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2005 (10) TMI 233 - AT - Income Tax
Issues:
1. Condonation of delay in filing appeal and admission for hearing.
2. Treatment of subsidy as revenue or capital receipt.
Condonation of Delay in Filing Appeal:
The appeal was filed beyond the prescribed time limit with a deficiency in the appeal-filing fee. The assessee sought condonation of delay, attributing it to the previous counsel's actions. The Departmental Representative opposed the condonation, citing the late filing and partial payment. The Tribunal, after considering the circumstances and the Counsel's affidavit, accepted the application, condoned the delay, and admitted the appeal for hearing.
Treatment of Subsidy as Revenue or Capital Receipt:
The Assessing Officer treated the subsidy received by the assessee as a revenue receipt, disallowing depreciation. The CIT(A) upheld this decision, citing the Hon'ble Supreme Court's ruling that subsidies received after the commencement of production are revenue receipts. The assessee contended that the subsidy was applied for before production began and should be considered a capital receipt. The Tribunal analyzed the purpose of the subsidy, the rules governing it, and relevant case law. It concluded that the subsidy was intended to promote industrial growth and was based on fixed capital investment, not profits. Considering these factors, the Tribunal held that the subsidy was a capital receipt, not a revenue receipt. Consequently, the appeal was allowed, directing the Assessing Officer to allow the claim and delete the addition made earlier.
In summary, the Tribunal addressed the issues of condonation of delay in filing the appeal and the classification of subsidy as a revenue or capital receipt. It granted condonation, admitting the appeal for hearing. Regarding the subsidy, it determined that the amount received was a capital receipt, not a revenue receipt, based on the purpose of the subsidy and relevant rules. Therefore, the appeal was allowed, and the addition made by the authorities was directed to be deleted.