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2010 (10) TMI 1089 - AT - Income TaxChargeability to income-tax on Subsidy received under Package Scheme of Incentives 1993 from State Government - credited to Capital Reserve A/c - nature of receipt - revenue or capital receipt - A.O was of the view that as per Explanation-10 to Section 43(1), any subsidy received from the Government is required to be reduced from the actual cost of the assets for the purpose of depreciation under the Income Tax Act 1961 - A.O was not satisfied with the explanation of the assessee and finally concluded that the subsidy should be excluded from the cost of the assets for the depreciation and made an addition after re-working the same - CIT(A) upheld the action of the A.O. HELD THAT:- An identical issue was raised under similar material facts in the case of M/s. Sapna Re-rolling Industries v. ITO wherein following the decision of the Tribunal in the case of Sasisri Extractions Ltd. v. ACIT,[2008 (1) TMI 485 - ITAT VISAKHAPATNAM], held that; “A careful perusal of “Target 2000” scheme shows that the scheme was intended to accelerate industrial development of the State and the incentive was given for setting up of determining the amount of subsidy to be given the cost of eligible investment was taken as the basis, though it was not specifically intended to subsidise the cost of the capital. Under the circumstances, we are of the view that the incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost of thus falls outside the ken of Explanation 10 to section 43(1). Therefore, we are of the view that for the purpose of computing depreciation allowable to the assessee, the subsidy amount cannot be reduced from the actual cost of the capital asset. AO is directed accordingly.” We, thus, following the decision, set aside orders of the lower authorities on the issue with direction to the A.O to decide the issue in view of the above cited decision. Ground is, accordingly, allowed in favour of the assessee.
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