2018 (7) TMI 2100 - AT - Income Tax

Characterization of income - interest subsidy received by the assessee under Technology Upgradation Fund Scheme of the Government of India - capital receipt or revenue receipt - HELD THAT - We find that the ld. Commissioner of Income Tax (Appeals) s observation is correct that the TUFs subsidy is to enhance the technology apparatus of the companies in the textile industry operating in India. As rightly held by the ld. Commissioner of Income Tax (Appeals) identical issues have been decided in favour of the assessee by SHAM LAL BANSAL 2011 (1) TMI 409 - PUNJAB AND HARYANA HIGH COURT holding that the interest subsidy as capital receipt and not a revenue receipt - Accordingly respectfully following the precedent we do not find any infirmity in the order of the ld. Commissioner of Income Tax (Appeals). Accordingly we uphold the same. Addition u/s 2(24)(x) r.w.s. 36(l)(va ) - assessee has not paid the employees contribution to the Provident Fund within the time allowed under the P.F. Act. - HELD THAT - Commissioner of Income Tax (Appeals) noted that the employees contribution to the provident fund though paid after the due date as specified in P.F. Act but was paid before the due date i.e. the due date prescribed under section 139(1) of the Income Tax Act 1961. In this regard he referred to the decision of Essae Teraoka (P.) Ltd. vs. DCIT 2014 (3) TMI 386 - KARNATAKA HIGH COURT - Accordingly the ld. Commissioner of Income Tax (Appeals) decided the issue in favour of the assessee.Upon hearing both the counsel and perusing the records we find that the issue is covered in favour of the assessee.

Summary

Issues:
1. Whether the interest subsidy received under the Technology Upgradation Fund Scheme is a capital or revenue receipt.
2. Whether the disallowance made by the Assessing Officer for delayed payment of employees' provident fund contribution is justified.

Analysis:

Issue 1:
The Assessing Officer treated the interest subsidy received under the Technology Upgradation Fund Scheme as a revenue receipt. However, the Commissioner of Income Tax (Appeals) disagreed, stating that the subsidy was meant to enhance technology in the textile industry. The Commissioner cited various decisions supporting the capital nature of such subsidies and ruled in favor of the assessee. The Appellate Tribunal concurred with this view, noting that similar issues had been decided in favor of the assessee by the Punjab and Haryana High Court. As a result, the Tribunal upheld the Commissioner's decision, dismissing the Revenue's appeal.

Issue 2:
The Assessing Officer disallowed the employees' provident fund contribution as it was paid after the specified period under the Provident Fund Act. However, the Commissioner of Income Tax (Appeals) found that the contribution was paid before the due date under the Income Tax Act, referring to a relevant High Court decision. The Appellate Tribunal, after considering the arguments and records, upheld the Commissioner's decision in favor of the assessee, noting the absence of any contradictory decision from the jurisdictional High Court. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner's order.

In conclusion, the Appellate Tribunal upheld the Commissioner of Income Tax (Appeals)'s decisions on both issues, ruling in favor of the assessee and dismissing the Revenue's appeal.