The Kolkata bench of the Income Tax Appellate Tribunal, in a recent ruling held that “grant-in Aids” received by the State Fisheries Development Corporation is not taxable for the reason that such receipts are capitals in nature. Further the Tribunal found that the payment made by the said assessee in respect of interest for delayed deposit of PF is also be allowed as deduction since the same was made as compensatory in nature, not penal.
The State Fisheries Development Corporation, the assessee in the instant case, filed an appeal before the ITAT mainly on the ground that the assessing Officer completed assessment by including the amount received by the assessee from the State Government on account of Grants-in-aid for payment of salary P.F. & Flood relief to the total income by holding that the same amount to “revenue receipt.” The assessee claimed that the said amount is a “capital receipt” and hence, cannot be included to the total income of the assessee. The Commissioner (Appeals) has also confirmed the impugned order.
The Tribunal noted that the issue is squarely covered by the order of the ITAT in an earlier case of the assessee, in which it was observed that the grant-in-aid as capital in nature therefore it is not liable to tax. Following the same, the ITAT reversed the orders impugned and concluded the issue in favour of the assessee.
The assessee has also challenged that the both the lower authorities were erred in disallowing the interest paid for delayed deposit of PF on ground that such interest is penal in nature.
The Tribunal noticed the decision of the Supreme court in Prakash Cotton Mills v. CIT, in which it was held that the interest paid for late deposit of PF with the authorities is compensatory in nature therefore it is entitled for deduction while computing the profit under the business head.
In view of the above findings, the Tribunal decided the matter in favour of the assessee and has quashed orders passed by both the Assessing Officer and the CIT(A).
Read the full text of the order below.
