The Mumbai bench of Income Tax Appellate Tribunal (ITAT) has held that interest subsidy received under technology upgradation fund is capital receipt.hence no tax should be leviable.
The assesee Grasim Industries Ltd is a company engaged in diverse business such as garments, insulators, fertilisers, viz cost element young, financial services et cetera at different units located across the country.
After filing the return of income, the assessee’s case was selected for scrutiny. Thereafter the assessing officer passed an assessment order under section 143 (3) of the Income Tax Act determining total income of the assessee.
Against this assessment order the assessee preferred an appeal before the coordinate bench on 21/1/2014 which was disposed of on 20 December 2019. The coordinate bench restored the certain issues to the file of the learned assessing officer. The assessing officer framed the assessment once again and partly rejected the claim of the assessee.
The main issue in the assessment was whether the subsidy received by the assessee for technology upgradation fund is capital receipt not chargeable to tax or revenue receipt chargeable to tax. The assessing officer considered it as a revenue receipt.
When an appeal filed before the CIT(A) held that subsidy received by the appellant company under technology upgradation fund scheme is a capital receipt.
Thereafter the revenue challenged the order before the tribunal.
Dr. Kishor Dhule, the counsel for revenue submitted that the main intention of the technology upgradation fund scheme was to actually set off and is out the interest burden of the assessee company.
The assessee has reduced the interest subsidy from the interest paid on various loans and therefore the interest income and interest expenditure both were treated as revenue expenditure and therefore the interest subsidy on technology upgradation fund was treated by the assessee itself as revenue expenditure.
Further, the subsidies have not been granted specifically against purchase of any capital asset and since the purpose has been to compensate for the competitive disadvantage of the business concern such subsidy falls in the realm of revenue.
Yogesh Thar counsel for the assessee submitted that the issue is already covered in favour of the assessee by the decision of the coordinate bench for assessment year 2010–11 ,assessment year 2013–14 and 2014–15.
It was observed by the tribunal that interest subsidy received under technology upgradation fund scheme, though credited in the net off against the interest expenditure in the books of account is still capital in nature and therefore not chargeable to tax.
Therefore the two member bench of Prashant Maharishi, Accountant Member and Kuldip Singh, (Judicial Member) allowed the appeal of the assessee .
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