TMI Blog2022 (1) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.2018 of the CIT(A)-30, New Delhi, relating to Assessment Years 2014-15 and 2015-16, respectively. Since identical grounds have been raised by the Revenue in both these appeals, therefore, these were heard together and are being decided by this common order for the sake of convenience. ITA No. 2418/Del/2018 (A.Y. 2014-15) 2. The grounds raised by the Revenue are as under:- 1. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to delete the addition of ₹ 2,82,79,733/- made on account of disallowance of depreciation u/s. 32(1) r.w.s. 43(1) of the Act. 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that excise refund being revenue receipt cannot be reduced from the cost of plant machinery. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in relying upon the Hon'ble Supreme Court decision in the case of CIT vs. Meghalaya Steel Ltd. wherein it was held that excise duty refund is a revenue receipt forming part of profits and gains, arising from business while dealing with deduction claimed u/s. 80IB/IC of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2007-08 to A.Y. 2011-12, the assessee was categorically asked to explain as to why the actual cost of assets should not be modified in accordance with the provision of explanation 10 to section 43(1) of the Income Tax Act and depreciation claim should also not be recomputed accordingly. Rejecting the various explanations given by the assessee and following his order for the preceding assessment years i.e., 2007-08 to 2011-12, the AO disallowed an amount of ₹ 2,82,79,733/- by observing as under:- 8.1 In this case, the assets on which depreciation has been claimed by the assessee company have been acquired out of government grants obtained by the De-merged company. The deferred government grants have been obtained by the de-merged company M/s. Dharampal Satyapal Ltd. in pursuance of notification no. 69/2003 dated 25-08-2003 and notification no. 8/2004 dated 21-01-2004 issued under Central Excise Act, 1944. Since, the entire cost of the asset have been directly met by the Central government grant, the actual cost of the asset in accordance with the provisions of section 43(1) of the Income tax Act shall be nil. There is no disputing the fact that the assets were acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s own case for A.Y. 2012-13 2013-14. The above decision of the Ld. CIT(A) has not accepted and the revenue has gone in further appeal against the same. 10.1 As there is no change in facts and circumstances of the case in the assessment year under consideration, the excess claim of depreciation made by the assessee is being disallowed. As per para 5 above, the cost of the assets met out of the deferred government grants as on 31-03-2011 was ₹ 55,72,52,172/-. During the year, no further investment has been made out of deferred government grants in plant machinery. Therefore, the total investment in plant machinery and other assets out of deferred government grants stands at ₹ 55,72,52,172/-. Thus, the cost of the assets met out of the deferred government grants comes to ₹ 55,72,52,172/-. Therefore, in accordance with the provision of section 43(1) of the Income Tax Act read with explanation 7 and explanation 10 of the said section, the actual cost of the assets is reduced by a sum of ₹ 55,72,52,172/-. The claim of depreciation u/s. 32(1) of the Income Tax Act is therefore recomputed by reducing the actual cost of the assets by a sum of ₹ 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were acquired by the de-merged company M/s. Dharampal Satyapal Ltd., out of the amount of excise duty refund, accounted as deferred government grants in its books of accounts, does not carry any force to make reduction in the cost of assets. The appellant has also relied 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 manufacturi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in relying upon the Hon'ble Supreme Court decision in the case of CIT vs. Meghalaya Steel Ltd. wherein it was held that excise duty refund is a revenue receipt forming part of profits and gains, arising from business while dealing with deduction claimed u/s. 80IB/IC of the Act whereas the issue under consideration is claim of depreciation in a situation in which the deferred government grants have been utilized by the demerged company in a direct manner in pursuance of notification issued under Central Excise Act, 1944. 4. That the grounds of appeal are without prejudice to each other. 5. The appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time hearing of the appeal. 7. We have considered the rival arguments made by both the sides and perused the record. We find, the AO, disallowed an amount of ₹ 2,82,79,733/- being depreciation on plant machinery which was purchased out of subsidy disregarding the order of CIT(A) on the ground that the department has not accepted the same and has filed appeal before the Tribunal. We find, the ld. CIT(A), deleted the addition by following the order of his predecessor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form 10CCB 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 considered the judicial pronouncement relied by Ld. AR that the audit report in form 10CCB can be submitted before the first appellant authority specially under the circumstances when loss was claimed in return of income which was converted into positive income by making addition by the assessing officer. Accordingly, the assessing officer is directed to allow deduction u/s. 80IC as per law treating that the requirement of filing audit report in form no. 10CCB is met. 5. Respectfully following the decision of the Tribunal (supra), we restore the issue in dispute to the file of the Assessing Officer to decide in accordance with the direction of the Tribunal (supra). 6. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The grounds of the appeal of the Revenue are accordingly allowed for statistical purposes. 7. In the result, both the appeals of the Revenue are accordingly allowed for statistical purposes. 8. Since the ld. CIT(A) while allowing the claim of depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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