TMI Blog2022 (7) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... ches the fixed capital of the company though it may create a positive image for particular product of the assessee company which may ultimately smooth the conduct of the business of the assessee company. However, the same in no manner actually adds to any gain in the fixed capital of the company. Subsidy receipt - Nature of receipts - subsidy was received by the assessee company under capital ASIDE Scheme - HELD THAT:- On bare perusal of the content of the aforesaid letter, it reflects that such subsidy was given towards administrative expenses incurred by the assessee company during the execution of project for upgradation of infrastructure facilities. The CIT(A) has rightly arrived at finding that the administrative expense being incurred for expansion of the infrastructure facility falls in the category of capital in nature and has therefore, rightly deleted the addition of an amount of Rs.3.87 crore made by the Assessing Officer. We could note that the ITAT has examined the components of sanctioned subsidy and has thereafter arrived at a finding that the same has been rightly treated as capital subsidy by CIT(A). Thus, the findings recorded by the ITAT cannot be terme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - being subsidy received, Rs.4,13,381/- being laboratory expenses and Rs.2,69,257/- being monthly car hire charges. Thus, the total income determined by the Assessing Officer was of Rs.4,48,36,230/- and accordingly, the assessment order dated 11.03.2013 came to be passed under Section 143(3) of the Act. 2.3 Being aggrieved and dissatisfied with the aforesaid order of assessment passed by the Assessing Officer, the assessee company preferred an appeal before the CIT(A) which was registered as Appeal No.CAB(A)-3/1044/14-15. The assessee original appellant has raised six grounds for consideration. The CIT(A) after hearing the respective parties and considering the submissions put forth along with the documents furnished and upon examination of the case laws relied upon, allowed the appeal of the assessee company vide order dated 24.02.2015. The CIT(A) was pleased to allowed the deduction of Rs.5,95,758/- as expense incurred for raising shed thereby treating the said amount as revenue expenditure. The CIT(A) also deleted the addition of an amount of Rs.27,39,668/- towards ISO Certification expense by referring to the decision in case of assessee company for assessment year 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d circumstances of the case and in law, the Appellate Tribunal is justified in confirming the view of CIT(A) of deleting the addition of Rs.3,87,00,000/- made on account of subsidy received by the assessee? [C] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in confirming the view of CIT(A) without appreciating that the assessee itself claimed that the subsidy was towards administrative expenses, which warranted the addition since the expenses claimed to this extent have been recovered from the Government? [D] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was justified in confirming the view of CIT(A) of treating the subsidy of Rs.3,87,00,000/- as capital in nature without appreciating that the same is in total contravention to Explanation 10 below section 43(1) of the Act and without compelling the assessee to reduce the cost of the asset to the extent of the subsidy received, particularly when CIT(A) held that the subsidy was for expansion of the capacity infrastructure facility which was a capital asset subject to depreciation? 4. Mr. M.R. Bhatt, the learned Senior Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he attention of this Court was drawn to the submissions dated 08.02.2013 made by the Assessing Officer whereby it was clearly stated that the subsidy was towards administrative expenses having been recovered from the Government. Thus, it was submitted that in-fact that subsidy of an amount of Rs.3.87 crore was given towards administrative expenses incurred during the execution of project for the upgradation of infrastructure facility which ultimately enables the assessee company to run business smoothly and more profitability. Thus, considering the nature of such expenses incurred, the same is required to be classified under the head of revenue expenditure. But at the same time, if such subsidy was not granted to set up a new unit or to expand the existing unit then in that case, the same was required to be considered as capital in nature. 4.2 The learned Senior Counsel has further relied upon the decision of the Supreme Court in the case of CIT(Madras) Vs. M/s. Ponni Sugars Chemicals Ltd . wherein the Supreme Court has laid down guidelines in the nature of basic test to be applied in judging the character of subsidy. By referring to said decision, the emphasis has been laid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 10 to Section 41(1) of the Act had held that the said subsidy was for expansion of the capacity, infrastructure facility and therefore, was required to be treated as capital asset subject to depreciation. 5. We have extensively heard Mr. M.R. Bhatt, the learned Senior Counsel appearing for the Revenue Department and have carefully gone through the order passed by the Assessing Officer as well as the CIT(A) and the Income Tax Appellate Tribunal. We have also perused the relevant provisions of law and have also taken into consideration the decisions relied upon by the learned Senior Counsel appearing for the Revenue. 6. This Court finds that the Revenue Department has principally raised two issues during the course of hearing of appeal, which falls for our consideration. The first issue which arises for our consideration is the aspect of entire expenditure of assessee company more particularly, with regard to the ISO Certification expenditure being treated as under the head of Revenue expenditure thereby deleting the disallowance of Rs.27,39,668/- for the assessment purpose. Upon appreciation of material brought on record vis-a-vis the findings of the CIT(A) as regards tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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