2023 (6) TMI 611 - AT - Income Tax

Nature of receipt - interest subsidy received under technology upgradation fund scheme - revenue or capital receipt - HELD THAT - As decided in assessee own case 2020 (3) TMI 942 - ITAT MUMBAI issue is squarely covered in favour of the assessee wherein it has been held that interest subsidy received under technology upgradation fund scheme, though credited in the net off against the interest expenditure in the books of account is still capital in nature and therefore not chargeable to tax. Further the argument of the learned departmental representative has also been negated about the applicability of explanation 10 to section 43 (1) of the act by the decision of the coordinate bench in case of orbit exports 2020 (9) TMI 617 - ITAT MUMBAI . In view of this both the grounds of appeal raised by the learned assessing officer are dismissed.

Summary

Issues:
The main issue in the assessment was whether the subsidy received by the assessee for technology upgradation fund is a capital receipt not chargeable to tax or a revenue receipt chargeable to tax.

Assessee's Grounds:
1. The learned CIT(A) erred in not directing the learned AO to consider the correct amount of subsidy under Technology Upgradation Fund Scheme.
2. The learned CIT(A) erred in not directing the learned AO to reduce TUF subsidy from Profit as shown in the statement of profit and loss while computing book profit.
3. The learned CIT(A) erred in not admitting the ground of appeal regarding incentives under Focus Market Scheme as a capital receipt not chargeable to tax.
4. The learned CIT(A) erred in not admitting the ground of appeal regarding excluding incentives under Focus Market Scheme from Profit while computing book profit.

Summary of Judgment:
The Deputy Commissioner of Income Tax appealed against the appellate order passed by the Commissioner of Income Tax (Appeals) regarding interest subsidy received under the Technology Upgradation Fund Scheme. The main issue was whether the subsidy is a capital or revenue receipt. The learned AO considered it as a revenue receipt, but the learned CIT(A) found it to be a capital receipt based on previous decisions. The learned departmental representative argued for it to be a revenue receipt, citing the purpose of the subsidy and relevant legal provisions. The authorized representative argued in favor of the assessee, citing previous decisions and the nature of the subsidy. The coordinate bench had previously held that the subsidy is a capital receipt, which was upheld in this case. The grounds of appeal raised by the AO were dismissed, and the cross objections by the assessee were also dismissed. The decision favored the assessee, confirming that the interest subsidy is a capital receipt not chargeable to tax.

Order pronounced in the open court on 12.06.2023.