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2015 (6) TMI 517 - AT - Income TaxEntitlement to claim depreciation on portion of plant and machinery received towards grant/subsidy from National Dairy Development Board under "70% loan and 30% grant" scheme - whether 30% grant has been received towards the project as a whole and hence, it is entitled to depreciation on the entire cost of assets installed and put to use without deducting the grant portion? - Held that:- In the light of the judgement of Mahesana District Co-operative Milk Producers Union Ltd. vs. CIT (1999 (12) TMI 4 - GUJARAT High Court) and CIT vs. Sun Fibre Optics (P.) Ltd.(2012 (6) TMI 502 - KERALA HIGH COURT ), we are of the considered view that the authorities below were not justified in excluding the grant portion of the amount from the actual cost. Hence, we hereby delete the disallowance and direct the AO to give deduction on the entire amount. - Decided in favour of assessee. Disallowance of expenditure contributed to Amul Research & Development Association (ARDA) - Held that:- In the case in hand, undisputedly the assessee has made contribution for research, therefore such payments would fall under section 35 of the Act and for claiming deduction u/s.35 of the Act, the Association is required approved in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed. No material is placed on record that the Association is approved in the manner prescribed. Under these facts, we do not see any infirmity in the order of ld.CIT(A),same is hereby upheld. - Decided against assessee. Disallowance of interest expenditure by invoking the provisions of section 14A - Held that:- Section 14A states that for the purpose of computing total income under Chapter IV, no deduction shall be allowed in respect of expenditure incurred in relation to the income which does not form part of the total income under this Act. It does not state that income which is entitled to deduction under Chapter VIA has to be excluded for the purpose of the said Section. The words “do not form part of the total income under this Act” is significant and important. As noticed above, before allowing deduction under Chapter VIA we have to compute the income and include the same in the total income. In this manner, the income which qualifies for deductions under Sections 80C to 80U has to be first included in the total income of the assessee. It, therefore, becomes part of the income, which is subjected to tax. Thereafter, deduction is to be allowed in accordance with and subject to the fulfillment of the conditions of the respective provisions. This is also subject to Section 80AB and 80A(1) and (2). Chapter VIA does not postulate or state that the incomes which qualify for the said deduction will be excluded and not form part of the total income. They form part of the total income but are allowed as a deduction and reduced. Therefore, respectfully following the judgement of the Hon’ble Jurisdictional High Court rendered in the case of CIT vs. Banaskantha Dist.Co-op.Milk Producers’ Union Ltd.( 2014 (5) TMI 12 - GUJARAT HIGH COURT ), we hereby direct the AO to delete the disallowance. - Decided in favour of assessee.
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