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TMI Blog2016 (5) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... which itself shows the intention of the assessee that the said amount of subsidy was revenue in nature and not of capital nature. This fact, brought on record by the AO was not disputed by the Ld. CIT(A)." 3. The Assessee is a company. It is engaged in the business of manufacture of iron ingots. During the previous year the assessee had received subsidy of Rs. 31,15,000/- from West Bengal Industrial Development Corporation. (WBIDC). This sum was not offered to tax by the assessee on the ground that it was a capital subsidy not chargeable to tax. The assessee however reduced from value of plant and machinery the subsidy received to arrive at the return of value on which depreciation was claimed by the assessee. However, in the Tax Audit Report it was mentioned that depreciation was claimed without reducing the value of the subsidy from WBIDC. In these circumstances AO came to the conclusion that the subsidy in question was neither offered to tax as revenue subsidy nor was it reduced from the WBIDC of plant and machinery for the purpose of claiming depreciation. AO further came to the conclusion that subsidy in question was a revenue subsidy and ultimately brought the subsidy to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and equipment installed for pollution control measures of the approved project of the eligible unit on or after the 1st April, 1999 subject to other conditions laid down in paragraph 6 of 2000 Scheme. Eligibility Criteria for incentive under the 2000 Schemeis : Large, medium and small sector industrial projects are eligible for securing eligibility certificate after fulfilling certain conditions. Classification of development areas and backward areas: For the purpose of determination of types and quantum of incentive available under the scheme for the approved projects, according to their location, the state shall be classified in the following groups: Group A : Calcutta Municipality area, Developed area. Group B : District of Burdwan and other backward area & districts. Group C : Other backward districts. State Capital Investment Subsidy: An eligible Industrial Unit located in Group 'B' area and set up in the state on or after the 1st January, 2000 will be entitled to State Capital Investment subsidy @ 15% of the Fixed Capital Investment subject to a limit of Rs. 150 lakhs. The above scheme is applicable to the Assessee and accordingly eligibility certificate was g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant company's case i)Subsidy granted from Govt. after They started production. i) Subsidy granted from Govt. Before commencement of production. ii)Subsidies were - (a) Reimbursement of Sales Tax (b) Reimbursement Tax on power Consumed & (c) Reimbursement of Water taxes Charges ii) Subsidy was given @ 15% on Fixed Capital Investment i.e. on land, Building, Plant & machinery. iii) Amount received were production incentive and operational subsidies. iii)Amount received was capital Incentive towards setting up certain industry in backward areas. 6. The CIT(A) agreed with the contentions put forth by the Assessee and held that the subsidy in question was capital subsidy not chargeable to tax. The following were the relevant observations of the CIT(A) in this regard: "6.2. I have perused the assessment order and considered the submission of the appellant. The fact of the case is that the appellant company received as sum of Rs. 31.15 lacs from Govt. of West Bengal as State Capital Investment Subsidy being 15%, of the fixed capital investment made as 'new' industrial unit' newly established at backward areas in the District of Burdwan as per the Government Scheme. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand its existing units, then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy/assistance is given which determines the nature of incentive subsidy. The form of the mechanism through which the subsidy is given is irrelevant. 10. It would also be of immense merit to refer to another judgement of the Hon'ble Calcutta High Court in the case titled Commissioner of Income Tax vs. Rasoi Limited [2011] 335 ITR 438, wherein it has been held by the Hon'ble Court by making a due reference to the judgement of the Hon'ble Apex Court in the case titled Commissioner of Income Tax vs. Ponni Sugars & Chemicals Ltd [2008] 174 Taxman 87 (SC) that one time subsidy received as a percentage of sales tax paid for modernization and expansion purposes would constitute a capital receipt not subject to the rigours of tax under the Income Tax Act, 1961. The Hon'ble Calcutta High Court further held that merely because subsidy received was equivalent to a substantial percentage of the sales tax paid, it cannot be construed that the same was in form of refund o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO by observing as follows :- " 9.1. During the course of appellate proceedings, the A.R. of the appellant submitted as under : " The addition of Rs. 12,54,893/- on excess depreciation charges on moulds. As per I.T.Act u/s 32 & Rules 5 Appendix I in case of Iron & Steel Industry - rolling mills (moulds) depreciation is allowable at the rate of 80% p.a. However the appellant company had claimed depreciation on moulds (rolling mills - rolls) at the rate of 30% p.a. (instead of allowable depreciation of 80%). The Ld. A/.O. without considering the above facts arbitraril7y and on estimated basis disallowed 15% of the depreciation on moulds, treating moulds as plant & machinery. Your goodself is requested to delete the addition made by Ld. A.O. 9.2. I have perused the assessment order and considered the submission of the appellant. The fact of the case is that the appellant was having an Iron & Steel Industry - Rolling Mills (Mould). As per section 32 and Rule 5, depreciation is allowable @ 80% on such moulds. However, the appellant claimed only 30%. Therefore, the A.O. was not justified to restrict the claim at 15%. Appeal on this ground is, therefore, allowed. 15. Aggrieved by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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