PR. COMMISSIONER OF INCOME TAX, AJMER vs. M/S NITIN SPINNERS LTD.

ITA/31/2019HC RajasthanRJHC01041877201919 September 2019Author: S. RAVINDRA BHAT,PUSHPENDRA SINGH BHATI4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose for consideration and dismissed the appeal. Regarding the TUFS subsidy, it noted the agreement treated it as a non-interest bearing term loan, adjusted against the loan account after a lock-in period, and cited the Punjab and Haryana High Court's decision in CIT vs. Shyam Lal Bansal, which relied on Supreme Court rulings in CIT vs. Ponni Sugars & Chemicals Ltd. and Sahney Steel & Press Works Ltd. & Ors. The Court found these subsidies were received as capital receipts. For the Focus Market Scheme subsidy, the Court agreed with the ITAT that it was not an export incentive but a capital receipt, citing Ponni Sugars. For the electricity subsidy, the Court concurred with the CIT(A) and ITAT that it was a capital receipt, referencing a previous Division Bench ruling in CIT, Ajmer vs. Shree Cement, and applying the principles from Ponni Sugars and Sahney Steel. Therefore, all subsidies were held to be capital receipts and not taxable.

What were the facts?

The Revenue appealed against an ITAT order concerning assessment year 2013-2014. The assessee, M/s Nitin Spinners Ltd., a textile manufacturer, claimed three subsidy amounts totaling ₹8,93,07,424/- as capital receipts. These were ₹7,08,60,525/- under the Technology Upgradation Fund (TUFS), ₹1,67,84,009/- under the Focus Market Scheme, and ₹26,52,890/- under the Electricity Duty Subsidy. The Assessing Officer (AO) treated these as taxable income. The CIT(A) granted partial relief, and the ITAT allowed the assessee's appeal, rejecting the Revenue's. The Revenue contended that these receipts were revenue in nature until production occurred.

What were the issues?

1. Whether the subsidy received under the Technology Upgradation Fund (TUFS) is a capital receipt or a revenue receipt, turning on the interpretation of the agreement dated 12.07.2005 and the purpose test under Section 2(24) of the Income Tax Act, 1961. Revenue's contention: The ITAT's approach was incorrect, and the receipts should be treated as revenue until production takes place. Assessee's contention (implied by ITAT's allowance): The subsidy is a capital receipt. 2. Whether the subsidy received under the Focus Market Scheme is a capital receipt or a revenue receipt, considering its purpose of enhancing export potential. Revenue's contention: Not recorded. Assessee's contention (implied by ITAT's allowance): The subsidy is a capital receipt. 3. Whether the electricity subsidy received under the Rajasthan Investment Promotion Scheme is a capital receipt or a revenue receipt, given its link to capital investment and public interest. Revenue's contention: Not recorded. Assessee's contention (implied by ITAT's allowance): The subsidy is a capital receipt.

Which sections of the Income-tax Act were involved?

Section 2(24),Section 260A

AI-generated summary — verify with the full judgment below

Cited by 59 judgments on BharatTax

See all citing judgments →

Counted from the text of the judgments hosted here. Most recent first.

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 31/2019 Pr. Commissioner Of Income Tax, Ajmer, Ajmer ----Appellant Versus M/s Nitin Spinners Ltd., 16-17 K.M. Stone, Chittor Road, Hamirgarh, Bhilwara (Rajasthan) ----Respondent For Appellant(s) : Mr. Kamal Kishore Bissa For Respondent(s) : --- HON'BLE THE CHIEF JUSTICE S. RAVINDRA BHAT HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI

Judgment 19/09/2019

1.

The Revenue’s grievance in this appeal under Section 260A of the Income Tax Act, 1961 is that the amount claimed as capital receipts, by the assessee are taxable and have to be treated as income. These involved the first subsidy of ₹7,08,60,525/- (towards Technology Upgradation Fund); second subsidy of ₹1,67,84,009/- (under the Focus Market Scheme); and the third subsidy of ₹26,52,890/- (under Electricity Duty Subsidy). The assessee claimed all these to be capital receipts.

2.

The assessee is a textile manufacturer. For the relevant year i.e. 2013-2014, it received the Technology Upgradation Fund, pursuant to a scheme drawn by the Union Textile Ministry. The payment of invasion of amounts by deferred repayment of interest, as it were. Under para

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 2(24)

All 355 judgments and leading authorities on Section 2(24) →

Recent GST High Court judgments

Search GST case law →