M/s Pundrik Textiles Mills (P) Ltd., Ludhiana V. ACIT, Ludhiana

CO 26/CHANDI/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1139 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 07-07-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 473/CHD/2014 ASSESSMENT YEAR: 2007-08 THE ACIT, VS M/S PUNDRIK TEXTILES CIRCLE 1, MILLS (P) LTD., LUDHIANA. E-463, PHASE VI, FOCAL POINT, LUDHIANA. PAN: AADCP5826B & CO 26/CHD/2014 IN ITA NO. 473/CHD/2014 ASSESSMENT YEAR: 2007-08 M/S PUNDRIK TEXTILES VS THE AC IT, MILLS (P) LTD., CIRCLE 1, E-463, PHASE VI, LUDHIANA. FOCAL POINT, LUDHIANA. PAN: AADCP5826B (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI MANJIT SINGH DATE OF HEARING : 19.08.2015 DATE OF PRONOUNCEMENT : 21.08.2015 O R D E R PER BHAVNESH SAINI,JM THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECTION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-II LUDHIANA DATED 14.02.2014. 2. WE HAVE HEARD LD. DR AND PERUSED THE MATERIAL ON RECORD. HOWEVER, NONE APPEARED ON BEHALF OF THE AS SESSEE 2 DESPITE SERVICE OF THE NOTICE. THE ASSESSEE FILED W RITTEN SUBMISSIONS ON RECORD WHICH IS TAKEN INTO CONSIDERA TION. 3. ON GROUND NO. 1 OF THE DEPARTMENTAL APPEAL, REVE NUE CHALLENGED THE ORDER OF LD. CIT(APPEALS) IN DELETIN G THE DISALLOWANCE OF RS. 38,77,948/-. BRIEFLY THE FACTS ARE THAT THE ASSESSING OFFICER NOTED THAT DURING THE YEAR, T HE ASSESSEE HAD RECEIVED TUFS INTEREST SUBSIDY AMOUNTI NG TO RS. 68,22,000/-. THE ASSESSING OFFICER NOTED THAT OUT OF THIS INTEREST SUBSIDY, ASSESSEE HAD CAPITALIZED SUB SIDY AMOUNTING TO RS. 38,77,948/- AS PRE-OPERATIVE INTER EST. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY THIS AMOUNT OF INTEREST SUBSIDY CAPITALIZED MAY NOT BE TREATED AS REVENUE RECEIPT. THE ASSESSEE SUBMITTED THAT MINISTRY OF TEXTILES, GOVERNMENT OF INDIA INTRODUCE D THE TUFS SCHEME W.E.F. 01.04.1999 IN ORDER TO UPGRADE TECHNOLOGY AND BOOST FRESH INVESTMENT IN THE TEXTIL E INDUSTRY. THE ASSESSEE HAD APPLIED LOAN UNDER TUFS SCHEME AND PART OF THE INTEREST PASSED WAS SUBSIDIZ ED UNDER THE TUFS SCHEME. THE ASSESSEE FURTHER EXPLAI NED THAT AMOUNT OF INTEREST SUBSIDY RECEIVED ON ACCOUNT OF TUFS SCHEME BEFORE THE COMMERCIAL PRODUCTION STARTE D WAS CAPITALIZED WHERE THE SUBSIDY RECEIVED AFTER TH E COMMERCIAL PRODUCTION STARTED, WAS TAKEN IN PROFIT & LOSS ACCOUNT AND SHOWN AS REVENUE RECEIPT. THE ASSESSIN G OFFICER, CONSIDERING THE DECISION OF THE HON'BLE PU NJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRI ES 284 ITR 1 AND DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SAHNI STEEL & PRESS WORKS LTD. V CIT 22 8 ITR 3 253 HELD THAT INTEREST SUBSIDY EVEN DURING THE PRE- OPERATIVE PERIOD WAS REVENUE RECEIPT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. THE ASSESSEE CHALLENGED ADDITION BEFORE LD. CIT(APPEALS) AND WRITTEN SUBMISSION IS REPRODUCED I N THE APPELLATE ORDER IN WHICH THE ASSESSEE REITERATED TH E SAME FACTS SUBMITTED BEFORE ASSESSING OFFICER AND ALSO SUBMITTED THAT AS PER THE TUFS SCHEME, THE ASSESSEE UNDER CONSIDERATION HAS ALSO CONSIDERED 5% INTEREST REIMBURSEMENT TUFS SUBSIDY SCHEME TO PROMOTE THE PROMOTERS TO REAP THE ADVANTAGE OF LOW INTEREST AND PUT THIS PROJECT FOR ALL INTENT AND PURPOSES, THE EFFEC TIVE INTEREST RATE TAKEN FOR PROJECT CONCEPTION AND ITS VIABILITY WAS INTEREST RATE AFTER TUFS SUBSIDY. HAD THERE BE EN NO 5% REIMBURSEMENT SCHEME, THE PROJECT MAY NOT HAVE B EEN CONCEIVED. ACCORDINGLY, THE LOAN WAS APPLIED UNDER TUFS AND SAME WAS SANCTIONED UNDER TUFS SCHEME AND IN SUPPORT OF THE SAME, SANCTION LETTER WAS ENCLOSED. IT WAS, THEREFORE, SUBMITTED THAT INTEREST WAS CAPITAL IN N ATURE. IT WAS FURTHER SUBMITTED THAT THE MINISTRY OF TEXTI LES PASSED FURTHER RESOLUTION DATED NOVEMBER,2007 AND I T WAS DECIDED THAT INDIAN TEXTILE INDUSTRY HAS SUFFERED F ROM SEVERE TECHNOLOGICAL OBSOLESCENCE AND LACK OF ECONO MIES OF SCALE. THE TECHNOLOGY UP-GRADATION FUNDS SCHEME (TUF) WAS INTRODUCED W.E.F. 01.04.1999 WHICH HAS PR O VIDED LOAN TO THE SAID COMPANY. IT WAS PRO VIDED I N THE SCHEME THAT 5% INTEREST REIMBURSEMENT SHALL BE MADE TO THE SAID CONCERN. THE ASSESSEE OBTAINED LOAN UNDER THE 4 TUF SCHEME AND INTEREST SO REIMBURSED BY THE BANK BEFORE COMMENCEMENT OF THE PRODUCTION WAS RIGHTLY CAPITALIZED. THE ASSESSEE RELIED UPON DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V SHAM LAL BANSAL. ACCORDINGLY, IT WAS HELD THAT SUB SIDY RECEIVED UNDER TUF SCHEME WAS CAPITAL SUBSIDY AND ALLOWED THIS GROUND OF APPEAL OF THE ASSESSEE. 5. THE LD. DR FILED COPY OF THE JUDGEMENT OF HON'BL E PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS S HAM LAL BANSAL IN ITA 472 OF 2010 DATED 17.01.2011 IN W HICH THE HON'BLE HIGH COURT DISMISSED THE DEPARTMENTAL A PPEAL CONFIRMING ORDER OF THE TRIBUNAL HOLDING THE TUF SU BSIDY TO BE CAPITAL IN NATURE. THE ISSUE IS, THEREFORE, COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE JUDGEMENT OF HO N'BLE PUNJAB & HARYANA HIGH COURT. THEREFORE, THIS GROUN D OF APPEAL OF THE REVENUE IS DISMISSED. 6. ON GROUND NO. 2, THE REVENUE CHALLENGED THE DELE TION OF DISALLOWANCE OF RS. 1,00,248/- ON ACCOUNT OF INT EREST CAPITALIZATION DONE BY ASSESSEE ON CAPITAL WORK IN PROGRESS. THE ASSESSING OFFICER NOTED THAT ASSESSE E HAD SHOWN CERTAIN WORK IN PROGRESS IN HIS RETURN. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHE THER INTEREST PAID ON MTL PERTAINING TO THIS WORK IN PRO GRESS HAVE BEEN CAPITALIZED OR NOT. FROM THE SUBMISSIONS OF THE ASSESSEE, ASSESSING OFFICER NOTED THAT INTEREST HAD BEEN CAPITALIZED @ 4.75% AND 5.5% WHE4REAS THE ACTUAL INTEREST COMPONENT PAID WAS @ 9.75% AND 10.5%. THE 5 ASSESSING OFFICER FURTHER NOTED THAT THIS WAS ON AC COUNT OF 5% SUBSIDY IN THE FORM OF INTEREST REIMBURSEMENT RECEIVED BY THE ASSESSEE UNDER TUF SCHEME. ON THE BASIS OF GROUND NO. 1 ABOVE, ASSESSING OFFICER TREATED TH E SAME ALSO TO BE REVENUE RECEIPT. THE LD. CIT(APPEALS) F OUND THAT THIS ISSUE IS SAME AS HAVE BEEN CONSIDERED IN GROUND NO. 1 ABOVE AND ACCORDINGLY HELD THAT THE SAME WAS CAPITAL IN NATURE. 7. FROM THE ABOVE, WE FIND THAT ISSUE IS SAME AS HA VE BEEN CONSIDERED ON GROUND NO. 1 IN DEPARTMENTAL APP EAL. FOLLOWING THE SAME REASONS, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE AS WELL. 8. IN THE RESULT, DEPARTMENTAL APPEAL IS DISMISSED. 9. THE ASSESSEE IN THE CROSS OBJECTION RAISED THREE GROUNDS OF APPEAL. ON GROUND NO. 2 & 3, THE ASSESS EE RAISED THE SAME ISSUES WHICH HAVE BEEN CONSIDERED I N THE DEPARTMENTAL APPEAL AND MERELY FILED THE SAME IN SU PPORT OF THE ORDER OF THE LD. CIT(APPEALS). SINCE WE HAV E DISMISSED DEPARTMENTAL APPEAL ON BOTH THESE ISSUES, THEREFORE, THIS GROUNDS ARE INFRUCTUOUS AND ACCORDI NGLY DISMISSED. 10. ON GROUND NO. 1 OF THE CROSS OBJECTION, ASSESSE E CHALLENGED THAT APPEAL FILED BY ACIT CIRCLE-I LUDHI ANA DOES NOT HAVE PROPER JURISDICTION OVER THE CASE AS THE SAME IS BEING ASSESSED WITH CENTRAL CIRCLE-II LUDHI ANA, THEREFORE, APPEAL FILED IS BAD IN LAW. 6 11. IN THIS CASE, THE ACIT CIRCLE-I LUDHIANA HAS PA SSED THE IMPUGNED ASSESSMENT ORDER DATED 17.12.2009. TH E ASSESSMENT ORDER WOULD REVEAL THAT ASSESSEE HAS NEV ER CHALLENGED THE JURISDICTION OF THE ASSESSING OFFICE R IN PASSING THE ASSESSMENT ORDER IN THE MATTER AT ASSES SMENT STAGE OR BEFORE COMPLETION OF THE ASSESSMENT. THER EFORE, JURISDICTION OF THE ASSESSING OFFICER COULD NOT BE CHALLENGED AT THIS STAGE. IN THE CASE OF HINDUSTAN TRANSPORT COMPANY 189 ITR 326, ALLAHABAD HIGH COURT HELD THAT JURISDICTION OF ASSESSING OFFICER CANNOT BE CHALLENGED AT APPELLATE STAGE. FURTHER, THE PRESEN T APPEAL IS FILED BY ACIT CIRCLE-I LUDHIANA BEING THE ASSESS ING OFFICER WHO HAS PASSED THE IMPUGNED ASSESSMENT ORDE R. THE APPEAL COULD BE FILED BY THE ASSESSING OFFICER ONLY WHICH IN THIS CASE IS PERFECTLY DONE BY ASSESSING O FFICER. THEREFORE, OBJECTION OF THE ASSESSEE HAS NO MERIT. THE SAME IS ACCORDINGLY DISMISSED. 12. IN THE RESULT, THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECTION BY ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST,2015. SD/- SD/- (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 ST AUGUST,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH