TaxTMI 
TaxTMI 
2016 (3) TMI 726
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....business of dying printing and processing of fabrics. The return of income was filed on 26.10.2007 declaring a loss of Rs. 1,79,12,287/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter 'the Act') and thereafter, the assessment was completed u/s 143(3) of the Act on 24.12.2009 computing loss at Rs. 99,37,978/- as against returned loss of Rs. 1,79,12,287/- as declared by the assessee after making certain addition/disallowance. On appeal, the ld. CIT (A) partly allowed the appeal. 4. Now the assessee, being aggrieved, is in appeal before us by taking the following ground :- "1. That the Ld. Commissioner of Income Tax (Appeals) [Ld. CIT(A)] has erred on facts and in law in sustaining the addition of Rs.....
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....ry and also relied on the judgment of the Hon'ble Supreme Court in the case of CIT vs. Ponni Sugars and Chemicals Ltd. - 306 ITR 392 (SC) and also CIT vs. Triumala Bricks and Tiles Factory - 217 ITR 547 (AP). The AO observed that the case laws relied upon by the assessee are not applicable in the present case of the assessee on the facts of the case and after relying on certain judicial pronouncements, he treated the aforesaid amount of Rs. 74,02,171/- as revenue receipt and added back to the income of the assessee. 6. Aggrieved, the assessee filed an appeal before the ld. CIT (A) on this issued and the ld. CIT (A) confirmed the addition by observing as under :- "2.2 I have also gone through the submission by the Ld AO. The crux....
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.... (1997) 220 ITR 626 (Mad) There are also other cases referred by him and it is no need to mention a" the cases. From the facts of the present case and also from the judicial decision as pronounced by the High Courts and the Apex Court, and the Apex Court, the ground of the appellant does not get substantiated. An examination of commentaries thereon it was held that over about 50 years since inception of the present statute, the Courts with very few exceptions have recognized such type of grant issued by the Govt. Authority as profits supplementing and not as capital receipt. Therefore, it is concluded that the grant received is a Revenue receipt and the action of the AO does not require interference of any sought from this office."....
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....se for which the subsidy is granted. In other words, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. If the object of the subsidy is to enable the assessee to run the business more profitably then the receipt is on revenue account. On the other hand, if the object of the assistance under the subsidy scheme is to enable the assessee to set up a new unit or to expand an existing unit then the receipt of the subsidy would be on capital account." He also relied on the decision of CIT vs. Tirumala Bricks & Tiles Factory reported in 217 ITR 547 (AP), wherein it was held that subsidy for setting up/ expansion of plant is a capital receipt. The ld. AR further submitted tha....
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....ower authorities rightly held the subsidy as revenue receipt and pleaded not to interfere with the orders of the authorities below on this issue. 9. We have heard both the sides and perused the materials. The sole issue that is before us is whether the receipt of Rs. 74,02,161/- from Ministry of Textile by the assessee was a capital receipt or a revenue receipt. Both the authorities below have held the receipt as revenue receipt and added the same to the income of the assessee. Before us, the ld. AR pointed out that the subsidy was received from the Ministry of Textile for the purchase of plant and machinery and it was received under the Technology Upgradation Fund Scheme (TUF Scheme) against the purchase of new machinery. The very nomen....