JCIT (OSD)CEN CIR 1(4), MUMBAI vs. GRASIM INDUSTIRES LTD, MUMBAI

ITA 3334/MUM/2016Status: DisposedITAT Mumbai23 May 2025AY 2009-1032 pages
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What did the Tribunal hold?

The Tribunal held that the interest earned on income tax refund is not taxable in the hands of the assessee, respectfully following the decision of the coordinate bench in the assessee's own case for AY 2007-08, which in turn followed the jurisdictional High Court's decision in DIT vs. Bank of America NT and SA. This decision allowed the netting off of interest paid against interest received as it was a peculiar situation between the same parties and did not violate any provisions of the Income Tax Act. Regarding the interest subsidy under the TUF scheme, the Tribunal, respectfully following the decision of the coordinate bench in assessee's own case for AY 2009-10 (in ITA Nos. 84/Mum./2023 and 356/Mum./2023), held that the subsidy is capital in nature and not chargeable to tax. This decision was based on High Court judgments, including PCIT vs. Nitin Spinners Ltd. (Rajasthan High Court) and CIT vs. Gloster Jute Mills Ltd. (Calcutta High Court), which held TUF subsidies as capital receipts. The Tribunal directed the Assessing Officer to delete the addition made on this account.

What were the facts?

The appeals by M/s Grasim Industries Ltd. (assessee) and the DCIT (revenue) pertain to Assessment Year 2009-10, arising from an order dated 12.02.2016 of the CIT(A)-13, Mumbai. The assessee's appeal (ITA No. 2224/Mum/2016) had one ground dismissed as infructuous. The primary dispute in the assessee's appeal concerns the taxability of interest earned on an income tax refund amounting to Rs.63,01,861/-. The revenue's appeal (ITA No. 3334/Mum/2016) challenges the deletion of an addition related to interest subsidy received under the Technology Upgradation Fund (TUF) scheme. The Tribunal notes that the issue of interest on refund has been decided in favour of the assessee in earlier assessment years.

What were the issues?

1. Whether the interest earned on income tax refund of Rs.63,01,861/- is taxable in the hands of the assessee for AY 2009-10? - Assessee: Contends that this issue has been decided in its favour in earlier assessment years. - Revenue: No specific argument recorded in the judgment. 2. Whether the interest subsidy received under the Technology Upgradation Fund (TUF) scheme is capital in nature and not chargeable to tax? - Assessee: Relied on decisions of the Jurisdictional High Court in DIT vs. Bank of America NT and SA and CIT vs. M/s Credit Agricole Corporate and Investment Bank, and its own earlier assessment year orders, arguing that netting off interest paid against interest received is permissible when parties are the same, and that the TUF subsidy is capital in nature. - Revenue: Argued that netting off interest paid against interest received results in allowing deduction of interest paid as business expenditure under Section 37(1), which is not permissible, and relied on Bharat Commerce & Industries Ltd. vs. CIT and Aruna Mills Ltd. vs. CIT. For the TUF subsidy, the revenue argued for reconsideration in line with Tribunal orders.

Which sections of the Income-tax Act were involved?

Section 40(a)(ii),Section 37(1),Section 43(1)

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Cases cited in this judgment(4)Show list

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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: SHRI SAKTIJIT DEY, VP & SHRI N.K. BILLAIYA, AM

For Appellant: Shri J.D. Mistri, Sr. Advocate, Shri Madhur Agarwal
For Respondent: Shri Dr. Kishor Dhule, CIT(DR)
Hearing: 06.03.2025Pronounced: 23.05.2025

Heard together (2 matters)

ITA No. 2224/Mum/2016
ITA No. 3334/Mum/2016

Read from the judgment's own cause title. This page is filed under one of them.

Per Saktijit Dey, VP:

Captioned cross appeals arise out of order dated 12.02.2016 of learned Commissioner of Income Tax Appeal)-13, Mumbai, pertaining to Assessment Year

(AY) 2009-10. ITA No.2224 & 3334/Mum/2016 A.Y. 2009-10 Grasim Industries Ltd.

ITA No. 2224/Mum/2016 Assessee’s Appeal (A.Y. 2009-10

2.

In so far as Ground No.1 is

The order continues below.

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