2016 (4) TMI 1140 - 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.

Summary

Issues:
1. Excess depreciation claimed by the assessee
2. Treatment of subsidy received on account of increasing installed capacity
3. Classification of subsidy received as excise duty reimbursement
4. Adjustments made by the assessee while calculating book profit under section 115JB

Issue 1: Excess Depreciation Claimed by the Assessee
The Revenue filed an appeal against the CIT(A)'s order deleting the addition on account of excess depreciation claimed by the assessee for the A.Y. 2010-11. The Tribunal noted that the grounds of appeal raised by the Revenue were similar to those in the assessee's own case for A.Y. 2008-09 and 2009-10. In a previous decision, it was held that capital subsidy need not be deducted from the cost of plant and machinery. The Tribunal upheld this view and concluded that the CIT(A)'s order was based on various decisions of the Co-ordinate Bench of ITAT and superior courts. Therefore, the Tribunal dismissed the appeal filed by the Revenue regarding excess depreciation claimed by the assessee.

Issue 2: Treatment of Subsidy Received on Account of Increasing Installed Capacity
The Revenue challenged the CIT(A)'s decision regarding the treatment of subsidy received on account of increasing installed capacity. The Tribunal referred to a previous judgment in the assessee's own case where it was established that subsidy received as excise duty reimbursement cannot be considered a revenue receipt. The Tribunal reiterated this stance and emphasized the importance of consistency in decisions. Consequently, the Tribunal upheld the CIT(A)'s order on this issue and dismissed the Revenue's appeal.

Issue 3: Classification of Subsidy Received as Excise Duty Reimbursement
Regarding the classification of subsidy received as excise duty reimbursement, the Tribunal relied on the principle of consistency and the previous decisions in the assessee's case. It was established that the AO is not entitled to add capital subsidy or excise duty reimbursement to the book profit computed under section 115JB of the Act. Therefore, the Tribunal found no reason to interfere with the CIT(A)'s order and dismissed the Revenue's appeal on this issue as well.

Issue 4: Adjustments Made by the Assessee While Calculating Book Profit under Section 115JB
The CIT(A) had made a decision regarding adjustments made by the assessee while calculating book profit under section 115JB. The Tribunal, following the judgment of the Co-ordinate Bench in the assessee's own case, upheld the CIT(A)'s order on this matter. It was emphasized that adjustments made by the assessee can be increased or decreased based on the findings of the AO. Therefore, the Tribunal dismissed the Revenue's appeal concerning adjustments made by the assessee under section 115JB.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue on all grounds, citing the principle of consistency and previous decisions in the assessee's own case as the basis for upholding the CIT(A)'s order.