Interest subsidy received under technology upgradation fund is a capital receipt: ITAT Mumbai
M/s Grasim Industries Ltd; AY.2009-10
ITA Nos. 84 & 351/Mum/2023
- The subject matter of the appeal was whether the subsidy received by the assessee for technology upgradation fund amounting to ₹ 83,426,992/– is capital receipt not chargeable to tax or revenue receipt chargeable to tax.
- The AO considered it as a revenue receipt. On appeal before the learned CIT – A, after considering the submission of the assessee found that coordinate bench in ITA number 4220 and 4704/M/2015 dated 24/2/2020 in assessee’s own case has held that subsidy received by the appellant company under technology upgradation fund scheme is a capital receipt.
- The contention of the AO was that the main intention of the technology upgradation fund scheme was to actually set off and is out the interest burden of the assessee company. The assessee has reduced the interest subsidy from the interest paid on various loans and therefore the interest income and interest expenditure both were treated as revenue expenditure and therefore the interest subsidy on technology upgradation fund is a revenue expenditure.
ITAT Mumbai held as below:
- The coordinate bench in assessee’s own case- ITA number 4220 and 4704/M/2014 dated 24/2/2020 has held that the subsidy received by the appellant company under technology upgradation fund scheme is capital receipt. The ld. Authorized Representative for the assessee submitted that the Hon’ble Rajasthan High Court in the case of PCIT vs. Nitin Spinners Ltd. in DB Income Tax appeal No.31/2019 decided on 19/09/2019 has held subsidy received under TUF as capital in nature. Similar view has been taken by Mumbai Tribunal in the case of ACIT vs. SVG Fashions Ltd. in ITA No.704/Mum/2016 for assessment year 2012-13 decided on 17/07/2018.
- The 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.
- In the result, appeal of the learned AO as well as the cross objections filed by the assessee are dismissed.
The copy of the ITAT order is as under: