DCIT 9(3)(1), MUMBAI V. DICITEX FURNISHING LTD, MUMBAI

ITA 4374/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7917 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 24-03-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 16-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital receipt; Revenue expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUM BAI , , , , ! BEFORE SHRI RAJENDRA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.2148/MUM/2015 & 4374/MUM/2015 ( '# $# / ASSESSMENT YEAR: 2011-12 & 2012-13) DY. COMMISSIONER OF INCOME TAX 9(3)(1) 418, AAYAKAR BHAVAN, 4 TH FLOOR, M.K.MARG, MUMBAI 400 020 / VS. M/S. DICITEX FURNISHINGS LTD. 301-B, 3 RD FLOOR, M BUILDING, PALM COURT COMPLEX, MALAD LINK ROAD, MALAD WEST, ./ ./PAN/GIR NO. : AAACD7780R ( /APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 24.03.2017 /DATE OF PRONOUNCEMENT: 24.03.2017 / O R D E R PER AMARJIT SINGH, JM: THE REVENUE HAS FILED THE ABOVE MENTIONED APPEALS A GAINST THE ORDER DATED 03.12.2014 FOR THE A.Y.2011-12 AND 23.04.2015 FOR THE A.Y.2012-13 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)- 16, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)]. ITA NO.2148/MUM/2015:- REVENUE BY: SHRI RAJGURU M. V. ASSESSEE BY: SHRI HARIOM TULSIYAN & SHRI RAHUL BAGARIA ITA NO.2148&4374/M/2015 A.Y.2011-12 & 2012-13 2 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF INTEREST SUBSIDY AMOUNTING TO RS.1 ,04,54,061/- TREATING THE SAME AS CAPITAL RECEIPT BY RELYING ON THE SUPREME COURT DECISION IN THE CASE OF SAHNEY STEEL AND PRES S WORKS VS. CIT (228 ITR 253 (SC)), WITHOUT COUNTERING THE FIND INGS OF THE A.O. IN PARA 5.5 OF THE ASSESSMENT ORDER THAT ASSES SEE HAD RECEIVED SUBSIDY IN THE FORM OF 5% REDUCTION IN THE RATE OF INTEREST AND INTEREST BEING A REVENUE EXPENDITURE A LLOWABLE UNDER THE IT ACT, ANY SUBSIDY RELATING TO INTEREST IS ALSO TO BE TREATED AS REVENUE ITEM. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL A T ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A)-16, MUMBAI ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A SSESSING OFFICER BE RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY FILED THE RETURN OF INCOME FOR THE A.Y.2011-12 ON 29.09.2011 DECLARING TOTAL LOSS TO THE TUNE OF (-)RS.34,15,123/-. THE RETURN WAS PROC ESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE CAS E WAS SELECTED FOR SCRUTINY. THEREAFTER NOTICE U/S.143(2) OF THE ACT WAS ISSUED ON 31.07.2012 WHICH WAS SERVED UPON THE ASSESSEE. THEREAFTER, TH E CASE WAS ASSIGNED TO THE PRESENT ASSESSING OFFICER BY VIRTUE OF LETTER N O.CIT-8/ASSIGNMENT OF CASES/2013-14 DATED 11.07.2013 BY THE CIT-8. SUBSE QUENTLY, FRESH NOTICE U/S.142(1) OF THE ACT WAS ISSUED ALONGWITH A DETAIL ED QUESTIONNAIRE AND THE SAME WAS SERVED UPON THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY WAS ENGAGED IN THE PRIMARY BUS INESS OF MANUFACTURING AND TRADING OF CLOTH AND YARN. DURIN G THE YEAR UNDER ASSESSMENT, IT WAS OBSERVED BY THE ASSESSING OFFICE R THAT THE ASSESSEE HAS ITA NO.2148&4374/M/2015 A.Y.2011-12 & 2012-13 3 AVAILED TECHNOLOGY UPGRADATION FUND SCHEME (HEREAFT ER REFERRED AS TUFS) FORMULATED BY THE GOVERNMENT OF INDIA AND RECEIVED INTEREST SUBSIDY OF RS.1,04,54,061/- WHICH WAS CLAIMED AS CAPITAL RECEI PT BY TRANSFERRING THE SAME TO THE CAPITAL RESERVE ACCOUNT OF TUF INTEREST . THE NOTICE WAS GIVEN TO THE ASSESSEE ASKING TO EXPLAIN WHY INTEREST SUBS IDY OF RS.1,04,54,061/- SHOULD NOT BE TREATED AS REVENUE RECEIPT INSTEAD OF CAPITAL RECEIPT. THEREAFTER, THE ASSESSING OFFICER RELIED UPON THE N UMBER OF AUTHORITIES MENTIONED IN THE ASSESSMENT ORDER AND TREATED THE T UFS TO THE TUNE OF RS.1,04,54,061/- AS REVENUE RECEIPT AND ASSESSED TH E INCOME TO THE TUNE OF RS.70,38,940/-. BOOK PROFIT U/S.115JB OF THE ACT W AS ASSESSED TO THE TUNE OF RS.83,66,337/-. THE ASSESSEE WAS NOT SATISFIED WITH THE ORDER PASSED BY THE ASSESSING OFFICER, THEREFORE, FILED AN APPEAL B EFORE THE CIT(A) AND THE CIT(A) TREATED THE TUFS TO THE TUNE OF RS.1,04,54,0 61/- AS CAPITAL RECEIPT. HENCE FEELING AGGRIEVED THE REVENUE HAS FILED THE P RESENT APPEAL BEFORE US. ISSUE NO.1:- 4. UNDER THIS ISSUE, THE REVENUE HAS CHALLENGED THE TREATMENT OF SUBSIDY OF RS.1,04,54,061/- AS CAPITAL RECEIPT UNDER THE TU FS FORMULATED BY THE GOVERNMENT OF INDIA. THE LEARNED REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE CIT(A) HAS TREATED THE SAID SUBSIDY AS CAP ITAL RECEIPT WITHOUT COUNTER FINDING OF THE ASSESSING OFFICER MENTIONED IN PARA NO.5.5, THEREFORE, THE FINDING OF THE CIT(A) ON THIS ISSUE IS WRONG AGAINST LAW AND FACTS WHICH IS LIABLE TO BE SET ASIDE. HOWEVER, ON THE OTHER HAND LEARNED REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE ON THE ORDER PASSED BY THE CIT(A) IN QUESTION. BEFORE GOING FURTHER, IT IS NE CESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD:- ITA NO.2148&4374/M/2015 A.Y.2011-12 & 2012-13 4 4. AFTER CAREFUL PERUSAL OF THE ASSESSMENT ORDER A ND WRITTEN SUBMISSIONS OF THE A/R OF THE APPELLANT IT HAS BEEN OBSERVED THAT THE ISSUE IS DIRECTLY COVERED WITH THE JUDGEME NT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SHAM LAL BANSAL (2011) 11 TAXMAN.COM 369 AS THE ISSUE BE FORE THE HIGH COURT WAS THAT WHETHER SUBSIDY RECEIVED FOR RE PAYMENT OF LOAN TAKEN FOR BUILDING AND PLANT AND MACHINERY UNDER TUFS SCHEME OF GOVT. IS A CAPITAL OR REVENUE RECEIP T. THEIR LORDSHIP OF HONBLE PUNJAB & HARYANA HIGH COURT HAS HELD WHILE RELYING ON THE JUDGMENT OF HONBLE SUPREME CO URT IN THE CASE OF PONNI SUGAR & CHEMICALS LTD. (2008) 306 ITR 392 THAT THE SUBJECT SUBSIDY IS A CAPITAL RECEIPT. HENCE, RESPECTFULLY FOLLOWING THE JUDGMENT OF SHAM LAL BAN SAL AND PONNI SUGAR & CHEMICALS LTD. DISCUSSED SUPRA IT IS HELD THAT THE SUBSIDY RECEIVED BY THE APPELLANT FOR REPAYMENT OF LOAN IN A CAPITAL RECEIPT. THE GROUNDS OF APPEAL NO.1 BEIN G THE ONLY GROUNDS OF APPEAL IS TREATED AS ALLOWED. 5. ON APPRAISAL OF THE ABOVE MENTIONED FINDINGS, IT IS CLEAR THAT THE CIT(A) HAS PASSED THE ORDER ON THE BASIS OF THE FIN DING OF THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SHAM LAL BANSAL (2011) 11 TAXMAN.COM 369 HAS HELD WHILE RELYING ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF PONNI SUGAR & CHEMICALS LTD. (2008) 306 ITR 392 THAT THE SUBSIDY RECEIVED FOR PA YMENT OF LOAN TAKEN FOR BUILDING AND PLAN AND MACHINERY UNDER TUFS SCHEME O F THE GOVERNMENT WAS A CAPITAL RECEIPT. THE HONBLE PUNJAB & HARYAN A HIGH COURT HAS ALSO ITA NO.2148&4374/M/2015 A.Y.2011-12 & 2012-13 5 RELIED UPON THE FINDING OF THE HONBLE SUPREME COUR T IN THE CASE OF PONNI SUGAR & CHEMICALS LTD. (2008) 306 ITR 392. SUBSEQU ENTLY, IN CASE OF THE ASSESSEES OWN CASE THE HONBLE INCOME TAX APPELLAT E TRIBUNAL, MUMBAI BENCH HAS ALSO GAVE THE FINDING IN ITA NO.4375/MUM/ 2015 FOR A.Y.2012- 13 AND ITA NO.2147/MUM/2012 FOR A.Y.2011-12 DATED 2 3.09.2016 IN WHICH THE INTEREST SUBSIDY UNDER THE TUFS HAS TREAT ED AS CAPITAL RECEIPT. IN AN ANOTHER CASE DECIDED BY THE HONBLE INCOME TAX A PPELLATE TRIBUNAL IN ITA NO.5644/MUM/2010 AND ITA NO.296&4154/MUM/2012 F OR A.Y.2005- 06, 2007-08 AND 2009-10 DATED 23.12.2015 IN CASE TI TLED AS M/S. SVG FASHIONS LTD. (FORMERLY KNOWN AS DEEPAK SUITINGS LI MITED) VS. DCIT 4(3), MUMBAI, IT IS SPECIFICALLY HELD THAT THE INTE REST SUBSIDY GRANTED UNDER TUF SCHEME WAS CAPITAL IN RECEIPT. IN VIEW OF THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS PASSED THE ORDE R IN QUESTION JUDICIOUSLY AND CORRECTLY WHICH IS NOT REQUIRED TO BE INTERFERE WITH AT THIS APPELLATE STAGE. HENCE THIS ISSUE IS DECIDED IN FAVOUR OF TH E ASSESSEE AGAINST THE REVENUE. ISSUE NO.2 & 3:- 6. ISSUE NO.2 & 3 ARE FORMAL IN NATURE WHICH NOWHER E REQUIRE ANY ADJUDICATION. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ITA NO.4374/MUM/2015:- 8. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- ITA NO.2148&4374/M/2015 A.Y.2011-12 & 2012-13 6 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF INTEREST SUBSIDY AMOUNTING TO RS.1 ,29,19,397/- TREATING THE SAME AS CAPITAL RECEIPT BY RELYING ON THE SUPREME COURT DECISION IN THE CASE OF SAHNEY STEEL AND PRES S WORKS VS. CIT (228 ITR 253 (SC)), WITHOUT COUNTERING THE FIND INGS OF THE A.O. IN PARA 5.5 OF THE ASSESSMENT ORDER THAT ASSES SEE HAD RECEIVED SUBSIDY IN THE FORM OF 5% REDUCTION IN THE RATE OF INTEREST AND INTEREST BEING A REVENUE EXPENDITURE A LLOWABLE UNDER THE IT ACT, ANY SUBSIDY RELATING TO INTEREST IS ALSO TO BE TREATED AS REVENUE ITEM. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A)-16, MUMBAI ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE A SSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL A T ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 9. THE BRIEF FACTS OF THE CASE ARE QUITE SIMILAR TO THE FACTS OF THE CASE AS MENTIONED IN ITA NO.2148/MUM/2015 MENTIONED ABOVE, HOWEVER THE FIGURES ARE DIFFERENT. SINCE THE MATTE R OF CONTROVERSY HAS ALREADY BEEN ADJUDICATED WHILE DECIDING THE ISSUE N O.1 IN ITA NO.2148/MUM/2015 VIDE WHICH THE INTEREST SUBSIDY UN DER TUF SCHEME FORMULATED BY THE GOVERNMENT OF INDIA HAS BE EN TREATED AS CAPITAL IN NATURE, THEREFORE IN VIEW OF THE OBSERVA TIONS MADE IN THE ABOVE SAID APPEAL THE PRESENT APPEAL IS ALSO HEREBY DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 10. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S HEREBY DISMISSED. ITA NO.2148&4374/M/2015 A.Y.2011-12 & 2012-13 7 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE HEREBY ORDERED TO BE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MARCH, 2017 . SD/- SD/- (RAJENDRA) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 24 TH #$ , 2017 MP & '$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. , , , , / DR, ITAT, MUMBAI 6. + -$ / GUARD FILE. / BY ORDER, ! ! //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI