DCIT, Circle-10, Kolkata, Kolkata V. M/S. BSL Ltd., Kolkata

ITA 2105/KOL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1443 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 17-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S D VERMA
• Keywords: Question of law; Capital receipt
• Section: 143(3); 263

Judgement Text

I.T.A. NO. 2105/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER I.T.A. NO. 2105/KOL/ 2014 ASSESSMENT YEAR: 2008-2009 DEPUTY COMMISSIONER OF INCOME TAX,................. ..................APPELLANT CIRCLE-10, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. BSL LIMITED,.................................. .................................RESPONDENT 151, SARAT BOSE ROAD, KOLKATA-700 020 [PAN: AABCB 0639 G] APPEARANCES BY: SHRI SALLONG YADEN, ADDL. CIT, D.R., FOR THE DEPART MENT SHRI S.D. VERMA, ADVOCATE, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : SEPTEMBER 18, 201 7 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 18, 2017 O R D E R PER SHRI P.M. JAGTAP, A.M. .: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKATA D ATED 01.09.2014 AND IN THE SOLITARY GROUND RAISED THEREIN, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN DIRECTING THE ASS ESSING OFFICER TO TREAT THE INTEREST SUBSIDY RECEIVED BY THE ASSESSEE AS CA PITAL RECEIPT NOT CHARGEABLE TO TAX. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION O N 25.09.2009 DECLARING A LOSS OF RS.10,58,28,082/-. IN THE ASSES SMENT ORIGINALLY I.T.A. NO. 2105/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 2 OF 7 COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 01.09.2010, THE TOTAL LOSS OF THE ASSESSEE WAS DETERMINED BY THE ASSESSIN G OFFICER AT RS.8,96,39,082/-. THE SAID ASSESSMENT WAS SUBSEQUEN TLY SET ASIDE BY THE LD. CIT VIDE AN ORDER DATED 08.12.2010 PASSED UNDER SECTION 263 WITH A DIRECTION TO THE ASSESSING OFFICER TO COMPLETE THE ASSESSMENT AFRESH ON CERTAIN ISSUES AS POINTED OUT IN THE ORDER UNDER SE CTION 263. IN COMPLIANCE WITH THE ORDER OF THE LD. CIT PASSED UND ER SECTION 263, A FRESH ASSESSMENT WAS MADE BY THE ASSESSING OFFICER VIDE A N ORDER DATED 22.12.2011 DETERMINING THE TOTAL LOSS OF THE ASSESS EE-COMPANY AT RS.7,13,55,082/- AFTER MAKING ADDITION OF RS.1,82,8 4,000/- ON ACCOUNT OF THE INTEREST INCOME. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3) READ WITH SECTION 263, AN APPEAL WAS FILED B Y THE ASSESSEE BEFORE THE LD. CIT(APPEALS). DURING THE COURSE OF APPELLAT E PROCEEDINGS BEFORE THE LD. CIT(APPEALS), ADDITIONAL GROUND WAS RAISED BY THE ASSESSEE CLAIMING THAT THE INTEREST SUBSIDY OF RS.3,04,53,55 9/- RECEIVED BY IT UNDER TECHNOLOGY UPGRADATION FUND SCHEME (TUFS IN S HORT) DURING THE YEAR UNDER CONSIDERATION WAS LIABLE TO BE TREATED A S CAPITAL RECEIPT NOT CHARGEABLE TO TAX INSTEAD OF REVENUE RECEIPT CHARGE ABLE TO TAX AS OFFERED BY THE ASSESSEE IN ITS RETURN OF INCOME. THE SAID A DDITIONAL GROUND ALONG WITH THE SUBMISSIONS MADE BY THE ASSESSEE IN SUPPOR T OF ITS CASE ON THE ISSUE RAISED THEREIN WAS FORWARDED BY THE LD. CIT(A PPEALS) TO THE ASSESSING OFFICER SEEKING THE LATTERS REMAND REPOR T. IN THE REMAND REPORT SUBMITTED TO THE LD. CIT(APPEALS), THE ASSES SING OFFICER STRONGLY OBJECTED TO THE ADMISSION OF THE ADDITIONAL GROUND RAISED BY THE ASSESSEE BY SUBMITTING THAT THE ISSUE RAISED THEREIN WAS NOT THE SUBJECT MATTER OF EITHER THE ORIGINAL ASSESSMENT MADE UNDER SECTION 1 43(3) OR EVEN THE FRESH ASSESSMENT MADE UNDER SECTION 143(3) READ WI TH SECTION 263. THE LD. CIT(APPEALS), HOWEVER, DID NOT FIND THE OBJECTI ON RAISED BY THE ASSESSING OFFICER TO BE SUSTAINABLE AND AFTER DISCU SSING THIS ASPECT IN DETAIL IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEME NTS, HE ADMITTED THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. IN THE RE MAND REPORT, THE CLAIM I.T.A. NO. 2105/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 3 OF 7 OF THE ASSESSEE AS MADE IN THE ADDITIONAL GROUND FO R TREATING THE INTEREST SUBSIDY RECEIVED UNDER TUFS AS CAPITAL RECEIPT WAS ALSO CHALLENGED BY THE ASSESSING OFFICER BY RELYING MAINLY ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS W ORKS LIMITED [228 ITR 253]. THE LD. CIT(APPEALS), HOWEVER, FOUND THAT THE ISSUE RAISED BY THE ASSESSEE-COMPANY IN THE ADDITIONAL GROUND WAS S QUARELY COVERED IN FAVOUR OF THE ASSESSEE ON MERIT BY THE DECISION OF THE KOLKATA BENCH OF ITAT IN THE CASE OF DCIT VS- M/S. GLOSTER JUTE MIL LS LIMITED (ITA NO. 766/KOL/2010 DATED 02.07.2014), WHEREIN THE INTERES T SUBSIDY RECEIVED BY THE ASSESSEE UNDER THE SAME TUFS WAS HELD TO BE CAPITAL RECEIPT BY THE TRIBUNAL AFTER TAKING INTO CONSIDERATION THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS W ORKS LIMITED (SUPRA). HE ACCORDINGLY FOLLOWED THE SAID DECISION OF THE TR IBUNAL AND DIRECTED THE ASSESSING OFFICER TO TREAT THE INTEREST SUBSIDY REC EIVED BY THE ASSESSEE- COMPANY UNDER THE TUFS AS CAPITAL RECEIPT NOT CHARG EABLE TO TAX. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT A SIMILAR ISSUE RELATING TO THE ASSESSEES CLAIM OF TREATING THE IN TEREST SUBSIDY RECEIVED UNDER TUFS AS CAPITAL RECEIPT NOT CHARGEABLE TO TAX HAD COME UP FOR CONSIDERATION IN THE CASE OF M/S. GLOSTER JUTE MILL S LIMITED (SUPRA) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY BOTH THE SIDES, THE TRIBUNAL FOUND THAT THE SAID ISSUE WAS SQUARELY COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE PUNJAB & HARYANA HIG H COURT IN THE CASE OF CIT VS.- SHAM LAL BANSAL (ITA NO. 472 OF 2010 DATE D 17.01.2011), WHEREIN THE INTEREST SUBSIDY RECEIVED BY THE ASSESS EE UNDER THE SAME SCHEME, I.E. TUFS WAS HELD TO BE CAPITAL SUBSIDY AF TER TAKING INTO CONSIDERATION THE RELEVANT JUDICIAL PRONOUNCEMENTS ON THE ISSUE INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SAHNEY STEEL & PRESS WORKS LIMITED (SUPRA) ON WHICH RELIAN CE WAS PLACED BY THE REVENUE. THE TRIBUNAL ACCORDINGLY FOLLOWED THE DECI SION OF THE HONBLE I.T.A. NO. 2105/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 4 OF 7 PUNJAB & HARYANA HIGH COURT IN THE CASE OF SHAM LAL BANSAL (SUPRA) AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE VIDE PA RAGRAPH NO. 9 OF ITS ORDER, WHICH READS AS UNDER:- 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. WE FIND CONSIDERABLE COGENCY IN THE SUBMISSIONS OF THE LD. COUNSEL OF THE ASSESSEE. WE FIND THAT IDENTICAL ISSUE UNDER TH E TECHNOLOGY UPGRADATION FUND SCHEME (IN SHORT TUFS) OF MINIST RY OF TEXTILES WAS CONSIDERED BY THE HONBLE PUNJAB & HAR YANA HIGH COURT IN ITA NO. 472 OF 2010 VIDE DECISION DATED 17 .01.2011. HONBLE HIGH COURT HAS CONSIDERED AND HELD THE ISSU E AS UNDER:- 2. THE ASSESSEE IS ENGAGED IN MANUFACTURE AND SAL E OF WOOLEN GARMENTS. IT RECEIVED SUBSIDY FOR REPAYMENT OF LOAN TAKEN FOR BUILDING, PLANT AND MACHINERY UNDER THE CREDIT LI NKED CAPITAL SUBSIDY SCHEME UNDER TECHNOLOGY UPGRADATION FUND SCHEM E (TUFS) OF MINISTRY OF TEXTILES, GOVERNMENT OF INDIA . THE ASSESSEE CLAIMED THE SAID SUBSIDY TO BE CAPITAL RECEIPT BUT T HE ASSESSING OFFICER DID NOT ACCEPT THE SAME AND ADDED BACK THE SA ME TO THE INCOME OF THE ASSESSEE HOLDING THE SAME TO BE REVENUE RECEIPT. ON APPEAL, THE CIT(A) UPHELD THE PLEA OF THE ASSESSEE, W HICH VIEW HAS BEEN AFFIRMED BY THE TRIBUNAL WITH THE FOLLOWING OBSE RVATIONS:- HAVING REGARD TO THE AFORESAID, IN OUR VIEW, IT IS QUITE CLEAR THAT THE OBJECTIVE OF THE SUBSIDY SCHEME WAS TO ENHANCE THE TECHNOLOGY APPARATUS OF THE ASSESSEE BY ASSISTING IN ACQUIRING MACHINERY AND FURTHER THAT THE SUBSIDY SO RECEIVED WAS UTILIZED FOR REPAYMENT OF LOANS TAKEN BY THE ASSESSEE TO SET UP THE NEW UNIT, AS WAS THE INTENTION OF THE SUBSIDY. CONSIDERED IN THE AFORESAID LIGHT, IN OUR VIEW, THE FACTS OF THE INSTANT CASE ARE ON ALL FOURS COMPARABLE TO THOSE CO NSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICAL S LTD. (SUPRA) AND THEREFORE, A NATURAL COROLLARY IS THAT THE NATURE OF T HE SUBSIDY IN QUESTION IS CAPITAL. THEREFORE, BOTH ON THE ISSUE OF THE OBJECTIVE OF THE SCHEME AND ON THE UTILIZATION OF THE FUNDS RECEIVED AS SUBSIDY, THE SUBSIDY IS TO BE VIEWED AS CAPITAL IN NATURE HAVING REGARD TO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS & CHEMICAL LTD. (S UPRA). RELIANCE PLACED BY THE REVENUE ON THE CASE OF SAWHNEY STEELS AND PRESS WORKS LTD. & OTHERS (SUPRA), IN OUR VIEW, IS NOT APPROPRIATE HAVING REGARD TO THE AFORESAID FEATURES OF THE SCHEME, WHICH A RE NOT IN DISPUTE. MOREOVER, IN THE CASE OF SAWHNEY STEELS AND PRESS WOR KS LTD. & OTHERS (SUPRA), IT WAS FOUND AS A FACT THAT THE SUBSIDY WAS GIVEN TO MEET RECURRING EXPENDITURE AND WAS NOT FOR ACQUIRING A CAPITAL ASS ET. WHEREAS IN THE INSTANT CASE, ADMITTEDLY, THERE IS NO PROVISION IN T HE SCHEME TO GRANT SUBSIDY TO MEET ANY RECURRING EXPENDITURE AND NEITHE R SUCH A CASE HAS I.T.A. NO. 2105/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 5 OF 7 BEEN SET UP BY THE DEPARTMENT. THE ONLY OBJECTIONS OF THE DEPARTMENT ARE THAT THE SUBSIDY HAS BEEN GIVEN AFTER COMMENCEMENT OF PRODUCTION AND, SECONDLY THAT IT WAS FOR REPAYMENT OF LOANS. BOTH THE SE FACTORS DO NOT DISTRACT FROM THE NATURE OF THE SUBSIDY BEING TREATE D AS CAPITAL, AS EXPLAINED BY THE HONBLE SUPREME COURT IN THE CASE OF PONNI SUGARS CHEMICALS LTD. (SUPRA). 3. WE HAVE HEARD LEARNED COUNSEL FOR THE APPELLANT. 4. LEARNED COUNSEL FOR THE REVENUE SUBMITTED THAT THE SUBSIDY WAS NOT GIVEN AT THE TIME OF SETTING UP OF THE INDUSTRY BUT A FTER COMMENCEMENT OF PRODUCTION FOR REPAYMENT OF LOAN. IN SUCH SITUATION, THE AMOUNT SHOULD HAVE BEEN TREATED AS REVENUE RECEIPT, AS PER JUDGMENT OF THE HONBLE SUPREME COURT IN SAHNEY STEEL & PRESS WORKS LTD. & ORS. V. CIT (19 97) 228 ITR 253. 5. WE ARE UNABLE TO ACCEPT THE SUBMISSION. 6. THE PURPOSE OF SCHEME UNDER WHICH THE SUBSIDY IS GIV EN, HAS BEEN DISCUSSED BY THE TRIBUNAL. TO SUSTAIN AND PROVE THE C OMPETITIVENESS AND OVERALL LONG TERM VIABILITY OF THE TEXTILE INDUSTRY, THE CONCERNED MINISTRY OF TEXTILE ADOPTED THE TUFS SCHEME, ENVISAGING TECHNOLOGY UPGRADATION OF THE INDUSTRY. UNDER THE SCHEME, THERE WERE TWO OPTIONS, EITHER TO REIMBURSE THE INTEREST CHARGED ON THE LENDING AGENCY ON PURCHASE OF TECHNOLOGY UPGRADATION OR TO GIVE CAPITAL SUBSIDY ON THE INVEST MENT IN COMPATIBLE MACHINERY. IN THE PRESENT CASE, THE ASSESSEE HAS TAKEN TERM LOANS FOR TECHNOLOGY UPGRADATION AND SUBSIDY WAS RELEASED UNDE R AGREEMENT DATED 12.7.2005 WITH SMALL INDUSTRY DEVELOPMENT BANK OF IN DIA. THE RELEVANT CLAUSE OF THE AGREEMENT UNDER WHICH THE SUBSIDY WAS GIVEN IS A S UNDER:- PARA 8. - TO PREVENT MISUTILIZATION OF CAPITAL SUB SIDY AND TO PROVIDE AN INCENTIVE FOR REPAYMENT, THE CAPITAL SUBSIDY WIL L BE TREATED AS A NON INTEREST BEARING TERM LOAN BY THE BANK/FIS. THE R EPAYMENT SCHEDULE OF THE TERM LOAN HOWEVER WILL BE WORKED OUT E XCLUDING THE SUBSIDY AMOUNT AND SUBSIDY WILL BE ADJUSTED AGAINST THE TERM LOAN ACCOUNT OF THE BENEFICIARY AFTER A LOCK IN PERIOD OF THREE YEARS ON A PRO-RATE BASIS IN TERMS OF RELEASE OF CAPITAL SUBSI DY. THERE IS NO APPARENT OR REAL FINANCIAL LOSS TO A BORROWER SINCE THE COUNTERVAILING CONCESSION IS EXTENDED TO THE LOAN A MOUNT. 7. IN VIEW OF ABOVE, THE VIEW TAKEN IN SAHNEY STEEL & PRESS WORKS LTD. & ORS., COULD NOT BE APPLIED IN THE PRESENT CASE, AS IN SAID CASE THE SUBSIDY WAS GIVEN FOR RUNNING THE BUSINESS. FOR DETERMINING WHET HER SUBSIDY PAYMENT WAS REVENUE RECEIPT OR CAPITAL RECEIPT, CHARACTER OF RECEIPT IN THE HANDS OF THE ASSESSEE HAD TO BE DETERMINED WITH RESPECT TO THE PUR POSE FOR WHICH SUBSIDY IS GIVEN BY APPLYING THE PURPOSE TEST, AS HELD IN SAHNE Y STEEL & PRESS WORKS LTD. & ORS. ITSELF AND REITERATED IN LATER JUDGMENT IN CI T V. PONNI SUGARS & CHEMICALS LTD. & ORS. (2008) 306 ITR 392, REFERRED TO IN THE IM PUGNED ORDER OF THE TRIBUNAL. I.T.A. NO. 2105/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 6 OF 7 8. IN VIEW OF ABOVE, SINCE THE MATTER IS COVERED BY JUDGMENT OF THE HONBLE SUPREME COURT IN PONNI SUGARS & CHEMICALS LTD. & ORS . AGAINST THE REVENUE, NO SUBSTANTIAL QUESTION OF LAW ARISES. THUS WE FIND THAT ON IDENTICAL ISSUE THE MATTER HA S BEEN DECIDED IN FAVOUR OF THE ASSESSEE. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT AS HELD HEREINABOVE IN ORDER TO SUSTAI N COMPETITIVENESS IN THE DOMESTIC AS WELL AS INTERNAT IONAL MARKETS AND OVERALL LONG-TERM VIABILITY OF THE INDUSTRY, TH E CONCERNED MINISTRY ADOPTED THE TUFS SCHEME ENVISAGING TECHNOL OGY UPGRADATION OF THE INDUSTRY. HENCE, THE SUBSIDY REC EIVED IN THIS REGARD FALLS INTO CAPITAL FIELD. HENCE RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE WE SET ASIDE THE ORDER OF THE LD . CIT(APPEALS) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 5. AS THE ISSUE INVOLVED IN THE PRESENT CASE AS WEL L AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THAT OF THE C ASE OF GLOSTER JUTE MILLS LIMITED (SUPRA), WE RESPECTFULLY FOLLOW THE DECISIO N RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE SAID CASE A ND UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DIRECTING TH E ASSESSING OFFICER TO TREAT THE INTEREST SUBSIDY RECEIVED BY THE ASSESSEE UNDER TUFS AS CAPITAL RECEIPT NOT CHARGEABLE TO TAX. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 18, 2017. SD/- SD/- (A.T. VARKEY) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEM BER KOLKATA, THE 18 TH DAY OF SEPTEMBER, 2017 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-10, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. BSL LIMITED, 151, SARAT BOSE ROAD, KOLKATA-700 020 (3) COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOL KATA; I.T.A. NO. 2105/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 7 OF 7 (4) COMMISSIONER OF INCOME TAX ,KOLKAT A (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.