INCOME TAX ACT, 1961

Section 4

Income - Capital or revenue receipt - Subsidy - Textile manufacturer receiving subsidy under TUFS scheme

Assessee was a textile manufacturer and it received Technology Upgradation Fund, pursuant to a scheme drawn by Union Textile Ministry. The payment of invasion of amounts by deferred repayment of interest, as it were. Technology Upgradation Fund programme, amounts were to be treated as non-interest bearing term loans by the Bank and the repayment was to be worked out excluding the subsidy amount and the subsidy to be adjusted against the term loan account of the beneficiary after a lock in period of three years. AO disallowed the amount and sought to tax it under the ground that the subsidy was a taxable income as it fell into revenue stream. Held: Central Government gave the subsidy to enhance Indian export potential in the international market. It was not granted to meet the cost of expenditure to meet the competition of the Indian textile market. Tribunal held that amount was not an export incentive, but rather capital receipt and therefore, not taxable. Court was of the opinion that amount was received as capital stream and therefore, not taxable.

REFERRED : CIT v. Ponni Sugars & Chemicals Ltd. (2008) 306 ITR 392 (SC) : 2008 TaxPub(DT) 2302 (SC), Sahney Steel And Press Works Limited & Ors. v. CIT (1997) 94 Taxman 368 (SC) : 1997 TaxPub(DT) 1342 (SC), CIT v. Gloster Jute Mills Ltd. (2018) ITL 3046 (CAL)(HC) : 2018 TaxPub(DT) 5370 (Cal-HC)

FAVOUR : In assessee's favour.

A.Y. :

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