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TMI Blog2021 (8) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A) erred in deleting the excess disallowance of depreciation claimed of Rs. 1.47 lakhs. 2.2 The learned CIT(A) erred in holding that the subsidy in the form of grant in aid received by the assessee was not relatable to any specific asset/plant and machinery. 2.3 The learned CIT(A) failed to appreciate that the disallowance made by the AO invoking provisions of Sec. 43(1) of the Act was required to be upheld in view of the fact that the grant in aid was tied to the purchase of assets required for setting up of a frozen veg/non veg food project as is evident from the terms and conditions mentioned in the annexure to the Sanction Letter. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation. In response, the assessee submitted that since, subsidy is for acquisition of plant & machinery, it is in the nature of capital receipts which cannot be taxed and hence, the question of reduction of said subsidy from the value of plant & machinery as per the provisions of section 43(1) of the Act does not arise. The AO, however, was not convinced with the explanation furnished by the assessee and according to him, if any cost of asset has been met directly or indirectly by any other person or authority for the purpose of purchase of assets, then same needs to be reduced from the concerned cost of assets before claiming depreciation. Therefore, he has rejected explanation furnished by the assessee and reworked depreciation after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. The ld. DR further submitted that the ld. CIT(A) has failed to appreciate the findings of the AO invoking provisions of section 43(1) of the Act, before deleting excess depreciation in view of the fact that grant in aid was tied to the purchase of assets required for setting up of a frozen veg/non-veg food products as evident from the terms and conditions enclosed as annexure to the sanction letter. 6. The ld. AR on the other hand strongly supporting order of the ld. CIT(A) submitted that the ld. CIT(A) has rightly appreciated the facts in light of the decision of Hon'ble Jurisdictional High Court of Madras in the case of M/s. Srinivas Industries vs. CIT, supra and held that when capital subsidy was received for promotion of indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and hence the same is in the nature of capital receipt, which cannot be taxed under the Act. Once the amount is in the nature of capital receipt, question of reduction of said subsidy from the cost of plant & machinery as per the provisions of section 43(1) of the Act does not arise. This proposition was supported by the decision of the Hon'ble Jurisdictional High Court of Madras in the case of M/s. Srinivas Industries vs. CIT, supra where it was held that amount of subsidy made available cannot be deducted from the cost of capital asset for the purpose of working out depreciation u/s. 43(1) of the Act. This proposition was further supported by the decision of the Hon'ble High Court of Rajasthan in the case of CIT vs. Ambica Elect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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