2014 (2) TMI 1260 - AT - Income Tax

Depreciation computation - capital subsidy reduction from the cost of machinery - Held that - Capital subsidy is not required to be deducted from the cost of plant and machinery Revenue v/s capital receipt - Held that - Subsidy received as Excise duty reimbursement cannot be taken as revenue receipt MAT computation - Held that - AO is not entitled to add the above said two items to the book profit computed u/s 115JB of the Act. See assessee s own case 2014 (1) TMI 1747 - ITAT MUMBAI

Summary

Issues:
- Whether capital subsidy should be reduced from the cost of machinery for computing depreciation.
- Whether subsidy received as excise duty reimbursement is a revenue receipt.
- Whether the AO was correct in adding the above items to the book profit under section 115JB of the Act.

Analysis:

Issue 1: Capital Subsidy for Depreciation
The Tribunal referred to a previous decision in the assessee's own case for the AY 2008-09, where it was held that capital subsidy should not be deducted from the cost of plant and machinery for computing depreciation. The Tribunal maintained consistency with this view and ruled in favor of the assessee, stating that the capital subsidy does not need to be reduced from the cost of machinery for depreciation calculation.

Issue 2: Subsidy as Revenue Receipt
Regarding the subsidy received as excise duty reimbursement, the Tribunal reiterated the decision from the previous case and held that this subsidy cannot be considered a revenue receipt. The Tribunal agreed with the assessee that the subsidy should not be treated as part of the revenue, supporting the argument that it should not be added to the income for tax purposes.

Issue 3: Addition to Book Profit under Section 115JB
The Tribunal also addressed the matter of whether the AO was justified in adding the capital subsidy and excise duty reimbursement to the book profit computed under section 115JB of the Act. Consistent with the previous ruling in the assessee's case, the Tribunal concluded that the AO was not entitled to include these items in the book profit calculation under section 115JB.

Conclusion
Given that the Ld CIT(A) had aligned the decision on the issues with the Tribunal's previous judgment, the Tribunal found no grounds to interfere with the order. Consequently, the appeal of the revenue was dismissed, affirming the decision of the Ld CIT(A) on all three issues. The judgment was pronounced in open court on 28th Feb 2014.

This detailed analysis of the judgment highlights the Tribunal's reasoning and conclusions on each of the issues raised in the appeal, providing a comprehensive understanding of the decision.