TMI Blog2016 (3) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... d received the subsidy for setting up a unit in the specified area and such subsidy received by the assessee is a capital receipt in the hands of assessee, cost of which is not to be reduced from the written down value of fixed assets. Further, the CIT(A) had placed reliance on series of decisions, which were also relied upon by the CIT(A) while deciding the appeal in the case of Rohit Exhaust Systems Pvt. Ltd. Vs. ACIT (supra). The Tribunal has considered the said reliance and had decided the issue holding that the incentive received by the assessee under Package Scheme of Incentive, 1993 in the form of subsidy was not covered under the provisions of Explanation 10 to section 43(1) of the Act. Following the same parity of reasoning, we hold that the Package Scheme of Incentives 2001 is similar to the Package Scheme of Incentives, 1993 and the incentive received by the assessee before us is not covered under the provisions of Explanation 10 to section 43(1) of the Act. Consequently, the subsidy amount received by the assessee is not to be reduced from the cost of assets. The Assessing Officer is thus, directed to re-work the depreciation allowable in the hands of assessee on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation on the assets was re-worked by the Assessing Officer. Consequently, the depreciation of ₹ 17,59,441/- was allowed to the assessee as against claim of ₹ 20,51,548/- and the excess depreciation of ₹ 2,91,807/- was added to the total income of the assessee. 5. The CIT(A) noted that the provisions of Explanation 10 to section 43(1) of the Act were introduced from assessment year 1999-2000 and the reliance placed upon by the learned Authorized Representative for the assessee on the ratio laid down by the Hon ble Supreme Court in CIT Vs. P.J. Chemicals Ltd. (1994) 210 ITR 830 (SC) was prior to the introduction of the said Explanation in Statute. The CIT(A) further noted that the subsidy was relatable to the cost of assets and had to be reduced from the cost of said assets. Reliance in this regard was placed upon the ratio laid down by (i) Pune Bench of Tribunal in Alfa Laval India Ltd. Vs. DCIT (2008) 117 TTJ 902 (Pune) , (ii) the Hon ble Punjab Haryana High Court in CIT Vs. Janak Steel Tubes (P) Ltd. 179 ITR 536 (P H) and (iii) CIT Vs. Jindal Bros. Rice Mills 179 ITR 470 (P H). The CIT(A) thus, upheld the order of Assessing Officer. 6. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ashtra had floated an Incentive Scheme named as Package Scheme of Incentives, 2001 on 31.03.2001. As per preamble of the said scheme, the intention was to encourage dispersal of industries to the less developed areas of the State, under which the Government was giving package of incentives to new / extension units set up in the developing region of the State since 1964, under a Scheme popularly known as Package Scheme of Incentives. In the preamble itself vide clause (2), it was recognized that the aforesaid Package Scheme of Incentives introduced in 1964, was amended from time to time and the last amended Scheme, commonly known as the 1993 Scheme was operative from the 1st October, 1993 to 31st March, 2001. In furtherance, the Government recognized the need to address the emerging challenges in the phase of second generation economic reforms and the need for encouraging hi-tech and sunrise industries in the Information Technology and other fields. The Government thus, decided to revise 1993 Scheme and bring into force a new scheme Package Scheme of Incentives, 2001 for intensifying and accelerating the process of dispersal of industries to the less developed regions and promotin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Government of Maharashtra for establishing industries in the backward area of Aurangabad. The assessee had claimed the said receipt to be capital in nature as the object of the subsidy was to set up units in backward areas. The said plea of the assessee has been accepted by the CIT(A), in turn, relying on the ratio laid down by Hon ble Bombay High Court in CIT Vs. Reliance Industries Ltd. (supra), against which the Revenue is not in appeal, hence, the said proposition is accepted in the hands of the assessee. The second proposition raised by the Assessing Officer that the said subsidy is to be added as income 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 Explanation 10 to section 43(1) of the Act is applicable and the value of capital inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Mumbai Bench of the Tribunal 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) 88 ITD 273 (SB) (Mum) have held that the subsidy received under the 1979 scheme for setting up new units in backward areas was a capital receipt. Applying the same ratio to the facts of the present case, we are in conformity with the order of the CIT(A) in holding that the grant of ₹ 30 lakhs received by the assessee during the year under consideration was a capital receipt and not taxable in the hands of the assessee. Further, there is no merit in invoking of the provisions of either section 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 invo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Court in the case of PJ. Chemicals Ltd. (supra) still holds the field. Their Lordships analysed the expression met directly or indirectly to come to the conclusion that only in a case where a subsidy or other grant was given to offset the cost of an asset, such payment/grant 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 assets. 11. A careful perusal of 'Target 2000' scheme shows that the scheme was intended to accelerate industrial development of the State and the incentive was given for setting up of industries in Andhra Pradesh and for the purpose of determining the amount of subsidy to be given, cost of eligible investment was taken as the basis, though it was not specifically intended to subsidise the cost of the capital. Under the circumstances, we are of the view that the 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 ken of Expln. 10 to s. 43(1) of the Act. In the light ..... X X X X Extracts X X X X X X X X Extracts X X X X
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