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TMI Blog2019 (4) TMI 558X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the assessment year 2011-12 and two cross appeals for the assessment year 2012-13. Since some of the issues raised in these appeals are common, we are, therefore, proceeding to dispose them off by this consolidated order for the sake of convenience. A.Y. 2011-12 : 2. The first ground of the Revenue's appeal (ITA No.1222/PUN/2016) is against the deletion of addition of Rs. 11,29,894/- made by the Assessing Officer (AO) on account of disallowance of commission payment. 3. Briefly stated, the facts of the case are that the assessee is engaged in the manufacturing of extra neutral alcohol from grain (jawar). It paid commission of Rs. 22,59,788/- to Kasturchand Raghunath & Sons. On being called upon to substantiate the payment, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,03,05,669 and Rs. 62,65,000/- to Vyanjan Hotels and Indo Sprint respectively, without charging any interest. It was further found that the assessee did pay interest. The AO made disallowance at 12% of the loan amount of Rs. 2.65 crore, which resulted into an addition of Rs. 31,88,480/-. The ld. CIT(A) allowed part relief and sent some part of the addition back to the AO for verification with certain directions. Though the assessee is also in appeal, but the part of the impugned order challenging the re-verification by the AO, has not been assailed before the Tribunal. Thus, to that extent the impugned order has attained finality. 6. We have gone through the relevant material on record and heard both the sides. The ld. CIT(A) has cat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No.3 of the Revenue's appeal is against deletion of addition of Rs. 13,76,60,000/- on account of subsidy and ground no. 1 of the assessee's appeal is against the direction of the ld. CIT(A) that the amount of subsidy should be reduced from the cost of assets in terms of Explanation 10 to section 43(1) of the Income tax Act, 1961 (hereinafter also called ` the Act'). 9. Succinctly, the facts of these grounds are that the assessee received financial assistance granted by the Government of Maharashtra to eligible units under the Financial assistance to Grain Distillery Scheme, 2007. The AO has highlighted the important features of the scheme in the assessment order. It has been mentioned that the scheme was brought out to encourage inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial unit in backward regions of the Maharashtra State. Even if such subsidy was quantifiable in the form of rebate of Rs. 10/- per litre on the Excise duty, but the purpose of its grant, which is to accelerate the industrial development in grain based distilleries in the backward regions of the Maharashtra State, does not alter the nature of subsidy from capital to a revenue receipt. Considering the mandate of the scheme issued by the Government of Maharashatra, it becomes clear that the subsidy is a capital receipt not a revenue receipt. The impugned order is upheld to this extent. 11. At this stage, it is relevant to mention that the Hon'ble Supreme Court in CIT Vs. P.J. Chemicals (1994) 210 ITR 830 (SC) held that subsidy received in Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence 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'. On going through the language of the Explanation 10, it is manifest that it is attracted only when the object of the Scheme is to subsidize the cost of an asset and not otherwise. Proviso also refers to `such subsidy' only. If the object of the Scheme is to accelerate the industrial development of the State, then the case is not caught within the mandate of the Explanation 10. Similar view has been taken by various benches of the tribunal in several decisions, including Sasisri Extractions Ltd. VS. ACIT (2010) 122 ITD 428 (Visakhapatnam). The Mumbai bench of the Tribunal in Godrej Agrovet Ltd. VS. ACI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e chargeable to tax, except where it has been taken into account for determining the actual cost of assets in terms of Explanation 10 to section 43(1). This amendment is patently prospective. As the assessment year under consideration is 2011-12 and the amendment is effective from assessment year 2016-17, new hold that section 2(24) (xviii) will have no application. In view of the foregoing discussion, we are satisfied that the subsidy received by the assessee from the Government of Maharashtra is a capital receipt and accordingly not chargeable to tax and at the same time, it is not liable to be reduced from the cost of assets for the purposes of depreciation in the year under consideration. Thus, the ground raised by the Revenue is dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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