The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, in an appeal filed before it, held that interest receipt under TUFS scheme is capital in nature, needs to be excluded while working out book profits under Section 115JB.
The aforesaid observation was made by the Delhi ITAT, when an appeal was preferred before it by the assessee, as directed against the order of the Commissioner of Income Tax (Appeals), Kolkata relating, for the Assessment Year 2011-12.
The ground of the assessee’s appeal being that interest subsidy being capital receipt is not taxable under normal provisions of the Income Tax Act, 1961, and that the same is liable to be excluded from book profit computed u/ s 115JB of the Income Tax Act, the brief facts of the case were that the Assessee was a company stated to be engaged in the business of manufacturing & trading of synthetic/wollen/worsted yarn fabrics & synthetics fabrics, who was also doing the manufacturing and trading of ready-made garments, generation of power, processing of synthetics etc.
The Assessee had electronically filed its return of income for AY 2011-12, declaring total income of Rs.7,43,42,220/- under the normal provisions of the Income Tax Act and Rs.10,38,62,502/- under 115JB of the Income Tax Act. And, had claimed the exclusion of interest subsidy of Rs.3,03,80,678/- from the profits, while computing the book profits under Section 115JB.
Before CIT(A) it was submitted by the assessee that the assessee had received interest subsidy of Rs.3,03,80,678/- under Technology Upgradation Fund Scheme (TUFS) during the year under consideration. It was also submitted that the subsidy received was reduced from the interest expenses and thus indirectly the interest subsidy was offered to tax.
Before the CIT(A), the assessee had claimed exclusion of interest subsidy received by it under normal provisions of tax as well as MAT provisions of the Act by claiming it to be a capital receipt. However, the CIT(A) while deciding the issue held the interest subsidy received by the assessee to be capital receipt but however, for the purpose of working out the profits under Section 115JB of the Income Tax Act, he, by relying on the decision of the Karnataka High Court in the case of B&B Infratech Ltd. ,held that the provisions of Section 115JB of the Income Tax Act , would override the other provisions of the Act and accordingly that, only those adjustments which are given in the explanation shall be made and no other addition or deduction can be allowed.
He accordingly held that though the interest subsidy received by the assessee was capital in nature, since the same was not prescribed in any explanation under Section 115JB, it cannot be allowed for exclusion under the provision of MAT and therefore that the deduction cannot be allowed.
He, accordingly, denied the claim of the assessee for excluding the interest subsidy for working out the provisions of MAT. And it is being aggrieved by this order of the CIT(A), that the assessee is now in appeal before the Delhi ITAT.
Hearing the opposing contentions of both sides, as presented by Shri Satyajeet Goel, the Advocate on behalf of the assessee, and by Shri Kanv Bali, the Sr. DR on behalf of the Revdenue, the ITAT Panel of Yogesh Kumar US, the Judicial Member, and Anil Chaturvedi, the Accountant Member, thus held:
“Following the decision of the coordinate bench in the case of Indogulf Cropsciences Ltd., we hold that since the interest receipt under TUFS Scheme is capital in nature, it needs to be excluded while working out the book profits under Section 115JB of the Act. We direct accordingly. Thus, the ground of the assessee is allowed.”
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