TMI Blog2017 (7) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... ted accordingly. This issue of assessee's appeal is allowed. - ITA No.86/PAT/2014 - - - Dated:- 13-4-2017 - Shri Aby. T. Varkey, Judicial Member And Shri Waseem Ahmed, Accountant Member For The Appellant : Shri A.K. Rastogi, Advocate For The Respondent : Shri S.K. Paul, DR ORDER PER BENCH:- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-Dhanbad Camp Office, Patna dated 26.03.2014. Assessment was framed by ACIT. Ramge-2, Patna u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 22.10.2008 for assessment year 2006-07. Shri A.K. Rastogi, Ld. Advocate appeared on behalf of assessee and Shri S.K. Paul, Ld. Departmental Representative represented on behalf of Revenue. 2. Only effective issue raised by assessee in this appeal is that Ld. CIT(A) erred in applying the provision of Explanation10 of Section 43(1) on account of subsidy received. 3. Briefly stated facts are that assessee is a private limited company and engaged in manufacturing sale of M.S. Ingot, Silico Manganese. The assessee in the year under consideration has received subsidy from Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en a correct view in line with the provisions of the statute and no intervention is called for. Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us on the following grounds:- 1. For that the Ld. CIT(A) has erred in upholding the reduction of subsidy of ₹ 25,00,000/- for the purposes of allowance of depreciation by applying Explanation10 of Section 43(1). 2. For that the Ld. CIT(A) has erred in holding that the judgment of the Hon'ble Apex Court in the case of CIT Vs P.J. Chemicals Ltd no longer remains good law after insertion of Explanation 10 to Section 43(1) with effect from 01/04/1999. 3. For that the Ld. CIT(A) has failed to appreciate that the subsidy in question was given as an incentive against capital investment made by the appellant on expansion of the second unit and was not given to meet out the cost of a particular asset or block of asset. 4. For that the Ld. CIT(A) has erred in affirming the invocation of Explanation 10 of Section 43(1) on the subsidy in question which is different from the subsidy mentioned in Explanation 10 of Section 43(1). 5. For that the reduction of subsidy for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o meet any portion of the actual cost and thus it fell outside the keen of Explanation 10 to Section 43(1) of the Income-tax Act, 1961. The subsidy amount could not be reduced from the actual cost of the capital asset. Ld. AR drew our attention of the aforesaid order of ITAT Vishakhapatnam Bench is on all fours to the facts of the present case of assessee so also the judgment of Hon'ble Supreme Court in the case of P.J. Chemical (supra) is clearly applicable and the order of Ld. CIT(A) may be quashed. On the other hand, Ld. DR vehemently relied on the order of Authorities Below. 6. We have heard the rival contentions and perused the materials available on record and the case laws cited by the Ld. AR for the assessee. From the above facts and circumstances, the admitted facts are that during the year under consideration assessee-company received incentive subsidy from Govt. of Jharkhand as encouragement for setting up of new industrial project and/or expansion/modernization of the existing unit. It is also a fact that maximum limit of the subsidy was restricted with reference to the value of fixed capital investments in land, building, plant and machinery but no part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee. It is further, provided there under, that where such subsidy or grant or reimbursement of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee. In order to invoke Explanation 10, it is necessary to show that the subsidy was directly or indirectly used for acquiring an asset. This is again a question of fact. The relatable subsidy to such asset can be reduced from the cost only if it is found that the cost for acquiring that asset was directly or indirectly met out of the subsidy. Likewise in the proviso, it is necessary to show that the subsidy has been directly or indirectly used to acquire an asset but it is not possible to exactly quantify the amount directly or indirectly used for acquiring the asset. Here also, a finding of fact is necessary that an asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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