COMMISSIONER OF INCOME TAX-I vs. SHAM LAL BANSAL

ITA/472/2010HC Punjab & HaryanaPHHC01093409201017 January 2011Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL5 pages
AI SummaryDismissed

What were the facts?

The assessee, engaged in manufacturing and selling woolen garments, received a subsidy of Rs. 60,90,000/- under the Technology Up-gradation Fund Scheme (TUFS) of the Ministry of Textiles, Government of India. This subsidy was for the repayment of loans taken for building, plant, and machinery under the Credit Linked Capital Subsidy Scheme. The assessee claimed this subsidy as a capital receipt. However, the Assessing Officer treated it as a revenue receipt and added it back to the assessee's income. The Commissioner of Income Tax (Appeals) upheld the assessee's claim, and this view was affirmed by the Income Tax Appellate Tribunal (ITAT). The Revenue has appealed this decision to the High Court.

What did the High Court hold?

The High Court held that the appeal by the revenue did not raise any substantial question of law. The Court agreed with the ITAT's view that the subsidy received by the assessee under the TUFS scheme was capital in nature. The reasoning was based on the purpose of the scheme, which was to enhance the technology apparatus of the textile industry for long-term viability. The Court noted that the subsidy was utilized for repayment of term loans taken for technology upgradation. The High Court distinguished the present case from the Supreme Court's decision in Sahney Steel & Press Works Ltd. & Ors. by observing that in Sahney Steel, the subsidy was given to meet recurring expenditure, whereas in the present case, the subsidy was linked to capital investment in machinery and was not for meeting recurring expenditure. The Court reiterated that the character of the receipt should be determined by the purpose for which it is given, as held in Sahney Steel itself and later in CIT v. Ponni Sugars & Chemicals Ltd. & ors. The appeal was accordingly dismissed.

What were the issues?

1. Whether, in the facts and circumstances of the case, the Hon'ble ITAT is justified in law in holding that the subsidy received by the assessee amounting to Rs. 60,90,000/- under the Technology Up-gradation Fund Scheme (TUFS) of the Ministry of Textiles, Government of India is capital in nature, whereas the Assessing Officer had rightly held the receipt of subsidy as revenue in nature applying the ratio of the decision of the Hon'ble Supreme Court in the case of M/s Sawhney Steels and Press Works Ltd. & Others Vs. CIT reported at 228 ITR 253? Assessee's Contention: The assessee contended that the subsidy received was capital in nature. The ITAT, in its order, relied on the Supreme Court judgment in CIT v. Ponni Sugars & Chemicals Ltd. & ors. (2008) 306 ITR 392, holding the subsidy to be capital in nature due to its objective of enhancing technology apparatus and its utilization for repayment of loans taken to set up a new unit. Revenue's Contention: The Revenue argued that the subsidy was not given at the time of setting up the industry but after the commencement of production, specifically for the repayment of a loan. Therefore, it should be treated as a revenue receipt, citing the Supreme Court judgment in Sahney Steel & Press Works Ltd. & Ors. v. CIT (1997) 228 ITR 253.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.472 of 2010 (O&M) Date of decision: 17.1.2011 Commissioner of Income Tax. -----Appellant. Vs. Sh. Sham Lal Bansal. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Rajesh Katoch, Standing counsel for the Revenue. --- ADARSH KUMAR GOEL, J.

1.

This appeal has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order of the Income Tax Appellate Tribunal, Chandigarh dated 22.9.2009 in I.T.A. No.639/Chandil/2009 proposing to raise following substantial question of law:- “Whether in the facts and circumstances of the case, the Hon’ble ITAT is justified in law in holding that the subsidy received by the assessee amounting to Rs.60,90,000/- under the Technology Up-gradation Fund Scheme (TUFS) of Ministry of Textiles, Government of India is capital in nature whereas the Assessing Officer has rightly held the receipt of subsidy as revenue in nature applying the ratio of the decision of Hon’ble Supreme Court in the case of M/s Sawhney Steels and Press Works Ltd. & Others Vs. CIT reported at 228 ITR 25

The order continues below.

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