9911796707
TMI Blog2021 (8) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... t, rather in assessment order it is stated that expenditure estimated has not been incurred which are on notional basis & were not supported with evidence rather proliferated artificially. 2. The appellant craves leave to add, to amend or later the above grounds as may be deemed necessary. 3. The only issue raised by the Revenue is that Ld. CIT(A) erred in deleting the addition made by the AO for Rs. 83.80 crores representing the amount of cash subsidy received from Madhya Pradesh Rajyasetu Nirman. 4. Briefly stated facts are that the assessee in the present case is a limited company and engaged in the business of Civil Engineering & Infrastructure Company. The assessee in the earlier years i.e. up-to 2005-2006 has received cash subsidy of Rs. 83.80 crores against it projects namely Hoshangabad-Harda Khandwa road project & Raisen Rahatgarh Road Project. 4.1. The assessee has shown such capital subsidy in its balance sheet under the head "Capital Reserve". However, the assessee pointed out that the amount of cash subsidy received by it was reduced against the project cost to which it relates and the balance amount of the project cost was amortized during the concession period o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y shown as capital with the accounting standard 12 relating to accounting of government grants, but while claiming depreciation, the cost of the project was reduced by the amount of subsidy. The AO rejected this claim by stating that the expenditure estimated by the assessee on the whole project has not been incurred but had been calculated on notional basis. Secondly, she held that there is no provision of section or section in Income Tax Act which says that the expenditure of this nature can be amortized. Thirdly, again she stated that the subsidy should have been reduced from the cost of project expenditure in the year in which it was received and the remaining net subsidy should have been shown as income for that year. 5.3.1. The appellant during the course of appellate proceedings have again explained the method of accounting and have also stated that the expenditure on the projects were not notional but were actual expenditure incurred and from such actual expenditure the subsidy had been reduced and balance amount was amortized over the concession period. On verification of the accounts furnished by the appellant, these facts are found to be correct. Moreover, the method f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith respect to such projects in the year under consideration on notional basis which were amortized. As per the AO, there was no provision under the Act for claiming the amortization of the future expenses. 11.1. Likewise, the subsidy received by the assessee with respect to the projects as mentioned above should have been reduced from the cost of the projects and the remaining net subsidy should have been accounted for as income in the books of accounts. But the assessee has shown such subsidy in its balance sheet under the head capital reserve. Thus the AO treated the subsidy amounting to Rs. 83.80 crores as income of the assessee. 11.2. However, the learned CIT(A) was pleased to delete the addition made by the AO for 2 reasons. Firstly subsidy was received by the assessee in the earlier years and therefore if at all it was to be subjected to tax then it should have been done in the year in which it was received. In other words the amount of subsidy received by the assessee in the earlier years cannot be added to the income of the year under consideration. Secondly, the assessee has incurred the expenses with respect to the projects as discussed above on actual basis which is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head capital reserve in the financial statements prepared under the Companies Act. However the assessee, while amortizing the project expenses has adjusted the amount of subsidy in the profit and loss account. This fact can also be verified from the financial statement of the assessee which are placed on record. Accordingly we hold that the finding of the AO that assessee has not adjusted the amount of capital subsidy against the project expenses is devoid of any merit. At the time of hearing, the learned DR has also not brought anything on record contrary to the finding of the learned CIT(A). 11.7. It was also argued by the learned DR that there is no provision under the Act for amortization of the expenses. Therefore, the assessee should not be allowed the deduction of the expenses amortized in the year under consideration. Undoubtedly, the assessee has incurred the expenses on the projects which were in the nature of BOT. Thus the assessee was entitled to amortize the expenses over the concession period of these projects. For this purpose reference can also be made to the circular issued by CBDT bearing No. 09 of 2014 dated 23 April 2013. The relevant extract of the circular is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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