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2018 (12) TMI 1891 - AT - Income TaxDepreciation on goodwill - AO rejected the assessee’s claim, observing that the assessee had not claimed any depreciation on goodwill, but had allocated the entire amount of share capital issued to the share holders of M/s JKSL free of cost, among all the fixed assets of the assessee company and has thus enhanced the value of the fixed assets, which is not permissible - HELD THAT:- For all these years, the ld. CIT(A) reversed the orders of the AO on the ground that issuance of shares was towards part payment of purchase consideration and hence was included in the cost of acquisition of the cement undertaking; that therefore, the assessee could not be deprived of depreciation by merely debiting the issue of shares to the goodwill account. The CIT(A) held in the alternative that even if the consideration in the form of shares was paid for purchase of goodwill, this payment could be considered as payment for acquiring brands of the demerged company, on which depreciation was allowable u/s 32 - Tribunal followed “CIT vs. Smifs Securities Ltd.’, [2012 (8) TMI 713 - SUPREME COURT], ‘CIT vs. Manipal Universal Learning Pvt. Ltd.’, [2013 (7) TMI 169 - KARNATAKA HIGH COURT] and ‘CIT vs. Hindustan Coca-Cola Beverages (P) Ltd.’[2011 (1) TMI 138 - DELHI HIGH COURT] Claim of additional depreciation - HELD THAT:- CIT(A) allowed the assessee’s claim, following ‘M/s Automotive Coaches & Components Ltd. vs. DCIT’,[2016 (4) TMI 34 - ITAT CHENNAI], for A.Y. 2008-09, wherein, it was held that if additional depreciation could not be allowed at the rate of 20% during the year in which the machinery was installed, the balance 50% has to be allowed in the subsequent year, and ‘CIT vs. Rittal India (P) Ltd.’, [2016 (1) TMI 81 - KARNATAKA HIGH COURT] in which, it was held that the proviso to Section 32 (1)(iia) of the I.T. Act would not restrain the assessee from claiming the balance of the benefit of additional depreciation in the subsequent assessment year.No decision contrary to the above decisions has been brought to our notice. Hence, finding no error therein, the order under appeal on this issue is also confirmed. Receipt of interest subsidy from the Rajasthan Govt. - Revenue or capital receipt - HELD THAT:- The case of the Department is that in ‘Sahney Steel & Pressing Works Ltd. [1997 (9) TMI 3 - SUPREME COURT] as been held that in the case of subsidy, the assessee is free to use the money in its business entirely as it likes and it is not obliged to spent the money for a particular purpose. However, it has remained to be noted that this observation was in the context of the background that the subsidy in that case was given to the new industries at the commencement of business, to carry on their business and not as an aid for setting up of the industries. It was, therefore, that the subsidy was treated as operational subsidy and not a capital one. With regard to revenue subsidy, it was held that if it is given by way of assistance to carry on trade or business, it has to be treated as a trading receipt. In the present case, the interest subsidy was given only for the payment of loan acquired for acquisition of capital asserts. As such, it is a subsidy given for setting up of business. Hence, it has rightly been treated as a capital receipt.
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