Interest subsidy under TUFS treated as capital receipt, for overall growth and generation of employment: ITAT [Read Order]

The Delhi bench of Income Tax Appellate Tribunal (ITAT) observed that the purpose of granting subsidy under TUFS (Technology Up-gradation Fund Scheme) by the Ministry of Textiles, Government of India was for overall growth and generation of employment and held that interest reimbursement received by the assessee is a capital receipt.

The assessee M/s Shahi Exports Pvt Ltd is engaged in the business of manufacturing and export of ready-made garments,he filed its return of income electronically on, declaring total income of Rs. 2,28,05,11,880. During the course of assessment proceedings, the Assessing Officer (AO) noticed that the assessee has claimed exempt income of Rs. 17,01,94,062 and asked the assessee to explain the income, the assessee stated that it has received interest subsidy under TUFS.

The assessee appealed before the Commissioner of Income Tax (Appeals) [CIT(A)], the first appellate tribunal relied on the decision of CIT Vs. Ponni Sugars & Chemicals Ltd held that interest reimbursement received by the assessee is a capital receipt and deleted the addition of Rs.17.02 crores received by the assessee as interest reimbursement under Technology Upgradation Scheme [TUFS].

The Revenue filed an appeal before the ITAT and the Departmental Representative strongly supported the findings of the AO and vehemently contended that the assessee has failed to explain the utilisation of the subsidy.

The counsel for the assessee stated that the objective and purpose of the Scheme is for larger interest of textile industry and, therefore, the interest subsidy received by the assessee has to be treated as capital receipt.

The Bench comprising of Saktijit Dey, Judicial Member, and N.K. Billaiya, Accountant Member observed that the Government recognised that technology upgradation in the textile industry would result in capacity expansion and modernisation which would have direct impact on employment generation, exports and globalisation of textile trade.

Therefore the Tribunal relied on the decision of CIT Vs. Ponni Sugars & Chemicals Ltd which held that the purpose of granting subsidy under TUFS by the Ministry of Textiles, Government of India was for overall growth and generation of employment and, therefore, the ‘Purpose Test’ was laid.

Considering the facts of the case in totality, the Bench did not find any reason to interfere with the findings of the CIT (A), thus appeal filed by assessee was dismissed.

To Read the full text of the Order CLICK HERE

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