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TMI Blog2015 (8) TMI 844X X X X Extracts X X X X X X X X Extracts X X X X ..... Act") for Assessment Year 2008-09 and 2009-10 vide their separate orders dated 17.05.2010 and 12.12.2011 respectively. 2. The first common issue in these two appeals of revenue is against the order of CIT(A) deleting the disallowance of depreciation by applying the provisions of explanation 10 to section 43(1) of the act. For this, revenue has raised identically worded grounds in both the assessment years i.e. AY 2008-09 and 2009-10. The relevant ground as raised in ITA No.1989/Kol/2013 reads as under: " 1. That the Ld. CIT(A) erred in law in deleting the disallowance of Rs. 6294085/- on account of depreciations without appreciating the fact that in the instant case the AO correctly made the said disallowance by applying Explanation 10 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve table, the depreciation relatable to assets covered under capital subsidy comes to Rs. 62,94,085/-. Hence the said amount is hereby disallowed as inadmissible depreciation and the same is added back to the total income of the assessee. 5. During the relevant year, the assessee derived dividend income of Rs. 6,31,807/- which is exempt u/s. 10(34) of the I. T. Act, As per the computation of income sheet, only 1% of said exempt income being Rs. 6,318/- has been t5reated as expense & offered for taxation. As the said expense is worked out without any basis, the same is not acceptable. Since such expense is not determinable, I go on to work out the expenses relatable to exempt income by invoking Section 14A of the I. T. Act read with Rule 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sale of finished goods for 11 years (9+2 years) subject to a maximum ceiling of 125% (100% + 25%) of gross value of certain fixed capital assets and also subject to an overall aggregate monetary ceiling of Rs. 75 crores. There is nothing in the said scheme to suggest that the West Bengal government intended to grant the subsidy to meet directly or indirectly the cost of any fixed assets. Mere fixation of ceiling with reference to investment in certain fixed assets being measurement of ceiling cannot lead to inference of subsidy's purpose and fixation of such ceiling to the extent of 125% in appellant's case also suggest that the subject subsidy was not meant for meeting an cost of asses directly or indirectly and was only to encourage ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question regarding depreciation on capital subsidy is raised by ground 2(a), which reads as under: "2(a) Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal 'B' Bench Kolkata erred in law in placing reliance on the decision of the Supreme Court in the case of P. J. Chemical Ltd. Reported in 210 ITR 830 and holding that capital subsidy would not be reduced from the written down value (WDV) of the fixed assets without considering the fact that the capital subsidy in this case has been given specifically for purchase of capital assets?" But Hon'ble High Court has not admitted this ground but admitted another ground vide order sheet in GA No. 2684 of 2014 ITAT No. 138 of 2014 dated 05.09.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing disallowance of expenses qua interest against exempt income by invoking the provision of section 14A of the Act read with Rule 8D of the Rules. For this, revenue has raised identically worded ground in both the years and the ground as raised in AY 2008-09 reads as under: "2. That the Ld. CIT(A) erred in law in restricting the disallowance u/s. 14A at 0.5% of the exempted income since the decisions of the Ld. CIT(A) is without any basis and in contravention to the judgment of Godrej Boyce Mfg. Co. Lltd. Vs. DCIT (2010) 328 ITR 81 (Bom) which Ld. CIT(A) highlighted in his order." 8. Briefly stated facts are that the AO disallowed interest paid by assessee on loans invested in the assets earning exempt income at Rs. 5,85,519/-. The AO di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2429 lacs and total average investment as on 31.03.2008 at Rs. 365 lacs only and which is also from common funds. According to CIT(A), the assessee has own sufficient funds to meet the cost of investment and in view of this, he deleted the disallowance by observing in para 5.2 as under: "5.2 I have carefully considered the observations of AO made in the assessment order and submission made by the appellant, in the light of the material on record. So far as the disallowance of interest portion under section 14A is concerned, there is no finding that there is/was any direct nexus between the borrowed funds and investments in shares. It is not in dispute that none of the investments held as on 31.03.2008 were made during the current year. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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