d h a d b e e n t a k e n fo r th e f i r st t i me b e f o r e i t , t he b e n e f i t o f g o i n g t h r o u g h t he i s su e s h a d b e e n d en i e d t o t he Re v e n u e . Th a t t h e L d . C I T( A ) w a s d i re c te d t o p a s s a s p e a k i n g o r d e r i n a l l 5 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 t h e y e a r s i n a c o m p r e he n s i ve m a n n e r . Th a t a c c o r d i n gl y , t h e C I T( A ) h e a r d t h e a s s e s s e e on t h e i s su e a n d a l l o we d the a s se s se e 's claim of treating t he i n te r e s t r e i m b u r se m e nt u n d e r TU F S c he m e a s c a p i ta l i n n a t u r e . Th a t f u r t he r the Ld . C I T( A ) h e l d t h a t t h e a s se s se e w o u l d n o t b e e n t i t le d f or i n te r e s t on t h e r e f un d o f t a x i f a n y o n a c c o u n t o f a l l o w a n ce of its aforesaid claim.
3. I t w a s p oin te d out tha t a ggr i e ve d b y the s a me , b oth the Re ve n ue a n d th e a sse ssee ha ve come up in a p pe a l be fore us, in a ll the c a pt io ne d cr os s a p pe a ls , w i th th e Re v e nue cha ll e n gi ng t he o rd e r of the C I T( A) i n h old i n g tha t t he in te re st re imb u rs e me n t un de r TU F S che me wa s a ca p i ta l re ce i p t a nd the a sse sse e con te s ti ng th e or de r o f the C I T(A ) hol d in g tha t n o i n te re s t be gr a n te d to t he a sse s see on t he re fu nd of ta x on a cco un t of h ol di n g i nte re st r ei mb u r se me nt un de r TU F S a s n on t a xa b le .
We sh a ll fi r st be d e a li ng w i th th e a pp e a ls of t he Re ve nue . Th e gr ou nd s r a is e d in all th e appeals was id e n ti ca l a n d re ad a s un d e r :
1. Whether on the facts and circumstances of the case and in law, the Ld.C1T(A) was justified 6 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 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, the Ld. CIT(A) was correct in cursorily addressing the fact that the assessee in his return of income had itself offered the subsidy as a revenue receipt?"
4. That the order of the Ld. CIT (A) be set aside and that of the Assessing Officer be restored.
5. That the appellant craves leave to add or amend any ground of appeal before it is finally disposed off."
4. As sta t e d a b ove , th e Re ve n ue has ch a ll e n ge d t he o rd e r of th e Ld . C I T( A) t re a ti ng the in te re st re i mb ur se men t r e ce i ve d by th e a sse ssee u nd e r TUF S , a s c a p i ta l i n na t ur e .
5. A p e r us a l of t he or de r of the Ld .C I T(A ) r e ve a ls tha t be fore the Ld. C I T( A) th e a ss e s see ha d e x pla i ne d t he pr ov is io ns a n d ob j e c tive s of the TU F Sc he me a s e n a bl i ng 7 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 mode r ni za tio n of p l a nt a nd ma c hi ne r y f or ma k in g t he te xtile in d ust ry cos t e f fe c ti ve , a n d w h ich w e re re cor de d i n b r i e f by the CI T(A ) a t p a r a N os . 5 a n d 6 of hi s or d e r a s u nde r :
" 5 . Expl a in in g th e p rovi s io n s an d o bje c tiv e s of the T UF S ch eme, it wa s sta ted th a t to mee t th e c hal l en ge s of post-qu o ta reg i me wh ich re qu ire d th e tex ti l e in d u str y to beco me more c o mpe ti ti ve, c o st- ef f ec tiv e an d qu al i ty or ien ted , th e Gove rn men t of In d i a l au n ch ed th e T e ch n ol ogy Upgr ad a ti on F u nd S ch eme f or tex ti l e, ju te and co t to n an d g inn in g & pre s sing ind u str ie s w. e .f . 0 1 /0 4 / 19 9 9 f o r a per iod of f iv e ye ar s i. e . u p to 3 1 /0 3 / 2 0 0 4 wh ic h wa s su b se qu en tl y e x te nd ed up to 31 /0 3 /20 0 7 .
6 . T h e s a id sch eme wa s s ta te d to be ai me d a t me e ti n g a par t of the c ap i tal i n ve stm en t of th e el ig i bl e u nd er ta k in g s in mo der n i sin g th e ir pl an t an d m ach in er y. Wi th ef f ec t f rom 0 1 /0 1 /20 0 2 , a n op tio n wa s prov id ed to th e el ig i bl e e n tre pre ne ur s t o av a il th e in ce n ti ve e ith er in th e f orm of C red i t L in ked C ap i tal S ub s id y ( CL CS ) o r b y way of 5% in tere st re i mbu r semen t u n d er th e T UF S ch e me. T h e me th od ol og y a s a p pl ic abl e to th e ap pe ll an t un d er the sc h e me wa s th a t of r eimbu r semen t of f ive (5 ) perc en ta ge po in t s prov id ed o n in tere st c h arg ed b y the l en d ing in sti tu tion s o n a pr o je c t of tec h n ol og y u pgr ad a ti on in c onf ormi ty wi th th e sc he me. It wa s f urth er sta ted th a t ac co rd in g to th e sa id sc he me a p pl ic a ble to th e a p pel l an t co m p an y, in tere s t p a id to b an k s /f inan c ial in sti tu ti on s wa s d iv id ed in t o t wo p ar ts, wi th on e p ar t inc u rre d b y the c om p an y h av in g been boo ke d a s an ex pe nse an d th e p ar t rei mbu r sed b y th e Gove rn men t s ho wn as a mou n t rec ov era ble f rom th e Go vern men t in th e boo k s of ac cou n ts . It wa s, th u s, re i te rated th a t th e a p pel l an t Co mmi ssio ne r c l ai med in tere st ex pe n se on l y to th e ex ten t of th e amou n t in c u rred b y i t. "8 ITA Nos.1429 &1479/Chd/2018
A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06
6. Th e a s se s see a l so r e l ie d up on ce rta i n j u di ci a l de c is io ns in su p p or t of i ts con te n ti on tha t co ns id e r i ng the ob je c ti ve of the s che me , the in te re st re i mb ur se me nt u nde r TU F S ch e me wa s ca p i ta l i n n a tur e , a s r e p rod uc e d in p a r a 4 of t he C I T( A) 's or d e r a s u nd e r :
"4. In the present appellate proceedings, a forceful plea was made for treating the subsidy in the form of interest reimbursement amounting to Rs.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. F in d in g me r i t i n th e co nte nti on s of the a sse ssee t he Ld. C I T( A) a ll ow e d th e a sse s se s cl a im h old i n g tha t t he i ssue wa s cov e re d b y the de ci si on of the j ur i sd i cti on a l H i gh C ou rt in t he ca se of S ha m La l ( su p r a ) a nd th e de cisi on of the Hon 'b l e C a lc utt a H i gh C ou r t in the c a se of CI T , Kol ka t a -1 vs G l oste r Ju te Mi l ls Lt d. ( 20 1 8 ) 9 6 ta xma n n. co m 3 0 3. The re le va n t fi nd i ng s of the Ld .C I T(A ) a t p a r a s 7 t o 9 of the or de r i s a s un de r:
9 ITA Nos.1429 &1479/Chd/2018
A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 "7. The objectives of the TUF scheme have been carefully examined from the Resolution of the Ministry of Textiles [No. 28/1/99-CTI dated 31st of March, 1999]. There cannot be any manner of doubt about the purpose of the subsidy being upgradation of the plant and machinery and, thereby, the capital apparatus of the appellant company. The jurisdictional High Court of and Punjab & Haryana had an occasion to examine this issue in the case of CIT Vs. Sham Lai Bansal [ITA No. 472 of 2010 O&M; date of decision:
17/01/2011] who was also engaged in the manufacture and sale of woolen garments and had received subsidy for repayment of loan taken for building, plant and machinery under the credit linked capital subsidy scheme under TUFS of Ministry of Textiles, Government of India. While delivering the decision on the matter, the Hon'ble High Court of Punjab & Haryana referred to the two conclusive decisions of the Hon'ble Supreme Court on the issue of taxability of subsidies viz Sahney Steel & Press Works Ltd., Vs. CIT [1997] 94 taxman 368 and CIT, Madras Vs. Ponni Sugars & Chemicals Ltd.,[2008] 174 taxman 87. It was categorically held therein that ".... For determining whether subsidy payment was "revenue receipt" or "capital receipt", character of receipt in the hands of the assessee had to be determined with respect to the purpose for which subsidy is given by applying the purpose test, as held in Sahney Steel & Press Works Ltd., & Ors. itself and reiterated in later judgement in CIT Vs. Ponni Sugars & Chemicals Ltd.
& Ors. (2008) 306ITR 392, referred to in the impugned order of the Tribunal. (Chandigarh ITAT, order dated 22/09/2009 in ITA No. 639/2009 Emphasis supplied). In view of the above, since the matter is covered by judgement of the Hon'ble Supreme Court in Ponni Sugars & Chemicals Ltd. & Ors. against the Revenue, no substantial question of law arises. The appeal is dismissed."
8. Very recently, on June 18, 2018, the Hon'ble High our of Calcutta also examined this matter in an appeal preferred by CIT, Kolkata-1 in the case of Gloster Jute Mills Ltd.,[2018] 96 taxman.com 303. It would be expedient to 10 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 extract 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 it had to be regarded as a revenue receipt and if it was given to meet any capital cost of any asset, it had to be seen as a capital receipt. In Sahney Steel and Press Works Ltd., (Supra) the Supreme Court held that if the subsidy was to help the assessee to set up its business or complete a project, the money had to be treated as having been received for capital purposes. In Ponni Sugars & Chemicals Ltd. (supra) the Supreme Court held that the character of the subsidy is determined with respect to the purpose for which it is granted and the point of time when the subsidy is made available to the assessee may not be of any consequence."
"6. The salient features of the scheme involved in this case have been noted in the order of the Commissioner 11 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 (Appeals). The scheme was instituted as the "Technology Upgradation Fund Scheme". The Ministry of Textiles aimed at making available funds to the domestic textile industry for technology upgradation of the existing units as well as to set up new units with the latest technology to enhance their viability and competitiveness in the domestic and international markets. The preamble to the scheme recognised that in the post-quota regime, the industry had to become competitive, cost effective and quality oriented."
"7. The avowed purpose of the scheme was to induce the entrepreneur to undertake investment in modernising the plant and machinery and assets and the objectives of the scheme clearly spelt out such purpose. In the context of the scheme, it could never have been understood to imply that the subsidy was for the purpose of the day-to-day business of the assessee or any entrepreneur qualified to receive it. The subsidy was clearly for the purpose of upgrading the machinery and plant and for acquiring capital assets. In the light of the judgements which were carried to the Commissioner (Appeals), the Commissioner ought to have construed the quantum of subsidy received by the assessee to be a capital receipt." [Emphasis supplied].
"8. The judgements relied upon before the Commissioner, particularly, the Supreme Court judgements in Sahney Steel & Press Works Ltd. and Ponni Sugars & Chemicals Ltd. (supra) were referred to by the Appellate Tribunal in correcting the error committed by the Commissioner in treating the subsidy in the hands of the assessee as a revenue receipt. In the light of the conclusive pronouncements 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].12 ITA Nos.1429 &1479/Chd/2018
A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06
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. B e f ore u s the Ld . c oun se l fo r a s se sse e re l ie d up on t he fa ct ua l c ont e nt ion s ma d e b e f ore th e Ld . C I T( A) , th e j ud i ci a l de ci si ons re lie d up on be fore h im a nd a ls o on t he f in d in gs of the Ld .C I T( A) .
9. Th e Ld . DR , on the othe r h a n d, ve he me n tl y a r g ued tha t the i nte re st su b si dy /re imb u r s e me n t re ce ive d by t he a sse sse e w a s re ve n ue in na t ure th ou gh h e w a s u na b l e to re b ut/c ontr ov e r t t he fa c tua l co nte nti on s a n d w as a l so not a bl e to dr a w ou r a t te n ti on to a n y j ud i ci a l d e ci si on c ont ra r y to tha t c it e d b y th e a sse s see a nd fol l ow e d by t he Ld . C I T( A) wh i le a l l ow in g the a s se s se e 's cl a im.
10 . W e ha ve hea r d bot h the p ar ti e s a nd ha ve a ls o go ne thr ou gh th e or de r of the Ld .C I T( A ). Th e i ssue b e f ore us re la te s to t he n atu r e of i n te re s t su bs i dy r e ce i ve d un de r t he TU F Sc he me of th e G ove r nme nt of I n di a . Th e f a ctu al fi nd i ng s of th e C I T( A) th a t the p ur p ose of th e i nte re st sub s id y w a s up g r a d a ti on of p l a n t & ma c hi n e r y a nd t hu s the 13 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 ca p it a l a p p a r a tus o f th e a sse ssee c omp a ny , h a s not b e e n con tr ove rte d by t he Re ve nue . Th e Ld .C I T(A ), w e fi nd , ha s re lie d up on the d e ci s ion o f the H on 'b le Ju r is di ct ion a l H i gh C our t in th e ca s e of CI T Vs. Sh a m La l B a n sa l , I TA N o.4 7 2 /2 01 0 (P & H) a nd th e de ci si on of t he H on 'b le H i gh C our t of C a l cu tta i n th e c a se of C I T Vs. Gl os te r Ju te Mi l ls Ltd .( 2 01 8 ) 9 6 Ta xma n. co m 3 0 3 fo r hol d in g the in te re st sub s id y t o be ca p ita l i n na tu re .W e h a ve gone th r oug h t he de ci si on of th e Hon 'b l e Jur i sd i c ti ona l H ig h C o u rt i n t he ca se of C I T Vs . S ha m La l B a n sa l (s up r a ) ,co py of w h i ch o rd e r wa s p la c e d be f ore u s, a nd w e a g ree w i th the Ld .C I T(A ) tha t in th e sa id ca se a l so , t he issu e re l a te d to n a tur e of sub s id y r e ce ive d un de r TU F S ch e me of the Min i str y of Te xti le s. The H o n'b l e H i gh C our t , h e l d tha t fo r t he p ur p ose of d e te r mi ni ng the na t ure o f the sub s id y , th e pur p os e f or wh i ch th e su b sid y w a s g iv e n wa s to b e de te rmin e d a n d re lie d up on th e de ci s ion o f the H on 'b le S up re me C o ur t in t he ca se of Sa h n i Ste e l & P re ss W or k s Ltd . Vs . C I T ( 1 99 7 ) 9 4 Ta x ma n 3 68 a n d C I T Vs . P on ni Su ga r s & C h e mi ca l s Ltd .
(2 0 0 8) 174 Ta x ma n 87 f or the a fore s a i d pr op os it ion .
Th e r e a fte r t he Hon'b l e H i gh cou rt not e d th a t the p ur p ose of 14 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 the TU F S ch e me was to in d uc e the e ntre p re ne ur to un de r ta ke i nvest me n t in mo d e r n iz i ng the p la n t and ma ch in e r y a nd wa s d e f in i te l y not f or the p u r po se of d a y to da y b usi n e ss of the a ss e ssee . A cco rd i ng ly the H on'b l e H i gh C our t he ld th a t the n a ture of the su b si d y w a s c a pi ta l .
11 . I n t he ca se o f Gl ost e r Ju te Mil l s( su pr a ) ,c op y o f o rd e r of wh i ch w a s a l s o pl a ce d be fore u s, the H on 'b le High Cou rt e xa mi ne d the fea tu re s of the TU F S ch e me a n d f oun d t he pu r po se was to i n du ce t he e nt re p re ne ur to u nd e r ta ke in ve s tme n t i n mod e r ni z in g th e p l a n t a nd ma c hi n e r y an d a sse ts a nd , the re for e w a s cle a r l y a c a p it a l r e ce ip t.
12 . Th e a for e s a i d tw o d e ci s ion s r e l ied up on b y th e C I T( A) , we fi nd the re f ore, h a ve a l re a d y de a l t w i th t he n a tu r e of t he sub s id y r e ce i ve d un d e r TU F S S c h e me a n d a f te r a na lyz i ng the te r ms of the sc he me a n d fi n di n g th a t th e pu r po se o f t he sch e me w a s t o i nd u ce mod e r ni z a tion of pl a n t a n d ma ch ni e r y use d in te xti le i n d ust ry , he l d the sa me to be c a pi ta l i n na tu r e f ol lo wi n g t he p ro po si tio n la i d d ow n b y t he ap e x c our t for d e te r min i ng t he n a tu re of sub s id y in the ca se of Sa w h ne y s tee ls (sup r a ) a nd P onn i Su ga r s( s up r a ). The Ld . DR 15 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 ha s b ee n u na bl e to br i ng to ou r n ot ic e a ny con tr a ry de ci si on e i the r of th e Hon 'b le Jur i sd i cti on a l Hi gh C ou r t or t he Hon 'b l e A pe x C o ur t o n thi s is s ue n or w a s the d e c is io ns re lie d up on b y the Ld. C I T( A) di s ti n gu is he d be f ore u s.
13 . I n v ie w of t he sa me , w e ha ve n o he s i ta ti on i n up ho ld i ng the or de r o f th e C I T(A ) t ha t c ons i d e r i n g the ob je cti ve of the TU F Sc he me a nd j ud i ci a l d e c i si ons of th e H on 'b le Jur is d ic ti ona l H i gh C our t a nd H on 'b l e H i gh C our t of C a lc utt a , th e i nte re s t re ce i ve d un d e r TU F Sc he m e i s ca p i tal in na tu r e . G r oun d s of a p p e a l r a is e d by t he Re ve nue a re , the re fo re , d is mis se d .
I n e ffe c t, a l l the a p pe a ls of the Reve nue a re d i smi ss e d .
14 . W e s ha l l n ow tak e u p the a p pe a ls of the a sse ssee . The gr oun d s r a i se d by the a s se s se e in all i ts a p pe a ls was id e n ti ca l ch a lle n gi n g th e or d e r of the C I T( A) sta t i n g th a t no in te re st be p a i d o n the re fu nd gra nte d to the a sse ssee on a ccou nt of h old i ng th a t th e in te re st re ce i ve d un d e r TU F Sch e me w a s n ot ta xa b le .16 ITA Nos.1429 &1479/Chd/2018
A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 G r oun d of a p pe a l r a i se d by the a sse ssee re a ds as un de r :
"1. T h a t the L d . C IT ( A ) erre d in l a w an d on f ac ts in d irec tin g th e A sse ssin g Of f ic er th a t in tere s t u/ s 2 4 4A of the Inc o me T ax Ac t, 1 9 61 sh all no t be gr an ted on th e a mou n t of r ef un d d u e to th e a sse s see in r el a ti on to in tere s t rei mbu r se men t u nd er T UF S (T ec h n ol ogy Upgr ad a tio n F u n d S ch eme) ."
15 . B r i e f ly sta te d , th e a sse sse e h a d or i gi na l ly r e tu r ne d t he in te re st s ub si d y f or ta xa tio n i n it s r e t ur n of in come fi l e d, a nd o nl y w he n the ma tt e r c a me up be for e the I TA T, t he a sse sse e ra ise d a d d i tio na l g ro un d for tr e a ti n g t he sa me a s non ta xa b le , be in g ca p it a l i n n a tur e . The I TA T r e sto re d the ma tte r t o the Ld . C I T( A) . Th e Ld . C IT( A) a f te r h ol di ng th a t t he in te re st u nde r TUF S ch e me w a s to b e tre a te d a s a cap i ta l re ce i p t, no te d th a t i t w a s t he a sse sse e w h o ha d a l l a l ong off e re d t he sa me for t a xa ti on a s re ve n ue re ce i pt and h a d f or the fi r st ti me r a i se d th i s i ssu e bef or e the I . T. A. T. onl y. The Ld. C I T( A) no te d th a t the a uth or itie s be l ow ha d , the re f ore , com mi tte d no e rr or of j ud gme nt r e ga r d i ng tre a tme n t a n d con se q ue n t ta xab il i ty of i nt e re st r e i mb ur s e me n t un de r TU F 17 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 Sch e me . He , ther e fore , he l d tha t sh oul d h is or de r hol d i ng the i nte re st u nder TUF Sc he me a s ca p i ta l i n n a ture re su l t i n a r e f un d of e xce ss ta x, n o in te re st be p a i d on the sa me s in ce it was the a s se sse e comp a n y i ts e l f wh i ch was so le ly re sp on si ble f or p a yin g e x ce s s tax b y tr e a t in g the i nte re st re imb u rs e me n t as ta x a bl e re ce ip t. Th e r e le va n t f in d in gs of the CI T(A ) a t p a r a N os . 9 & 1 0 o f hi s or d e r a re a s u nd e r :
"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 the Ministry of Textiles, Government of India, as capital receipt, ex cathedra. However, it is deemed necessary to record here that the appellant company had voluntarily offered the interest reimbursement to tax, while filing its return of income. No claim was made during the assessment proceedings regarding the mistake committed by the appellant qua the reimbursement ofinterest under the TUF Scheme. Even in the subsequent appellate proceedings, this ground was never raised. However, when the appellant chose to challenge the appellate order before the Hon'ble ITAT, additional ground was raised on the strength of the decision of the jurisdictional High Court of Punjab & Haryana, which ground was admitted for adjudication and restored to this appellate 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 18 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 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 . B e f ore u s the Ld. cou ns e l f or a sse ssee c ha l le nge d this or de r of t he Ld .C I T(A ) on t hr e e grou nd s ;
i ) t ha t the Ld . CIT( A) h a d e x cee de d hi s ju r is d ic tion b y h old i ng s o si nce th e I . T.A . T. h a d r e ma nd e d on ly t he i ssu e of tr e a tme n t of i n te re s t r e ce i ve d un d e r TU F S ch e me t o h im an d th e i n te re s t on r e f un d so ge ner a te d h a d n ot b e e n re fe r re d to hi m b y th e I . T.A . T., i i) th a t wh i le hol d in g so, the C I T( A) ha d gi ven no op p or tun i ty of he a r in g to the a s se sse e a nd , i ii ) e ve n on me r i ts th e or de r of the CI T(A ) wa s i nc o r r e ct i n vi e w of v a r ious d e c is ion s of Cour ts hol d in g i nte re st on r e fu nd to be a uto ma ti c. A tte nti on w a s d r a w n to t he or d e r of the Hon 'b l e G uj a r a t H igh C ou r t in th e ca s e of Aj a n ta Ma n uf a ct ur in g Ltd . V s. D C I T ( 2 0 17 ) 3 9 1 ITR 3 3 , U ni on of I nd i a Vs. Ta ta C h e mi ca l s Ltd . ( 2 0 14 ) 3 6 3 I TR 6 5 8 ( SC ) .
19 ITA Nos.1429 &1479/Chd/2018
A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 17 . Th e Ld . D R, on th e othe r h a nd , re l ie d u p on the ord e r of the CI T(A ). He f ur th e r con ce de d t ha t th e or de r h a d b e en pa s se d b y the C I T(A ) w i th out a ff or d in g a n op p or tu ni ty of he a r i n g to t he a ss e ssee . He , th e re f ore , p le a ded th at t he is sue be re st ored b a ck to th e CI T( A ) to b e a d j ud i cate d a f te r giv i ng d ue op po rtun it y of he a r i ng to the a s se sse e . Th e Ld . DR s ta te d th a t th e i ss ue o f i nte re st on re f un d w a s to be a dj ud i ca t e d b a sed on the f a ctu a l ma t ri x of the ca se a nd, the re fo re , it w ou ld b e be tte r if t he i ss ue i s re ma nd e d ba c k to the CI T(A ) f or co nsi d e r a ti on a f re sh. 18 . We h a ve he a r d ri v a l c onte n tions a nd pe r u se d t he or de r s o f the a uth or it ie s be low . I t is a n a d mi tte d fa c t tha t the Ld .C I T(A ) h a d d ir e cte d th a t no in te re st be gr ant e d on t he re fu nd ge ne r a te d on a c cou nt of tre a tme n t of in te re st su bs id y re ce i ve d un de r TU FS ,a s ca p i ta l i n na tu r e , wi thou t gi vi ng a ny op p or tu ni ty of he a r in g to the a sse ssee . We h a ve a l so note d th a t th e asse ssee ha s v e heme ntl y a r gue d th a t it w a s e nt itle d to i nte rest on re fu nd a nd r e l ie d u po n var i ous c a se la w s a nd j ud gme nts of the H igh C o ur t a n d e ve n of t he Hon 'b l e Su pre me C our t i n su pp or t of i ts c onte n ti on .O ur 20 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 a tte n ti on w a s dr a w n to the de ci si on of the h on 'b le a pe x cou rt i n the c a se of Ta ta C he mic a ls Ltd . (s up r a ) a t pa r a 3 0 -3 1 a s u n de r:
"30. The refund becomes due when tax deducted at source, advance tax paid, self assessment tax paid and tax paid on regular assessment exceeds tax chargeable for the year as a result of an order passed in appeal or other proceedings under the Act. When refund is of any advance tax (including tax deducted/collected at source), interest is payable for the period starting from the first day of the assessment year to the date of grant of refund. No interest is, however, payable if the excess payment is less than 10 percent of tax determined under Section 143(1) or on regular assessment. No interest is payable for the period for which the proceedings resulting in the refund are delayed for the reasons attributable to the assessee (wholly or partly). The rate of 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 to refund to individuals any sum paid by them as taxes which are found 21 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 to have been wrongfully exacted or are believed to be, for any reason, inequitable. The statutory obligation to refund carried with it the right to interest also. This is true in the case of assessee under the Act."
19 . O ur a tte nti on w a s a l so d r a wn t o th e d e c is ion of t he Hon 'b l e G uj a r a t Hi gh C ou r t in the ca se of Aj a nt a Ma nu fa c tur i ng , w h e re i n it w a s he ld a s un de r a t p a r as 16 to 18 :
"16. We would also examine the order of the Commissioner on merits. As noted, according to the Commissioner the assessee had raised a belated claim during the course of the assessment proceedings which resulted into delay in granting of refund and therefore, the assessee was not entitled to interest for the entire period from the first date of assessment year till the order giving effect to the appellate order was passed. We cannot uphold the view of the Commissioner. First and foremost requirement of sub-section (2) of Section 244A is that the proceedings resulting into refund should have been delayed for the reasons attributable to the assessee, whether wholly or in part. If such requirement is satisfied, to the extent of the period of delay so attributable to the assessee, he would be disentitled to claim interest on refund. The act of revising a return or raising a claim during the course of the assessment proceedings cannot be said to be the reasons for delaying the proceedings which can be attributable to the assessee. Mere fact that the claim came to be granted by the Appellate Commissioner, would not change this position. In essence, what the Commissioner (Appeals) did was to allow a claim which in law, in his opinion, was allowable by the Assessing Officer. In other words, by passing order in appeal, he merely recognized a legal position whereby, the assessee was entitled to claim certain benefits of reduced tax. Surely, the fact that the assessee had filed the appeal which ultimately came to be allowed by the Commissioner, cannot be a reason for delaying the proceedings which can be attributed to the assessee.22 ITA Nos.1429 &1479/Chd/2018
A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06
17. The Department does not contend that the assessee had needlessly or frivolously delayed the assessment proceedings at the original or appellate stage. In absence of any such foundation, mere fact that the assessee made a claim during the course of the assessment proceedings which was 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 Income- Tax 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 issuing the proceedings leading to the refund that is attributable to the assessee. In other words, if the issue of the refund order is delayed for any period attributable to the assessee, then the assessee shall not be entitled to interest for such period. This is of course an exception to clauses (a) and
(b) of section 244A(1) of the Act. In other words, if the issue of the proceedings, that is, refund order, is delayed for any period attributable to the assessee, then the assessee is not entitled to interest of such period. Further, what is clear from sub-section (2) is that, if the officer feels that delay in refund for any period is attributable to the assessee, the matter should be referred to the Commissioner or Chief Commissioner or any other notified person for deciding the issue and 23 ITA Nos.1429 &1479/Chd/2018 A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 ordering exclusion of such periods for the purpose of granting interest to the assessee under section 244a(1) of the Act. In this case, there was no decision by the Commissioner or Chief Commissioner on this issue and so much so, we do not think the Assessing Officer made out the case of delay in refund for any period attributable to the assessee disentitling for interest. So much so, in our view, the officer has no escape from granting interest to the assessee in terms of section 244A(1)(a) of the Act."
18. Under the circumstances, impugned orders dated 18.2.2016 and 16.3.2016 passed by the Commissioner of Income-Tax and Assessing Officer respectively and the demand notice dated 16.3.2016 are quashed. Petitions are disposed of accordingly.
20 . A ba r e pe r us a l of t he a bo ve ju dgeme n ts r e ve a ls tha t a s pe r the p r ov is ions of th e re le va n t s e ct ion re la ti n g to I nte re st on r e f un ds , i .e . 24 4 A of th e Ac t, th e de ni a l o f in te re st ca n be in ce r ta i n s p e cif ic ci r cu msta n ce s, a s in c a se s w he re t he de la y i n p ro cee din g f or g r a nti n g re fu nd i s a ttr i b uta b l e to the a sse sse e .
21 . S in ce i n th e p res e nt c a se , the Ld. C I T( A) ha s giv e n t he di r e c tio n of n o in te re st be i ng gr a nte d on re fu nd , w i th out giv i ng th e a sse ssee a ny op p or tu ni ty of h e a r i ng and con si de r in g t he for ce f ul a r gu me n ts of the Ld .C oun se l f or the a sse sse e be f ore us ba s e d on dec i si ons o f C ou r ts a s c ite d a bo ve , we hol d ,th a t th e is su e ne e d s re c ons id e ra t ion . 24 ITA Nos.1429 &1479/Chd/2018
A.Y.2002-03 ITA Nos.1430 &1480/Chd/2018 A.Y.2003-04 ITA Nos.1404 &1481/Chd/2018 A.Y.2004-05 ITA Nos.1405 &1482/Chd/2018 A.Y.2005-06 Fu r the r not in g th e i n te r p re ta t ion of th e r e le van t se cti on de a li n g w it h i nte re s t on re fu nd s i. e . se cti on 244 A of t he Act , a s a b ov e , we a re i n a gre e men t w i th the Ld . DR tha t t he is sue ne e d s to be con si de re d i n t he fa c tua l ma tr i x of t he ca se be fo re us . W e the re f ore co ns id e r i t f it to r e s tore t he is sue b a ck to the CI T(A ) to c on s i de r the s a me a fr e sh . The Ld. C I T( A) i s di r e c te d t o gi ve d ue op p or tun i ty o f h e a r i n g to the a s se s se e a n d t he re a fte r d e c ide the i ssu e in a cco rd a n ce wi th l a w .
22 . I n e f fe ct a ll the a pp e a ls of the a ss e s see a re al l owed f or sta ti st ic a l p ur p ose s.
23 . I n the re su lt , a l l th e a p pe a l s filed b y th e a sse ssee a re a ll ow e d f or st a tisti ca l p ur p os e s a nd a l l the a p pea l s of t he Re ve nue a re di smis se d .
O r d e r p r on o u n ce d i n t h e O p e n C o u r t .
Sd/- Sd/-
दवा संह अ नपण
ू ा& ग(ु ता
(DIVA SINGH) (ANNAPURNA GUPTA)
याय,क सद"य/ Judicial Member लेखा सद"य/ Accountant Member
दनांक /Dated: 29th May, 2019
*रती*
25 ITA Nos.1429 &1479/Chd/2018
A.Y.2002-03
ITA Nos.1430 &1480/Chd/2018
A.Y.2003-04
ITA Nos.1404 &1481/Chd/2018
A.Y.2004-05
ITA Nos.1405 &1482/Chd/2018
A.Y.2005-06
आदे श क त*ल+प अ,े+षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु-त/ CIT
4. आयकर आयु-त (अपील)/ The CIT(A)
5. +वभागीय त न0ध, आयकर अपील$य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानुसार/ By order, सहायक पंजीकार/ Assistant Registrar