The Chandigarh Bench of the Income Tax Appellate Tribunal ( ITAT ) has held that the subsidy received under TUF Scheme is a capital receipt and allowable as a deduction.
The Revenue challenged the order of Commissioner of Income Tax (Appeals)-5, Ludhiana [ CIT(A)’] passed u/s 250(6) of the Income Tax Act, 1961.M/s Aarti International Ltd, the assessee filed its return of income declaring total income of Rs. 83,79,59,930/- on 28/09/2011 which was processed under section 143(1) on 29/03/2013.
The matter was selected for scrutiny and notices were issued and completedthe assessment proceedings by the Assessing officer under section 143(3) vide order dt. 28/02/2014 wherein the assessed income was determined at Rs. 84,01,25,935/- after making certain additions and disallowances. On appeal, CIT(A) deleted the additions/disallowances made by the AO.
The claim of TUFS subsidy being exempt from tax has been raised for the first time during the appellate proceedings and such a claim was neither made while filing the return of income nor anytime during the course of assessment proceedings.
that the assessee has since been held eligible for a refund of taxes on account of the TUFS Subsidy which has been held to be capital receipt by the order of the CIT(A) and which has subsequently been upheld by the order of the Coordinate Bench.
The limited issue under consideration relates to whether the proceedings resulting in a refund are delayed for reasons attributable to the assessee and the period of such delay which shall be excluded from the period for which the assessee is eligible for interest u/s 244A on refund of aforesaid taxes in respect of TUFS Subsidy.
A Coram of ITAT bench consisting of Shri Sudhanshu Srivastava, JM & Shri Vikram Singh Yadav, AM observed that the TUFS subsidy received by the assessee company from the Ministry of Textiles, Government of India can be treated as capital receipt and can reduce the amount of TUFS subsidy received during the year from total assessed income.
The bench held that the assessee shall be eligible for interest on the refund amount with effect from 04/10/2016 till the date of the grant of refund and the AO was directed to allow the interest for the said period. While partly allowing the appeal, the Tribunal modified the order of the CIT(A).
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