Technology Upgradation Fund Subsidy received was capital receipt and not taxable

Technology Upgradation Fund Subsidy received was capital receipt and not taxable. Supreme Court dismisses the SLP of the Department

In the instant case, the Revenue had filed SLP before the Hon’ble Supreme Court challenging the order passed by the Hon’ble High Court in confirming that amount of subsidy received was rightly claimed as capital receipts, by the assessee and it was not income.

ABCAUS Case Law Citation
ABCAUS 3546 (2021) (09) SC

Important case law relied referred:
Commissioner of Income Tax vs. Shyam Lal Bansal [200 Taxman 14 (P&H) HC
Commissioner of Income Tax vs. Ponni Sugars & Chemicals Ltd. & Ors. [(2008) 306 ITR 392]
Sahney Steel &Press Works Ltd. & Ors. vs. Commissioner of Income Tax [(1997)94   Taxman   368]
CIT vs. Gloster Jute Mills Ltd. [(2018) ITL 3046

The assessee was a textile manufacturer. For the relevant assessment year it received the Technology Upgradation Fund Subsidy, pursuant to a scheme drawn by the Union Textile Ministry.  

Under the Technology Upgradation Fund programme, the amounts were released under an agreement and 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.

The AO disallowed the amount and sought to tax it under the ground that the subsidy was a taxable income as it fell in the instant appeal, the assessee had challenged the order of CIT(A) in confirming Revenue stream. The CIT(A) granted   partial relief; the ITAT allowed assessee’s appeal and rejected the Revenue’s appeal.

The Hon’ble High Court observed that the Tribunal relied upon the judgment of the Punjab and Haryana High Court which was based on binding ruling of the Hon’ble Supreme Court.

Accordingly, the Hon’ble High Court held that the amount was   received as capital stream and therefore, not taxable.

Aggrieved by the judgment of the Hon’ble High Court, the Revenue had filed a Special Leave Petition before the Hon’ble Supreme Court which their Lordships declined to interfere and dismissed the SLP.

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