TaxTMI 
TaxTMI 
2019 (5) TMI 1782
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.... 2. At the outset it was pointed out that in all the captioned appeals, this was the second round before us. That in the first round of appeal before the I.T.A.T., the assessee had raised an additional ground vis-à-vis the treatment of interest reimbursement under TUFS (Technology Upgradation Fund Scheme),whether capital or revenue in nature, for all the impugned years. That the I.T.A.T. in its consolidated order dated 4.5.2018 in ITA No.681/Chd/2017 & Others, had remanded the issue to the file of the Ld. CIT(A), noting that since the ground had been taken for the first time before it, the benefit of going through the issues had been denied to the Revenue. That the Ld.CIT(A) was directed to pass a speaking order in all the years in a comprehensive manner. That accordingly, the CIT(A) heard the assessee on the issue and allowed the assessee's claim of treating the interest reimbursement under TUF Scheme as capital in nature. That further the Ld.CIT(A) held that the assessee would not be entitled for interest on the refund of tax if any on account of allowance of its aforesaid claim. 3. It was pointed out that aggrieved by the same, both the Revenue and the assessee have co....
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.... competitive, costeffective and quality oriented, the Government of India launched the Technology Upgradation Fund Scheme for textile, jute and cotton and ginning & pressing industries w.e.f. 01/04/1999 for a period of five years i.e. up to 31/03/2004 which was subsequently extended up to 31/03/2007. 6. The said scheme was stated to be aimed at meeting a part of the capital investment of the eligible undertakings in modernising their plant and machinery. With effect from 01/01/2002, an option was provided to the eligible entrepreneurs to avail the incentive either in the form of Credit Linked Capital Subsidy (CLCS) or by way of 5% interest reimbursement under the TUF Scheme. The methodology as applicable to the appellant under the scheme was that of reimbursement of five (5) percentage points provided on interest charged by the lending institutions on a project of technology upgradation in conformity with the scheme. It was further stated that according to the said scheme applicable to the appellant company, interest paid to banks/financial institutions was divided into two parts, with one part incurred by the company having been booked as an expense and the part reimburse....
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....decision on the matter, the Hon'ble High Court of Punjab & Haryana referred to the two conclusive decisions of the Hon'ble Supreme Court on the issue of taxability of subsidies viz Sahney Steel & Press Works Ltd., Vs. CIT [1997] 94 taxman 368 and CIT, Madras Vs. Ponni Sugars & Chemicals Ltd.,[2008] 174 taxman 87. It was categorically held therein that ".... For determining whether 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 purpose for which subsidy is given by applying the purpose test, as held in Sahney Steel & Press Works Ltd., & Ors. itself and reiterated in later judgement in CIT Vs. Ponni Sugars & Chemicals Ltd. & Ors. (2008) 306ITR 392, referred to in the impugned order of the Tribunal. (Chandigarh ITAT, order dated 22/09/2009 in ITA No. 639/2009 Emphasis supplied). In view of the above, since the matter is covered by judgement of the Hon'ble Supreme Court in Ponni Sugars & Chemicals Ltd. & Ors. against the Revenue, no substantial question of law arises. The appeal is dismissed." 8. Very recently, on June 18, 2018, the Hon'ble High our of Calcut....
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.... the latest technology to enhance their viability and competitiveness in the domestic and international markets. The preamble to the scheme recognised that in the post-quota regime, the industry had to become competitive, cost effective and quality oriented." "7. The avowed purpose of the scheme was to induce the entrepreneur to undertake investment in modernising the plant and machinery and assets and the objectives of the scheme clearly spelt out such purpose. In the context of the scheme, it could never have been understood to imply that the subsidy was for the purpose of the day-to-day business of the assessee or any entrepreneur qualified to receive it. The subsidy was clearly for the purpose of upgrading the machinery and plant and for acquiring capital assets. In the light of the judgements which were carried to the Commissioner (Appeals), the Commissioner ought to have construed the quantum of subsidy received by the assessee to be a capital receipt." [Emphasis supplied]. "8. The judgements relied upon before the Commissioner, particularly, the Supreme Court judgements in Sahney Steel & Press Works Ltd. and Ponni Sugars & Chemicals Ltd. (supra) were referr....
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.... High Court , held that for the purpose of determining the nature of the subsidy ,the purpose for which the subsidy was given was to be determined and relied upon the decision of the Hon'ble Supreme Court in the case of Sahni Steel & Press Works Ltd. Vs. CIT (1997) 94 Taxman 368 and CIT Vs. Ponni Sugars & Chemicals Ltd. (2008) 174 Taxman 87 for the aforesaid proposition. Thereafter the Hon'ble High court noted that the purpose of the TUF Scheme was to induce the entrepreneur to undertake investment in modernizing the plant and machinery and was definitely not for the purpose of day to day business of the assessee. Accordingly the Hon'ble High Court held that the nature of the subsidy was capital. 11. In the case of Gloster Jute Mills(supra),copy of order of which was also placed before us, the Hon'ble High Court examined the features of the TUF Scheme and found the purpose was to induce the entrepreneur to undertake investment in modernizing the plant and machinery and assets and, therefore was clearly a capital receipt. 12. The aforesaid two decisions relied upon by the CIT(A), we find therefore, have already dealt with the nature of the subsidy received under TUFS S....
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....gment regarding treatment and consequent taxability of interest reimbursement under TUF Scheme. He, therefore, held that should his order holding the interest under TUF Scheme as capital in nature result in a refund of excess tax, no interest be paid on the same since it was the assessee company itself which was solely responsible for paying excess tax by treating the interest reimbursement as taxable receipt. The relevant findings of the CIT(A) at para Nos. 9 & 10 of his order are as under: "9. In view of the aforesaid, this appellate authority cannot be detained any longer in treating the reimbursement of interest under the TUF scheme of the Ministry of Textiles, Government of India, as capital receipt, ex cathedra. However, it is deemed necessary to record here that the appellant company had voluntarily offered the interest reimbursement to tax, while filing its return of income. No claim was made during the assessment proceedings regarding the mistake committed by the appellant qua the reimbursement ofinterest under the TUF Scheme. Even in the subsequent appellate proceedings, this ground was never raised. However, when the appellant chose to challenge the appellate or....
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.... perused the orders of the authorities below. It is an admitted fact that the Ld.CIT(A) had directed that no interest be granted on the refund generated on account of treatment of interest subsidy received under TUFS, as capital in nature, without giving any opportunity of hearing to the assessee. We have also noted that the assessee has vehemently argued that it was entitled to interest on refund and relied upon various case laws and judgments of the High Court and even of the Hon'ble Supreme Court in support of its contention .Our attention was drawn to the decision of the hon'ble apex court in the case of Tata Chemicals Ltd.(supra) at para30-31 as under: "30. The refund becomes due when tax deducted at source, advance tax paid, self assessment tax paid and tax paid on regular assessment exceeds tax chargeable for the year as a result of an order passed in appeal or other proceedings under the Act. When refund is of any advance tax (including tax deducted/collected at source), interest is payable for the period starting from the first day of the assessment year to the date of grant of refund. No interest is, however, payable if the excess payment is less than 10 perc....
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.... foremost requirement of sub-section (2) of Section 244A is that the proceedings resulting into refund should have been delayed for the reasons attributable to the assessee, whether wholly or in part. If such requirement is satisfied, to the extent of the period of delay so attributable to the assessee, he would be disentitled to claim interest on refund. The act of revising a return or raising a claim during the course of the assessment proceedings cannot be said to be the reasons for delaying the proceedings which can be attributable to the assessee. Mere fact that the claim came to be granted by the Appellate Commissioner, would not change this position. In essence, what the Commissioner (Appeals) did was to allow a claim which in law, in his opinion, was allowable by the Assessing Officer. In other words, by passing order in appeal, he merely recognized a legal position whereby, the assessee was entitled to claim certain benefits of reduced tax. Surely, the fact that the assessee had filed the appeal which ultimately came to be allowed by the Commissioner, cannot be a reason for delaying the proceedings which can be attributed to the assessee. 17. The Department does n....