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2020 (9) TMI 617 - AT - Income TaxDisallowance of depreciation - capital subsidy received under Technology Upgradation Fund (TUF) scheme - Determination of value as per the Explanation 10 to Section 43(1) - HELD THAT:- Respectfully following the various decisions relied upon by the ld. CIT(A) and the decision of the Hon’ble Supreme Court in the case of Ponni Sugars [2008 (9) TMI 14 - SUPREME COURT] and in the facts and circumstances of the case, we do not find any infirmity in the order of the ld. CIT(A) deleting the disallowance of depreciation on capital subsidy and accepting the plea of the assessee that the said capital subsidy need to be directly credited only to capital reserve and not to be reduced from the value of plant and machinery as per Explanation-10 to Section 43(1) of the Act. Whether the CIT(A) was justified in treating the interest subsidy received by the assessee under TUF scheme as a capital receipt? - CIT(A) had categorically observed that the object of the TUF subsidy was to increase the competitiveness in the textile industry and not to increase the profits and hence the said interest subsidy deserves to be treated only as a capital receipt. Similarly, we have also observed that the interest subsidy given under the State Government scheme was also meant for promoting the industry in the area which also deserves to be treated only as a capital receipt. Hon’ble Rajasthan High Court in the case of PCIT vs. Nitin Spinners Ltd., [2019 (9) TMI 1154 - RAJASTHAN HIGH COURT] had under similar facts and circumstances held these receipt of subsidies to be capital receipts - Decided against revenue.
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