TMI Blog2014 (1) TMI 1747X X X X Extracts X X X X X X X X Extracts X X X X ..... in the hands of the assessee has to be determined with respect to the purpose for which the subsidy is given. The point of time at which the subsidy is paid and the source or the forms of subsidy are immaterial. If the object of the the subsidy scheme is to enable the assessee in setting up the new unit or to expand the existing unit, then the receipt of the subsidy is to be treated on capital account.- Decided against revenue MAT computation - additions made to the book profit on account of excess depreciation and subsidy received by way of excise duty - Held that:- The issue raised in this ground is squarely covered in favour of the assessee by the decision of the Hon’ble Apex Court in the case of Apollo Tyres Ltd. Vs. CIT [2002 (5) TMI 5 - SUPREME Court ], wherein it has been held that the AO while computing the income under section 115J has only the power to examine whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the said Act. The AO, thereafter, has the limited power of making increases and reductions as provided for in the explanation to the said section. To put it differently the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leted the addition made by the AO. According to the Ld.CIT(A), the impugned subsidy was granted with the object of inducing entrepreneurs to establish sugar industry/ expand the capacity in the state of Bihar and where the subsidy was granted and percentage of fixed capital cost taken as basis for determining the subsidy that would only be a measure adopted under the scheme to quantify the subsidy. Hence, the same could not be considered as a payment directly or indirectly to meet any portion of the actual cost. Aggrieved by the impugned decision, the revenue has raised this ground in the appeal before us. 2.2 Before us, the Ld.DR has contended that the Ld.CIT(A) is not justified in deleting the addition by relying on the order of the AO. On the other hand, the Ld. Senior Counsel for the assessee has drawn our attention to the incentive package resolution of the Bihar State Government dated 12.09.2006 which is available at page nos. 11 to 17 of the paper book and demonstrated the purpose for which the incentive scheme has been devised by the Government of Bihar. Further, the Ld. Counsel has explained that the amount of such subsidy cannot be held to reduce the actual cost of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observation of the Ld.CIT(A) that the said subsidy is given for setting up of industry or expansion of industry in the state of Bihar which is the object of the scheme. In this connection, it is relevant to state that in the case of Sasisri Extractions Ltd. (supra), the Tribunal has held that where subsidy is granted as percentage of fixed capital cost taken as basis for determining the subsidy that would only be a measure adopted under the scheme to quantify subsidy, the same could not be considered as a payment directly or indirectly to meet any portion of the actual cost. The same view has been followed by the Tribunal in a subsequent case, namely M/s. Godrej Agrovet Ltd. (supra), the order to which the present Accountant Member is also a party. It is pertinent to mention that in the appeal preferred before the High Court against the said decision of the Tribunal, the Revenue has not disputed the decision of the Tribunal in the appeal before the Hon ble High Court. This suggests that the Revenue has accepted the decision of the Tribunal in the said case. The Hon ble Apex Court, in the case of P.J. Chemicals Ltd. (supra), has held that the expression actual cost in section 43( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve and to encourage setting up the industry/expand the unit. The Ld.CIT(A) in his order, relied on various decisions where it has been held that when the subsidy scheme is to enable the assessee in setting up the new unit or to expand the existing unit, then the receipt of the subsidy is on capital account. Aggrieved by the impugned decision the revenue has raised this granted in the appeal before us. 3.2 Before us, the Ld. DR has contended that the reimbursement of the excise duty has to be treated as revenue receipt by relying on the order of the AO. On the other hand, the Ld.Senior Counsel for the assessee has argued that the Ld.CIT(A) has correctly deleted the impugned addition by treating the reimbursement of excise duty as capital in nature by relying on the decisions of the Hon ble Apex Court in the cases of Mepco Industries Ltd. Vs. CIT 319 ITR 208, CIT Vs. Ponni Sugars And Chemicals Ltd. 306 ITR 392, the decision of the Calcutta High Court in the case of CIT Vs Rasoi Ltd. 335 ITR 438 (CAL), the decision of the High Court of Gujarat in the case of CIT Vs. Tripti Menthol Industries 35 taxmann.com 515 (Gujarat) and the decision of the J K High Court in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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