ASST CIT CIR 4(3)(2), MUMBAI vs. SVG FASHIONS LTD, MUMBAI

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ITA 704/MUM/2016Status: DisposedITAT Mumbai30 July 2018AY 2012-134 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision that the interest subsidy is a capital receipt, following various High Court judgments. The Tribunal also upheld the deletion of disallowance for delayed PF contribution, as it was paid before the due date under Section 139(1) of the Income Tax Act.

What were the facts?

The Revenue appealed against the CIT(A)'s order deleting the addition of interest subsidy received by the assessee under the Technology Upgradation Fund Scheme. The AO treated it as revenue receipt, while the assessee claimed it as capital receipt. The second issue involved disallowance of employees' PF contribution paid after the PF Act due date but before the IT Act due date.

What were the issues?

Whether interest subsidy received under a government scheme is a capital or revenue receipt, and whether disallowance of employee's PF contribution is valid if paid after the PF Act due date but before the IT Act due date.

Which sections of the Income-tax Act were involved?

Section 139(1),Section 2(24)(x),Section 36(1)(va)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(7)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI SHAMIM YAHYA, AM & SHRI RAM LAL NEGI, JM

For Appellant: Shri V. Justin
Hearing: 02.05.2018Pronounced: 30.07.2018

O R D E R Per Shamim Yahya, A. M.: This appeal by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) dated 03.11.2015 and pertains to the assessment year 2012- 13.

2.

The grounds of appeal

read as under: 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the interest subsidy of Rs.1,19,11,327/- received by the assessee under Technology Upgradation Fund Scheme of the Government of India is capital receipt and not a revenue receipt." 2. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs.1,22,706/-made by the AO u/s 2(24)(x) r.w.s. 36(l)(va) even though the assessee has not paid the employees' contribution to the Provident Fund within the time allowed under the P.F. Act."

3. We have heard both the counsel and perused the records. None appeared on behalf of the assessee. However, in our considered opinion, the issue can be adjudicated by hearing the ld. Departmental Representative and perusing the records.

M/s. SVG Fashions Ltd. Apropos ground no.1:

4.

In this issue, the Assessing Officer has held that the interest subsidy of Rs.1,19,11,327/- received by the assessee under Technology Upgradation Fund Scheme (TUF Scheme) of the Government of India was revenue receipt and not capital receipt as canvassed by the assessee.

5.

Upon the assessee’s appeal, the ld. Commissioner of Income Tax (Appeals) elaborately dealt with the issue. He also referred to the objectives mentioned in the said TUF scheme. He also referred to several decisions on the same subject and thereafter deleted the addition. The order of the ld. Commissioner of Income Tax (Appeals) reads as under:

I have considered the stand of the AO as well as submissions of the AO. I have also considered Technology Upgradation Fund Scheme of the Government (TUFs). It is found that TUFs subsidy is to enhance the technology apparatus of the companies in the textile industry operating in India. As the assessee has made certain up-gradation to its machinery by procurement of new machinery, the TUFS subsidy was made available to it by the competent authority. This fact is nowhere disputed by the assessing officer. I have also gone through the following decisions:- i. DCIT vs. Gloster Jute Mills Ltd. 40 CCH 433 (2014). ii. CIT vs. Sham Lal Bansal 200 Taxman 14 [2011](P&H). iii. Sahney Steel & Press Works Ltd. (228 ITR 253) iv. Ponni Sugars and Chemicals Ltd. (306 ITR 392) v. M/s. Shree Balaji Alloys & Ors. Vs. CIT (2011) 333 ITR 335 (J&K) vi. CIT vs. Chaphalkar Brothers [2013] 351 ITR 309 (Bombay High Court) vii. CIT vs. Reliance Industries Ltd [2011] 339 ITR 632 (Bombay High Court) After going through the entire facts and circumstances of the present case, I find that the ratio of issue in the present case is similar to that of Chaphalkar Brothers wherein the Hon'ble jurisdictional High Court of Bombay, has pronounced that the subsidy provided by the government to the assessee was in the nature of capital receipt Further, I find that the issue is squarely covered in favour of the appellant by the Hon'ble Punjab & Haryana High Court in CIT vs. Sham Lal Bansal 200 Taxman 14 [2011] and Hon'ble Tribunal (Kolkata Bench) in DCIT vs.

M/s. SVG Fashions Ltd. Gloster Jute Mills Ltd. 40 CCH 433 (2014) wherein identical questions of facts and law arose. The appellant has also filed a copy of appellate orders of my co- ordinated CIT(A)-16, Mumbai in the case of M/s Dicitex Furnishing Ltd. for A.Y. 2012-13 in appeal No. CIT(A)-:S/ ACIT(OSD)-8(1)/IT-220/2014-15 dated 23.4.2015 and appeal No.CIT(A)-16/ACIT(OSD)-$(1)/IT-221/2014-15 dated 23.4.2015 wherein similar facts arose and the issue was decided in favour of the assessee. Respectfully following the ruling of the Hon'ble Punjab & Haryana High Court in CIT vs. Sham Lal Bansal (supra) and other judicial pronouncements referred above, it is held that the TUFS subsidy received by the appellant is capital in nature. Accordingly, the addition made by the AO amounting to Rs.1,19,11,327/-, which was added by the AO as revenue receipt, is deleted since the same has been held as capital in nature.

6.

Upon hearing the ld. Departmental Representative and perusing the records, we find that the ld. Commissioner of Income Tax (Appeals)’s observation is correct that the TUFs subsidy is to enhance the technology apparatus of the companies in the textile industry operating in India. As rightly held by the ld. Commissioner of Income Tax (Appeals), identical issues have been decided in favour of the assessee by the Hon’ble Punjab and Haryana High Court. Accordingly, respectfully following the precedent, we do not find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals).

Accordingly, we uphold the same.

Apropos ground no. 2: 7. On this issue, the Assessing Officer has made disallowance, as he noted that the employees contribution to provident fund was paid after the period as specified under the provisions of the Provident Fund Act.

8.

Upon the assessee’s appeal, the ld. Commissioner of Income Tax (Appeals) noted that the employees contribution to the provident fund though paid after the due date as specified in P.F. Act but was paid before the due date, i.e., the due date prescribed under M/s. SVG Fashions Ltd. section 139(1) of the Income Tax Act, 1961. In this regard, he referred to the decision of the Hon’ble Karanataka High Court in the case of Essae Teraoka (P.) Ltd. vs. DCIT [2014] 266 CTR 246. Accordingly, the ld. Commissioner of Income Tax (Appeals) decided the issue in favour of the assessee.

9.

Upon hearing both the counsel and perusing the records, we find that the issue is covered in favour of the assessee. No contrary decision from the Hon'ble jurisdictional High Court was brought to our notice. Accordingly, we uphold the order of the ld. Commissioner of Income Tax (Appeals).

10.

In the result, this appeal by the Revenue stands dismissed.

Order pronounced in the open court on 30.07.2018

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