The Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘A’, adjudicated on the appeal filed by BSL Limited, a company based in Bhilwara, Rajasthan, against the orders of the CIT(A)-30, New Delhi. The appeal, registered as ITA No. 321/DEL/2021, pertains to the assessment year 2017-18. The primary issue at hand was the tax treatment of the Technology Up-gradation Fund (TUF) subsidy received by BSL Limited.
BSL Limited, engaged in manufacturing and processing cotton and synthetic yarns, received a TUF subsidy amounting to Rs. 1,31,89,720 during the assessment year 2017-18. This subsidy, provided under the Technology Up-gradation Fund Scheme by the Ministry of Textiles, Government of India, aimed to encourage technological advancements in the textile industry to improve competitiveness and sustainability.
The dispute arose when the Assessing Officer (AO) treated the TUF subsidy as a revenue receipt, thereby increasing the taxable income of BSL Limited. The company contended that the subsidy had already been deducted from the written down value of the block of fixed assets, resulting in a reduced depreciation claim. They argued that treating the subsidy as a revenue receipt would result in double taxation.
The grounds of appeal raised by BSL Limited included:
The tribunal, comprising Dr. B. R. R. Kumar (Accountant Member) and Sh. C. M. Garg (Judicial Member), heard the case on multiple dates but received no representation from BSL Limited. The tribunal noted that the TUFS subsidy aimed to promote technological upgrades and improve the competitiveness of the textile industry.
The CIT(A) had invoked Section 2(24)(xviii) of the Income Tax Act, applicable from 01.05.2016 (A.Y. 2016-17 onwards), which includes subsidies and grants as income. The tribunal upheld the CIT(A)’s decision, stating that the action was in line with the provisions of the Act. The tribunal directed that the depreciation on the block of assets should be allowed based on the original value of the assets.
The appeal was allowed, and the tribunal emphasized the need for clear accounting and compliance with tax regulations regarding subsidies and grants. The decision highlighted the importance of adhering to legislative provisions while ensuring fair tax practices.
The order pronounced on 30th August 2023 by the tribunal concluded the appeal in favor of the assessee, BSL Limited.
Order Pronounced in the Open Court on 30/08/2023.
Signed by:
(C. M. Garg) – Judicial Member
(Dr. B. R. R. Kumar) – Accountant Member
Date: 30/08/2023
Subodh Kumar, Sr. PS
Copy forwarded to:
Assistant Registrar, ITAT, New Delhi
ITA No. 321/DEL/2021 – BSL Limited vs DCIT Central Circle-31, Assessment Year 2017-18
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