2023 (6) TMI 877 - AT - Income Tax

Grant received under Sampoorna Gramin Swarojgar Yogna ( SGSY ) from Government - Nature of receipt - revenue or capital receipt - HELD THAT - This issue is covered in favour of the assessee in assessee s own case by the Co-ordinate Bench of this Tribunal 2016 (11) TMI 526 - ITAT AHMEDABAD held that the sum receipt on account of grant under SGSY as not revenue receipt. Depreciation claimed on the portion of plant and machinery acquired through grant/subsidy received from NDDB under 70% loan and 30% grant scheme - HELD THAT - This issue is also covered in favour of the assessee in assessee s own case 2015 (6) TMI 517 - ITAT AHMEDABAD for the Assessment Years 2002-03 to 2007-08 relying upon the judgment of the Kerala High Court in the case of Sun fiber Optics (P.) Ltd. 2012 (6) TMI 502 - KERALA HIGH COURT and also assessee s own case for the AY 2010-11 - Decided in favour of assessee. Disallowance u/s. 80P(2)(d) - interest paid by the assessee to various co-operative banks/ Societies/Bodies exceeded the income earned from its investment with Bank/Co-operative Societies - HELD THAT - In the present case, own funds to the tune of Rs. 332.41 crores available as per the balance sheet as against, this the investments by way of fixed deposits with Cooperative Banks and Societies was Rs. 68.50 crores only. Thus the said deposits is made out of own non-interest bearing funds. Therefore the disallowance u/s. 80P(2)(d) is unwarranted and liable to be allowed.

Summary

Issues Involved:
1. Deletion of addition on account of grant received under Sampoorna Gramin Swarojgar Yogna (SGSY).
2. Deletion of addition on account of depreciation claimed on plant and machinery acquired through grant/subsidy.
3. Disallowance under Section 80P(2)(d) of the Income Tax Act.
4. Taxation of interest earned on SGSY grant.

Summary:

1. Deletion of Addition on Account of Grant Received under SGSY:
The Revenue challenged the deletion of Rs. 1,85,04,494/- received under the Sampoorna Gramin Swarojgar Yogna (SGSY) by the Commissioner of Income Tax (Appeals). The Tribunal found that the issue was already decided in favor of the assessee in their own case for the Assessment Year 2006-07. The grant was received for specific objectives under a Memorandum of Understanding and was not to be treated as a revenue receipt. Therefore, the Tribunal upheld the deletion of the addition and dismissed the Revenue's grounds on this issue.

2. Deletion of Addition on Account of Depreciation Claimed on Plant and Machinery Acquired through Grant/Subsidy:
The Revenue contested the deletion of depreciation on plant and machinery acquired through a 70% loan and 30% grant scheme from NDDB. The Tribunal noted that this issue had been resolved in favor of the assessee in previous years (Assessment Years 2002-03 to 2007-08 and 2010-11). Following these precedents, the Tribunal upheld the deletion of the addition and dismissed the Revenue's grounds on this issue.

3. Disallowance under Section 80P(2)(d) of the Income Tax Act:
The Revenue appealed against the deletion of Rs. 1,88,18,927/- disallowed under Section 80P(2)(d). The Tribunal observed that the assessee had sufficient own funds to cover the investments made in fixed deposits with Cooperative Banks and Societies. Therefore, the disallowance under Section 80P(2)(d) was unwarranted. The Tribunal dismissed the Revenue's grounds on this issue, following the decisions in the assessee's own case for previous years.

4. Taxation of Interest Earned on SGSY Grant:
The assessee's cross-objection concerned the interest of Rs. 2,40,043/- earned on the SGSY grant, which was taxed as revenue receipt. The Tribunal held that the interest earned on the SGSY grant, kept in a separate bank account for specific purposes, should be treated as part of the grant. Since the grant itself was not considered income, the interest earned thereon was also not liable to be taxed. The Tribunal allowed the assessee's cross-objection on this issue.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, upholding the decisions made in favor of the assessee on all contested issues.