Adarsh Kumar Goel, J. - (1.) This appeal has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, "the Act") against the order of the Income Tax Appellate Tribunal, Chandigarh dated 22.9.2009 in I.T.A. No.639/Chandil/2009 proposing to raise following substantial question of law:- "Whether in the facts and circumstances of the case, the Hon'ble ITAT is justified in law in holding that the subsidy received by the assessee amounting to Rs.60,90,000/- under the Technology Up-gradation Fund Scheme (TUFS) of Ministry of Textiles, Government of India is capital in nature whereas the Assessing Officer has rightly held the receipt of subsidy as revenue in nature applying the ratio of the decision of Hon'ble Supreme Court in the case of M/s Sawhney Steels and Press Works Ltd. & Others Vs. CIT reported at, 1997 228 ITR 253."
(2.) The assessee is engaged in manufacture and sale of woolen garments. It received subsidy for repayment of loan taken for building, plant and machinery under the Credit Linked Capital Subsidy Scheme under Technology Upgradation Fund Scheme (TUFS) of Ministry of Textiles, Government of India. The assessee claimed the said subsidy to be capital receipt but the Assessing Officer did not accept the same and added back the same to the income of the assessee holding the same to be revenue receipt. On appeal, the CIT(A) upheld the plea of the assessee, which view has been affirmed by the Tribunal with the following observations:- "Having regard to the aforesaid, in our view, it is quite clear that the objective of the subsidy scheme was to enhance the technology apparatus of the assessee by assisting in acquiring machinery and further that the subsidy so received was utilized for repayment of loans taken by the assessee to set up the new unit, as was the intention of the subsidy. 10. Considered in the aforesaid light, in our view, the facts of the instant case are on all fours comparable to those considered by the Hon'ble Supreme Court in the case of Ponni Sugars & Chemicals Ltd. (supra) and therefore, a natural corollary is that the nature of the subsidy in question is capital. Therefore, both on the issue of the objective of the scheme and on the utilization of the funds received as subsidy, the subsidy is to be viewed as capital in nature having regard to the judgment of the Hon'ble Supreme Court in the case of Ponni Sugars & Chemical Ltd. (supra). 11. Reliance placed by the Revenue on the case of Sawhney Steels and Press Works Ltd. & others (supra), in our view, is not appropriate having regard to the aforesaid features of the scheme, which are not in dispute. Moreover, in the case of Sawhney Steels and Press Works Ltd. & others (supra), it was found as a fact that the subsidy was given to meet recurring expenditure and was not for acquiring a capital asset. Whereas in the instant case, admittedly, there is no provision in the scheme to grant subsidy to meet any recurring expenditure and neither such a case has been set up by the Department. The only objections of the Department are that the subsidy has been given after commencement of production and, secondly that it was for repayment of loans. Both these factors do not distract from the nature of the subsidy being treated as capital, as explained by the Hon'ble Supreme Court in the case of Ponni Sugars Chemicals Ltd. (supra)."
(3.) We have heard learned counsel for the appellant.;