2021 (4) TMI 1153 - AT - Income Tax

Interest subsidy received by the appellant under Technology Upgradation Fund Scheme (TUFS) for Textile and Jute Industries - MAT computation u/s 115JB - reducing the amount of subsidy from the book profit while computing u/s 115JB - HELD THAT - As relying on own case 2019 (2) TMI 1888 - ITAT AHMEDABAD , we consider that issue raised in grounds no. 1 to 1.3 as above covered in favour of the assesse after following the decision of Co-ordinate Bench as supra that the interest subsidy is required to be treated as capital receipt of non-taxable nature. Therefore, similar to the direction laid down by the Co-ordinate Bench for A.Y. 2012-13, we restore this issue to the file of the A.O. for verification and to exclude the subsidy from the ambit of taxation as directed in the decision of the Co-ordinate Bench. Therefore, these grounds of appeal of the assessee are allowed for statistical purpose.

Summary

Issues:
1. Adjudication of additional grounds raised by the appellant.
2. Treatment of interest subsidy as capital receipt.
3. Applicability of judicial decisions on reducing interest subsidy from taxable income.
4. Entertaining additional grounds in cross objections.
5. Verification of factual aspects regarding interest subsidy.

Adjudication of Additional Grounds:
The appellant filed a Miscellaneous Application against the ITAT order, contending that certain grounds were not adjudicated. The ITAT noted that the appeal was already decided, and the additional grounds had become academic. Referring to a previous decision by the ITAT on similar issues, the ITAT held that the grounds were not adjudicated. The ITAT considered the legal position regarding raising additional grounds in cross objections and allowed the additional ground for adjudication based on relevant facts.

Treatment of Interest Subsidy:
The appellant argued that interest subsidy received under the Technology Upgradation Fund Scheme should be treated as a capital receipt and not taxable income. The ITAT agreed with the appellant, citing Supreme Court decisions and legislative amendments. The ITAT directed the Assessing Officer to verify the factual aspects of the subsidy and exclude it from taxation based on the nature of the receipt.

Applicability of Judicial Decisions:
The ITAT found merit in the appellant's plea regarding the treatment of interest subsidy as a capital receipt, supported by Supreme Court decisions and legislative amendments. The ITAT agreed with the appellant's contention that the subsidy should not be considered taxable income based on the purpose of the scheme and judicial precedents.

Entertaining Additional Grounds in Cross Objections:
The ITAT considered the legal position on raising additional grounds in cross objections and allowed the additional ground for adjudication. Referring to a previous case, the ITAT emphasized that there is no bar to raising legal issues in cross objections, treating them akin to regular appeals. The ITAT highlighted the importance of correctly assessing the tax liability of the assessee.

Verification of Factual Aspects:
The ITAT directed the Assessing Officer to verify the relevant factual aspects concerning the quantum of interest subsidy received by the appellant. The ITAT emphasized the importance of factual correctness in determining the tax treatment of the subsidy. The ITAT restored the issue to the AO for verification and exclusion of the subsidy from taxation based on factual findings.

In conclusion, the ITAT allowed the appellant's Miscellaneous Application, directing the exclusion of interest subsidy from taxation as a capital receipt. The decision was based on legal precedents, legislative amendments, and the factual verification to be conducted by the Assessing Officer.