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2015 (3) TMI 1151 - ITAT PUNE

2015 (3) TMI 1151 - ITAT PUNE - TMI - Capital Incentive subsidy received for establishing industry in Backward area - whether is to be reduced from actual cost of asset? - Appellant prays to hold that Capital Subsidy, is not to be reduced from ‘Actual Cost’ - Disallowance of Depreciation by reducing Written down value of assets by subsidy received - Held that:- The perusal of the Package Scheme of Incentive, 1993 reflect that the scheme was formulated to give incentive for setting up the industr .....

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educed from the cost of the assets. Accordingly, the Assessing Officer is directed not to reduce the value of the subsidy from the cost of assets while allowing depreciation on the said assets of the assessee. - Decided in favour of assessee - ITA No.1880/PN/2013 - Dated:- 31-3-2015 - SHRI G.S. PANNU, ACCOUNTANT MEMBER AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER For the Appellant : Shri S.N. Puranik For the Respondent : Shri Achal Sharma ORDER PER SUSHMA CHOWLA, JM: This appeal filed by the assessee .....

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ls) has erred in not following jurisdictional Pune ITAT decision in case of Balaprasad Agarwal referred to him. 3. Appellant prays to add, alter, amend, modify and / or withdrawn the grounds as and when necessary. 3. The brief facts of the case are that, the assessee was engaged in the business of manufacturer of Pressparts & Fabricated Assemblies & Painting various Pressparts and fabricated items. During the year under consideration, the assessee had received ₹ 15 lakhs Special Ca .....

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on the basis of fixed capital investment actually made by the eligible SSI unit. The Assessing Officer was of the view that the subsidies were capital or revenue in nature is to be decided from the nature of subsidies. Merely because subsidies have been granted for encouraging the setting up of industries in a particular area of the State, does not establish that it is capital in nature. Further, under the scheme, the units were eligible to draw the Special Capital Incentive at a certain percent .....

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n on the assets, the provisions of section 41(1) of the Act were applicable and the same was added as income of the assessee. Another aspect considered by the Assessing Officer was the Explanation 10 to section 43(1) of the Act and it was held that the said provisions of the Act were applicable and the value of fixed assets should be reduced by the quantum of Special Capital Incentive received during the year. However, since the said amount was treated as income under section 41(1) of the Act on .....

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Assessing Officer was thus rejected by the CIT(A). The second contention of the Assessing Officer that the said investment was to be added as income under section 41(1) of the Act, as depreciation was an item of expenditure claimed by the assessee, in respect of assets on which subsidy had been received, was also rejected by the CIT(A), in view of the ratio laid down by Hon ble Supreme Court in Nector Beverages (P) Ltd. Vs. DCIT 314 ITR 314 (SC). However, the third contention of the Assessing Of .....

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(P&H) 5. The Assessing Officer was therefore, directed to reduce the cost of assets in respect of which the subsidy had been received and allow the depreciation on the reduced cost of assets. 6. The assessee is in appeal against the order of CIT(A). 7. The learned Authorized Representative for the assessee pointed out that the Special Capital Incentive received as per the Maharashtra Package Incentive Scheme was establishing units in backward areas of State and not for acquiring capital asse .....

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Vs. Rasoi Ltd. (2014) 46 taxmann.com 214 (Kolkata - Trib) and by Visakhapatnam Bench of the Tribunal in Sasisri Extractions Ltd. Vs. ACIT (2008) 119 TTJ (Visakha) 976. It was further pointed out by the learned Authorized Representative for the assessee that the reliances placed upon by the CIT(A) were mis-placed as the decision in Alfa Laval India Ltd. Vs. DCIT (supra) was in relation to subsidy received from National Dairy Development Board and not from Government of Maharashtra. Further, the .....

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xplanation 10 to section 43(1) of the Act, the capital incentive subsidy received is to be reduced from the cost of assets. Further, reliance was placed on the order of CIT(A), in this regard. 9. We have heard the rival contentions and perused the record. The assessee during the year under consideration had received Capital Incentive Subsidy under the Package Incentive Scheme, 1993 of Government of Maharashtra for establishing industries in the backward area of Aurangabad. The assessee had claim .....

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come under section 41(1) of the Act, in view of the ratio laid down by Hon ble Bombay High Court in Nector Beverages (P) Ltd. Vs. DCIT (2004) 267 ITR 385 (Bom) has been reversed by the CIT(A) since the Hon ble Supreme Court has reversed the decision of Hon ble Bombay High Court in Nector Beverages (P) Ltd. Vs. DCIT (supra). The Revenue is also not in appeal against the said proposition and the same stands accepted. The third proposition proposed by the Assessing Officer was that in the alternate .....

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e Government for the implementation of the scheme. Under the 1993 scheme, the procedures were framed and the entrepreneur was entitled to special capital incentive of varying percentage of the gross fixed capital investment, subject to ceiling in respect of eligible unit, provided where the entrepreneur does not opt for availing sales tax incentive under Part-III of 1993 scheme. Under the said scheme a grant of ₹ 15 lakhs was disbursed to the assessee. 11. We find that similar issue of tax .....

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ITA No.1206/PN/2011, the Tribunal considered the ratio laid down by the Mumbai Bench of the Tribunal in the case of Everest Industries Ltd. Vs. ACIT vide ITA No.814/Mum/2007 relating to assessment year 2003-04 order dated 04.12.2009, wherein it was held as under:- 10.4 Coming to the merits of the case, the "G" bench of the Tribunal in the case of M/s Zenith Fibres Ltd (supra) had considered the incentive scheme of the Maharashtra Government of 1993 and came to a conclusion that this sc .....

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in Everest Industries Vs. ACIT (Supra), wherein it has been held that the incentive received under the scheme was capital receipt. It has also been held by the Mumbai Bench of the Tribunal that the scheme referred to in the case of Reliance Industries Ltd., i.e. 1979 scheme was identical to the 1993 scheme. The Hon ble Bombay High Court in the case of CIT Vs. Reliance Industries Ltd., (Supra) in the appeal filed by Revenue against the order of Special Bench of Mumbai Tribunal reported in (2004) .....

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ion 41(1) or section 43(1)(b) of the Act. Thus, ground of appeal No.3 raised by the Revenue is dismissed. 13. The issue before us is restricted to the invoking of Explanation 10 to section 43(1) of the Act, under which it is provided that where portion of cost of asset acquired by the assessee has been met directly or indirectly by the Central Government or the State Government or any Authority established under any law or by any other person, in the form of subsidy or grant or reimbursement, th .....

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sset to the assessee. In other words, in order to invoke the provisions of Explanation 10 to section 43(1) of the Act, it is necessary to establish that the subsidy was directly or indirectly utilized for meeting the cost or portion of cost of asset acquired. Where it is found that the cost for acquiring the asset was directly or indirectly met out of the subsidy, then the value of subsidy is to be reduced from the cost of the asset to re-work the depreciation on the said asset. Under the provis .....

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been further laid down by the Tribunal in Sasisri Extractions Ltd. Vs. ACIT (supra) that even after insertion of Explanation 10 to section 43(1) of the Act, the basic principle underlying the decision of Apex Court in CIT Vs. P.J. Chemicals Ltd. (1994) 210 ITR 830 (SC) still holds the field. The Tribunal has held as under:- 10. We have carefully considered the rival submissions and perused the record. In our considered opinion, even after insertion of Expln. 10 to s. 43(1) of the Act, the basic .....

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