M/S VMT SPINNING COMPANY LIMITED,LUDHIANA vs. ACIT, CIRCLE 1, LUDHIANA

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ITA 501/CHANDI/2018Status: DisposedITAT Chandigarh16 January 2019AY 2013-147 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that interest income from customers and suppliers was correctly treated as business income, aligning with previous tribunal decisions. Reimbursements under the TUFS scheme were set aside to the CIT(A) for fresh adjudication.

What were the facts?

The assessee company treated interest received and reimbursements under the TUFS scheme as business income and capital receipts, respectively. The Revenue contested these treatments, arguing they should be taxed as 'Income from Other Sources' and were not eligible for deduction under Section 80IC.

What were the issues?

Whether interest income should be treated as business income or income from other sources, and whether TUFS reimbursements are eligible for deduction under Section 80IC.

Which sections of the Income-tax Act were involved?

Section 80IC

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
आयकर अपील"य अ"धकरण,च"डीगढ़ "यायपीठ “बी” , च"डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH "ी संजय गग", "या"यक सद"य एवं डा. बी.आर.आर, कुमार, लेखा सद"य BEFORE: Sh. SANJAY GARG, JM & DR. B.R.R. KUMAR, AM आयकर अपील सं./ ITA Nos. 452, 499, 500, 501, & 502/Chd/2018 "नधा"रण वष" / Assessment Years : 2008-09 to 2009-10 and 2012-13 to 2014-15 M/s VMT Spinning Company Limited The ACIT, Circle-1 बनाम Chandigarh Road, Ludhiana Ludhiana, Punjab Punjab "थायी लेखा सं./PAN NO: AABCV8087C अपीलाथ"/Appellant ""यथ"/Respondent आयकर अपील सं./ ITA Nos. 579 to 583/Chd/2018 "नधा"रण वष" / Assessment Years : 2008-09 to 2009-10 and 2012-13 to 2014-15 The DCIT, Circle-1 M/s VMT Spinning Company Limited बनाम Ludhiana, Punjab Chandigarh Road, Ludhiana Punjab "थायी लेखा सं./PAN NO: AABCV8087C अपीलाथ"/Appellant ""यथ"/Respondent "नधा"रती क" ओर से/Assessee by : Shri. Vineet Jain राज"व क" ओर से/ Revenue by : Shri. Manjit Singh सुनवाई क" तार"ख/Date of Hearing : 29/11/2018 उदघोषणा क" तार"ख/Date of Pronouncement : 16/01/2019

आदेश/Order PER BENCH, A.M:

All the above Appeals have been filed by the Assessee and Cross Appeals have been filed by the Revenue.

Following grounds raised by the Assessee in ITA No. 452/Chd/2018 for A.Y. 2008-09:

1.

That the Ld. CIT(A) has erred in law and on facts in treating Interest received amounting Rs.38,07,084/-as 'Income from Other Sources' instead of Income from Business and Profession.

2.

That the Ld. CIT (A) has erred in law and on facts in not adjudicating the claim of the assessee regarding allowance of deduction u/s 80IC of the Act on interest reimbursement of Rs.1,81,81,351/- under TUFS.

3.

That the Ld. CIT (A) has erred in law in not allowing the claim of the assessee for treating interest reimbursement of Rs.1,81,81,351/- under Technology Upgradation Fund Scheme (TUFS) as capital receipt.

Following grounds raised by the Assessee in ITA No. 499/Chd/2018 for A.Y. 2009- 10:

1.

That the Order passed by the Ld.CIT(A) is contrary to law and facts of the case.

2.

That the Ld. CIT(A) has erred in law and on facts in treating Interest received amounting Rs.1,17,84,041/-as 'Income from Other Sources' instead of Income from Business and Profession.

3.

That the Ld. CIT(A) has erred in law and on facts in confirming the action of the AO to reduce Interest from others of Rs.1,22,346/- from the profits of the units eligible for deduction u/s 80IC of the Income Tax Act, 1961. 4. That the Ld. CIT (A) has erred in law and on facts in not adjudicating the claim of the assessee regarding allowance of deduction u/s 80IC of the Act on interest reimbursement of Rs.1,82,79,859/- under TUFS.

5.

That the Ld. CIT (A) has erred in law in not allowing the claim of the assessee for treating interest reimbursement of Rs.1,82,79,859/- under Technology Upgradation Fund Scheme (TUFS) as capital receipt.

Following grounds raised by the Assessee in ITA No. 500/Chd/2018 for A.Y. 2012- 13:

1.

That the order passed by Ld. CIT(A) is contrary to law and facts of the case.

2.

That the Ld. CIT (A) has erred in law in not allowing the claim of the assessee for treating interest reimbursement of Rs.1,56,02,175/- under Technology Upgradation Fund Scheme (TUF5) as capital receipt.

Following grounds raised by the Assessee in ITA No. 501/Chd/2018 for A.Y. 2013- 14:

1.

That the order passed by the Ld. CIT(A) is contrary to law and facts of the case.

2.

That the Ld. CIT(A) has erred in law and on facts in confirming the action of the Assessing Officer to reduce Rent received from employees of Rs.14,75,085/- and Refund on account of excess deposit of service tax of Rs.2,38,911/- booked under Miscellaneous receipt from the profits of the units eligible for deduction u/s 80IC of the Income Tax Act, 1961. 3. That the Ld. CIT (A) has erred in law and on facts in not adjudicating the claim of the assessee regarding allowance of deduction u/s 80IC of the Act on interest reimbursement of Rs.1,50,29,978/- under TUFS.

4.

That the Ld. CIT (A) has erred in law in not allowing the claim of the assessee for treating interest reimbursement of Rs.1,50,29,978/- under Technology Upgradation Fund Scheme (TUFS) as capital receipt.

Following grounds raised by the Assessee in ITA No. 502/Chd/2018 for A.Y. 2014- 15:

1.

That the order passed by the Ld. CIT(A) is contrary to law and facts of the case.

2.

That the Ld. CIT(A) has erred in law and on facts in confirming the action of the AO to reduce Rent received from employees of Rs.19,44,377/- from the profits of the units eligible for deduction u/s 80IC of the Income Tax Act, 1961. 3. That the Ld. CIT (A) has erred in law and on facts in not adjudicating the claim of the assessee regarding allowance of deduction u/s 80IC of the Act on interest reimbursement of Rs.1,48,64,622/- under TUFS.

4.

That the Ld. CIT (A) has erred in law in not allowing the claim of the assessee for treating interest reimbursement of Rs.1,48,64,622/- under Technology Upgradation Fund Scheme (TUFS) as capital receipt.

Following grounds raised by the Revenue in ITA No. 579/Chd/2018 for A.Y. 2008- 09:

1.

Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing relief to the assessee by treating the interest income from Customers & Suppliers as income from "business and profession" instead of "income from other source"?

2.

Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing relief to the assessee by treating the Insurance Claim received, Interest from Customer & Suppliers and Misc. receipts eligible for deduction u/s 80IC of the Income Tax Act, 1961?

3.

Whether on the issue of deduction u/s 80IC claimed on interest reimbursement under TUFS Scheme, the Ld. CIT(A) can refrain from adjudication by directing the AO to apply the decision of higher appellate authority on the identical issue, on receipt of the decision, which is yet to be decided by the such appellate authority?

4.

Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing relief to the assessee by holding that MAT credit to be carried forward to subsequent years should be calculated after including of Surcharge and Cess?

5.

That the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored.

Following grounds raised by the Revenue in ITA No. 579/Chd/2018 for A.Y. 2009- 10:

1.

Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing relief to the assessee by treating the interest income from Customers & Suppliers and Employees as income from "business and profession" instead of "income from other source"?

2.

Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing relief to the assessee by treating the Insurance Claim received, Interest from Customer & Suppliers, Misc. receipts & Interest from Others eligible for deduction u/s 80IC of the Income Tax Act, 1961?

3.

Whether on the issue of deduction u/s 80IC claimed on interest reimbursement under TUFS Scheme, the Ld. CIT(A) can refrain from adjudication by directing the AO to apply the decision of higher appellate authority on the identical issue, on receipt of the decision, which is yet to be decided by the such appellate authority?

4.

Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing relief to the assessee by holding that MAT credit to be carried forward to subsequent years should be calculated after including of Surcharge and Cess?

5.

That the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored.

Following grounds raised by the Revenue in ITA No. 581/Chd/2018 for A.Y. 2012- 13:

1.

Whether on the issue of deduction u/s 80IC claimed on interest reimbursement under TUFS Scheme, the Ld. CIT(A) can refrain from adjudication by directing the AO to apply the decision of higher appellate authority on the identical issue, on receipt of the decision, which is yet to be decided by the such appellate authority?

2.

That the order of the Ld. CIT(A) be set aside and that of t h e Assessing Officer be restored.

Following grounds raised by the Revenue in ITA No. 582/Chd/2018 for A.Y. 2013- 14:

1.

Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing relief to the assessee by treating the Rent received, Misc. receipts, Gain on forex fluctuation and Interest from Customer 8B Suppliers eligible for deduction u/s 80IC of the Income Tax Act, 1961?

2.

Whether on the issue of deduction u/s 80IC claimed on interest reimbursement under TUFS Scheme, the Ld. CIT(A) can refrain from adjudication by directing the AO to apply the decision of higher appellate authority on the identical issue, on receipt of the decision, which is yet to be decided by the such appellate authority?

3.

That the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored.

Following grounds raised by the Revenue in ITA No. 583/Chd/2018 for A.Y. 2014- 15:

1.

Whether upon facts and circumstances of the case, the Ld. CIT(A) was justified in allowing relief to the assessee by treating the Rent received, Misc. receipts, Gain on forex fluctuation and Interest from Customer & Suppliers eligible for deduction u/s 80IC of the Income Tax Act, 1961?

2.

Whether on the issue of deduction u/s 80IC claimed on interest reimbursement under TUFS Scheme, the Ld. CIT(A) can refrain from adjudication by directing the AO to apply the decision of higher appellate authority on the identical issue, on receipt of the decision, which is yet to be decided by the such appellate authority?

3.

That the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored.

2.

The appeals of the assessee in ITA Nos. 452, 499, 500, 501 and 502 primarily deal with the issue of deduction under section 80IC on interest reimbursement of amount under TUFS (Technology Up-gradation Fund Scheme).

3.

The Ld. CIT(A) has not adjudicated this issue raised before him on the grounds that the similar matter has been pending for adjudication in the Group of Vardhman Holdings Ltd. for the A.Y. 2003-04 and Vardhman Textiles Ltd. for A.Y’s 2002-03 to 2005-06 before the ITAT Chandigarh. At the time of passing of the order by the Ld. CIT(A), he held that the cases were heard and the order was awaited and hence precluded himself in pre deciding the matters heard by the ITAT.

4.

We find that the cases mentioned supra have been heard and order has been passed on 04/05/2018 setting the matter back to the file of the Ld. CIT(A) as in that case the issue has not been taken before the Ld. CIT(A) in their appeals filed. Hence the matter is being sent back to the file of the Ld. CIT(A), Ludhiana with directions to pass a speaking order in a comprehensive manner in a way so as to have a common departmental view in accordance with the provisions of the Income Tax Act,1961. 5. Regarding the departmental appeal in ITA No. 581/CHD/2012 for A.Y. 2012-13 the only issue taken up by the Revenue pertains to the reimbursement of interest under TUF Scheme which has been set aside to the file of the Ld. CIT(A) while adjudicating the appeals of the Assessee mentioned above in this order.

Hence this appeal is treated as allowed for statistical purposes. Appeal of the Revenue in ITA No. 582/CHD/2012 for A.Y. 2013-14

6.

Regarding the Ground No. 1 the Revenue has objected to the order of the Ld.CIT(A) in allowing exemption to the assessee on account of a) Rent received b) Misc. receipts c) Gain on Forex fluctuations d) Interest from customers and suppliers

7.

We have gone through the page no. 8 of the order of the Ld. CIT(A) wherein it was held that the rent receipts were not eligible for exemption under section 80IC. To that extent the ground taken by the Revenue is factually

incorrect. Regarding the other items namely Misc. receipts, Gain on Forex fluctuations, Interest from customers and suppliers, we find that the Ld. CIT(A) has allowed these expenses based on the decision of the Tribunal in ITA No. 592/CHD/2005, dt. 31/07/2007 and ITA No. 1147/CHD/2014. Since the decision of the Ld. CIT(A) was based on the decision of the Tribunal in the assessee’s own case in earlier years and in the absence of any new material brought to our notice by the Revenue, we hereby confirm the order of the Ld. CIT(A) on this ground.

8.

Ground No. 2 pertains to the reimbursement of interest under TUF Scheme which has been set aside to the file of the Ld. CIT(A) while adjudicating the appeals of the Assessee mentioned above in this order. The same holds good for the appeal of the Revenue too.

9.

Hence the appeal of the Revenue treated as partly allowed for statistical purposes.

Appeal of the Revenue in ITA No. 579/CHD/2012 for A.Y. 2008-09 and Appeal of the Revenue in ITA No. 580/CHD/2012 for A.Y. 2009-10. 10. Ground No. 1 pertaining to treating of interest income from customers and suppliers has been rightly treated by the Ld. CIT(A) as income from business and profession based on the order of this Tribunal in the case of Vardhman Threads Ltd. in ITA No. 556/CHD/2008 dt. 28/04/2014. Hence, we declined to interfere in the order of the Ld. CIT(A).

11.

Ground No. 2 pertaining to treatment of insurance claim, interest from customers, misc. receipts and interest from others following the similar rationale adopted in ITA No. 582/CHD/2012 for A.Y. 2013-14 mentioned in this order, we hereby confirm the order of the Ld. CIT(A) which was based on the earlier order of this Tribunal.

12.

Ground No. 3 pertains to the deduction of reimbursement of interest under TUF Scheme which has been set aside to the file of the Ld. CIT(A) while adjudicating the appeals of the Assessee mentioned above in this order. The same holds good for the appeal of the Revenue too.

13.

Ground No. 4 wherein the Ld. CIT(A) justified in allowing relief to the Assessee by holding that MAT credit has to be carried forward to the subsequent year after including surcharge and cess. The adjudication of the Ld.

CIT(A) was inconsonance with the order of the Tribunal in assessee’s own case for A.Y. 2007-08 which states as under:

“ 11. In view of the aforesaid decisions of the coordinate Bench and of the Apex Court in the case of K Sreenivasan (supra), we hold that MAT credit to be carried forward should be calculated after including surcharge and cess in the tax calculated both under MAT under section 115JB and under the normal provisions of the Act. We, therefore, direct the Assessing Officer to calculate the MAT credit accordingly. The ground of appeal raised by the assessee, therefore, stands allowed.”

14.

Since the matter already stands adjudicated in favour of the assessee by this Tribunal in earlier year, we hereby confirm the order of the Ld.CIT(A).

Appeal of the Revenue in ITA No. 583/CHD/2012 for A.Y. 2014-15. 15. The Ground No.1 of this appeal is akin to the Ground No. 1 of the ITA NO. 580/CHD/2012 for the A.Y. 2009-10. Hence the adjudication to ground no. 1 stands mutatis mutandis to the issue discussed above.

16.

Ground No. 2 pertains to the deduction of reimbursement of interest under TUF Scheme which has been set aside to the file of the Ld. CIT(A) while adjudicating the appeals of the Assessee mentioned above in this order. The same holds good for the appeal of the Revenue too.

17.

This appeal of the Revenue treated as partly allowed for statistical purposes.

18.

In the result, appeal of the Assessee are allowed for statistical purposes and that of the Revenu’s appeal are partly allowed for statistical purposes.

Order pronounced in the open Court. संजय गग" डा. बी.आर.आर, कुमार, (SANJAY GARG ) ( DR. B.R.R. KUMAR, ) "या"यक सद"य/ Judicial Member लेखा सद"य/ Accountant Member AG Date: 16/01/2019

आदेश 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"न"ध, आयकर अपील"य आ"धकरण, च"डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड" फाईल/ Guard File

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