TMI Blog2020 (11) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... treating it as chargeable to tax will gain relevance in the periods covered by the afore discussed amendments. Since such amendments are not applicable to the year under consideration, the case will be governed by the ratio decidendi in the judicial precedents discussed supra. We are satisfied that the ld. CIT(A) was not justified in directing to exclude the amount of subsidy allowed to the assessee by the States of Jharkhand and Maharashtra from the cost of assets for the purposes of allowing depreciation. - Decided in favour of assessee. - ITA No. 1117/PUN/2017 ITA No. 1041/PUN/2017 - - - Dated:- 10-11-2020 - SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER Assessee by : Shri C. H. Naniwadekar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost of assets for the purpose of depreciation. Both the sides are in appeal on their respective stands. 3. We have heard both the sides through Virtual court and scanned through the relevant material on record. Insofar as the Departmental appeal is concerned, the only grievance is against the ld. CIT(A) treating the amount of subsidy from Maharashtra and Jharkhana Governments as capital in nature. On a perusal of the schemes under which such subsidy was provided, it clearly emerges that the object of the subsidy was to accelerate industrial development in the concerned States. By applying `purpose test in determination of the nature of subsidy, the same cannot be construed as revenue in nature. Similar issue cropped up for consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee : Provided that where such subsidy or grant or reimbursement is 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. 5. On a careful perusal of the above Explanation, it is immensely clear that the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 to section 43(1) of the Act. 6. The ld. DR strenuously argued that if the subsidy is to be held as a capital receipt, then as a fortiori, it must reduce the cost of assets in terms of Explanation 10 to section 43(1) and ex consequenti, depreciation ought to be allowed at the reduced cost of assets. 7. At this juncture, it is pertinent to note that the Finance Act, 2015, w.e.f. 1.4.2016 inserted clause (xviii) to sub-section (24) to section 2 defining the term `income and thereafter the Finance Act, 2016 w.e.f. 1.4.2017 carried out an amendment to clause (xviii). The effect of these amendments is that the newly inserted clause (xviii) now reads as under:- `(xviii) assistance in the form of a subsidy or grant or cash incentive or d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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