Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (4) TMI 461 - AT - Income TaxDisallowance of depreciation - reducing the incentives received from Maharashtra State Government from the cost of the building and plant and machinery and further by enhancing the income by holding that subsidiary receipt from Maharashtra Government for putting a mega project in backward area is Revenue receipt liable to tax - Held that:- The assessee has set up a manufacturing unit in notified low human development district Jalana. The assessee has been granted eligibility certificate under PSI-227 No. DI/PSI-2007/Mega Project/Ec08/2009/B-401 dated 03-01-2009 on specific criteria that the assessee shall employ 250 employees and at least 75% of same should be local persons. Accordingly, the assessee on complying all conditions of scheme, has received Industrial promotion Subsidy (Capital Incentive) from Govt. of Maharashtra under PSI-2007 Scheme. The same was claimed to be capital receipt and credited to capital reserve account by the assessee. We find that in the present case, the cost of the asset is incurred and paid by the assessee and not met by the Government in form of subsidy. The method of quantification i.e. the maximum subsidy limit is the only linked with cost of fixed assets. This quantification is for putting cap on maximum amount of subsidy eligibility. This method of quantification does not mean, in any way, that subsidy is given to offset cost of asset. It is very clear from PSI scheme as well as Eligibility certificate that subsidy is given to generate local employment in low human index district and receipt is in not for meeting or subsidizing cost of asset by Govt. It is only where subsidy is given specifically to offset the cost of an asset, such payment would fall within the expression ‘met’, whereas the subsidy received merely to accelerate the industrial development of the state cannot be considered as payments made specifically to meet a portion of the cost of the asset. Therefore, incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost and thus it falls outside the ambit of Explanation 10 to Section 43(1) of the Act. In the light of the above discussion, for the purpose of computing depreciation allowable to the assessee, the subsidy amount cannot be reduced from the cost of the capital asset. Accordingly, on both the issues we are of the view that the subsidy received by the assessee is capital in nature and it cannot be reduced from the cost of the fixed assets for computing depreciation. Accordingly, this inter-connected issue of assessee’s appeal is allowed. Disallowing advertising and sales promotion expenses on adhoc basis - Held that:- In view of the above details given by the assessee and the fact that the AO has estimated the disallowance on adhoc basis, we are of the view that a reasonable disallowance of ₹ 5 lakhs will meet the end of justice, to which the learned Counsel for the assessee is also agreed. Accordingly, we allow this issue of assessee partly.
|