TMI Blog2019 (8) TMI 1784X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 375 - SUPREME COURT] - Accordingly, findings of the A.O. are erroneous and therefore, disallowance is deleted. Thus we restore the issue in dispute to the file of the Assessing Officer to decide in accordance with the direction of the Tribunal - The grounds of the appeal of the Revenue are accordingly allowed for statistical purposes. - ITA Nos. 5131 & 5132/Del/2016 - - - Dated:- 8-8-2019 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER For the Appellant : Shri Manoj Kumar Mahar, Sr.DR For the Respondent : S/shri R.S. Singhvi Satyajeet Goel, CA ORDER PER BENCH: These two appeals by the Revenue are directed against a common order dated 15/07/2016 passed by the Ld. Commissioner of Income-tax (Appeals)-30 [in short the Ld. CIT(A) ] for assessment year 2012-13 and 2013-14, involving a common issue in dispute in identical set of the circumstances and, therefore, both these appeals were heard together and disposed off by way of this consolidated order for sake of convenience. For the sake of brevity, the grounds of appeal raised in ITA No. 5131/Del/2016 are as under: 1. On the facts and in the circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case, are that the Flexible Packaging Unit and Rubber Thread Unit of existing Company M/s Dharampal Satyapal Ltd. got demerged w.e.f. 01.4.2006, vide order of Hon ble Delhi High Court dated 11.9.2007 and the resultant companies were named as M/s Avichal Buildcon Pvt. Ltd and M/s Abhisar Buildwell Pvt. Ltd. As per observations made by the Special Auditor, appointed in the case of M/s Dharampal Satyapal Ltd., the assets of the demerged Units, included assets acquired out of amount of Excise Duty Exemption (accounted as Deferred Govt. Grant in the books of the demerged company). The year wise amount spent in the case of the assessee company is given as under: (in Rs) Particulars Up to 31.3.2010 F.Y.2010-11 Upto 31.3.2011 Plant Machinery 40,34,32,866 - 40,34,32,866 Civil Works 15,38,19,306 - 15,38,19,306 Total 55,72,52,172 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IL depreciation. Accordingly, A.O. observed that the cost of the assets met out of the deferred Govt, grants as on 31.3.2011, is ₹ 55,72,52,172/- and no further investment has been made out of deferred govt, grants in block of assets. The A.O has recomputed the claim of depreciation u/s 32(1) of the Act, by reducing the actual cost of assets by a sum of ₹ 55,72,52,172/- and the excess claim of depreciation made by the appellant company to the tune of ₹ 3,54,15,791/-, has been disallowed. (v) In the appellate proceedings, the appellant has reiterated the arguments submitted in the assessment proceedings and has also submitted that the excise duty refund is a revenue receipt, which has been credited to the P L Account. The nature of the excise duty refund received is like a benefit of cash assistance, arising from business and therefore, same will form part of profits and gains from business. Accordingly, it is submitted by the AR that in view of the fact that the excise duty refund is a revenue receipt and therefore, same cannot be further reduced from the block of assets, for determining depreciation on the reduced WDV. For the above view, the AR has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made before the A.O. as well as in appellate proceedings, before Ld. CIT(A) that the scheme of demerger was approved by the Hon ble High Court, and therefore, it amounts to approval of the cost of acquisition of assets in the hand of the resulting companies, after demerger. Therefore, the claim of depreciation has been correctly made on such cost of assets transferred to the resulting companies and there is no scope for making any disallowance against claim of depreciation made on such acquired value of assets, without reducing the Excise duty refund. However, the excise duty refund, was always credited to the P L Account and therefore, it was always treated as revenue receipt in the books of account from A.Y. 2007-08 onwards. However, the appellant did not make submission before the A.O. as well as before Ld. CIT(A), regarding nature of excise duty refund. However, the submissions now made on account of nature of excise duty refund and decision of Apex court in the case of Commissioner of Income Tax Vs. Meghalaya Steels Ltd. [2016] 383 ITR 217 (SC), was not available earlier. Therefore, it is submitted that now the ratio led down by the Hon'ble Supreme Court, is equally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon a recent judgment of Hon ble Gujarat High Court in the case of Alpha Lab vs. ITO reported in [(2016)(6) TMI 560,Gujarat H.C] dated 07.6.2016, wherein it has been clearly held that subsidy received against investment made in a backward area, where industrial development activities have been undertaken, is by way of promotion of such activities and that will not reduce the value of the assets, even where the amount of subsidy received was transferred to the capital account of the partners, and it was held that the cost of assets could not be reduced by the amount of subsidy while working out the depreciation allowance. From the above, following facts emerged: The excise duty refund is given to the appellant on account of the manufacturing activities carried out in the notified area, upon fulfillment of certain conditions; and The Excise duty refund, is derived from the manufacturing activities and purchasing the assets from this excise duty refund on fulfillment of certain conditions, is nothing, but application of profits, The excise duty refund is of the nature of revenue receipt, forming part of Profits and Gains, arising from business. The same is a revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer to examine what happened in the preceding years. If in the preceding years the depreciation was not claimed or this issue was not considered and the facts of the case warrant the consideration of this issue in the year under consideration, then Assessing Officer will consider the same in the light of the decision of Hon'ble Apex Court in the case of Meghalaya Steels Ltd. (supra) and also the decision of ITAT in the case of Abhisar Buildwell Pvt.Ltd. vide ITA No.823/Del/2015. If the claim of depreciation of the assessee is allowed, then the assessed income will turn into negative income and there will be no question of claim u/s 80IC which will render the Revenue's appeal academic. If at all the Assessing Officer takes the decision to disallow the depreciation, then he will consider the claim of deduction u/s 80IC as per the direction of the learned CIT(A) in paragraph 5.5 of his order, which reads as under:- 5.5 Considering the entire facts and circumstances of the case, / admit the audit report in form 1OCCB as fresh evidence and the same has been examined by the assessing officer on merits as well. No further opportunity is required as such. / have consid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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