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Interest subsidy of Rs. 3,25,00,000/- under Technology Up gradation Fund (TUF) "That an amount of Rs. 3,25,00,000/- received by assessee on account of interest subsidy under Technology Up-gradation Fund (TUF) scheme be excluded from the total income since it is a capital receipt in nature not liable to tax."

Deduction of education cess u/s 37 "9. The Hon'ble ITAT may be pleased to grant the claim of 'Education Cess' (@ 3%) amounting to Rs. 2,54,68,332/- u/s 37 of the Act paid/payable by the assessee under normal provisions of the Act."

36. The brief facts are that during the year, assessee had obtained loan of Rs. 3,000 Lacs from SBI and Rs. 3,500 Lacs from State Bank of Mysore under TUF Scheme issued by the ministry of textile, Government of India. Under the TUF scheme, the assessee was eligible for 5% Interest subsidy calculated on the loan outstanding which amounted to Rs. 3,25,00,000/-. The Objective of the subsidy/incentive under TUF scheme was expansion of capacities, modernisation and up-gradation of facilities.

The assessee included the above interest subsidy as taxable receipts in its return of income. Before, us the assessee has raised this issue for exclusion of interest subsidy received under the TUF scheme for the first time. The contention of the assessee is that interest subsidy received under TUF scheme is in the nature of capital receipt and hence should be excluded from total income.

37. At the outset the ld. Counsel submitted that issue is covered by the order of coordinate bench in assessee's own case vide ITA no.5784/Del/2016 for A.Y. 2012-13. The relevant para of above order is reproduced hereunder:-

"Para no.27-We have heard the rival contentions, perused the relevant findings and as well as material referred to before us at the time of hearing. It is a settled position that purpose of subsidy or incentive and not the nomenclature of such incentive have to be seen for the purpose of deciding its nature as capital or revenue. In the judgment of Ponni Sugars & Chemicals Ltd. (Supra), the Hon'ble Apex Court have held that character of the receipt of a subsidy in the hands of recipient assessee has to be decided with respect to the purpose for which subsidy is granted. If the subsidy is received to enable the assessee to run its business more profitably then such subsidy is revenue in nature. While, if the subsidy has been received by the assessee to set up a new unit or for expansion of existing unit then such subsidy would be capital in nature. We find form the objective of TUF scheme that interest subsidy under such scheme was granted for expansion of capacities, modernisation and up gradation of facilities. In case of CIT v. Sham Lal Bansal (Supra), the Hon'ble Punjab & Haryana High Court on similar facts held subsidy received under TUF Scheme as capital receipt. Since the issue under hand is related to additional claim which was not entertained by the lower authorities, we therefore allow the assessee's ground for entertainment of above additional claim and remit the issue back to the file of AO to decide the same in accordance with law after granting a reasonable opportunity of being heard to the assessee. The assessee shall be free to file such documents, explanations, submissions as it deems fit in respect of this claim."