PUSHPENDRA SINGH BHATI,J. - (1.) The Revenue's grievance in this appeal under Section 260A of the Income Tax Act, 1961 is that the amount claimed as capital receipts, by the assessee are taxable and have to be treated as income. These involved the first subsidy of Rs.7,08,60,525/-(towards Technology Upgradation Fund); second subsidy of Rs.1,67,84,009/- (under the Focus Market Scheme); and the third subsidy of Rs.26,52,890/- (under Electricity Duty Subsidy). The assessee claimed all these to be capital receipts.
(2.) The assessee is a textile manufacturer. For the relevant year i.e. 2013-2014, it received the Technology Upgradation Fund, pursuant to a scheme drawn by the Union Textile Ministry. The payment of invasion of amounts by deferred repayment of interest, as it were. Under para 8 of the Technology Upgradation Fund programme (the amounts which were released under an agreement dated 12.07.2005) the 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. The agreement pertinently provided as follows: "Para8. to prevent mis-utilization of capital subsidy and to provide an incentive for repayment, the capital subsidy will be treated as a non interest bearing term loan by the Bank/Fis. The repayment schedule of the term loan however will be worked out excluding the subsidy amount and subsidy will be adjusted against the term loan account of the beneficiary after a lock in period of three years on a pro-rate basis in terms of release of capital subsidy. There is no apparent or real financial loss to a borrower since the countervailing concession is extended to the loan amount."?
(3.) The 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. The CIT(A) granted partial relief; the ITAT allowed assessee's appeal and rejected the Revenue's appeal.;