9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (10) TMI 1448 - AT - Income TaxReduced depreciation on reduced cost of fixed assets - whether grant received by assessee from State Govt. towards cost of capital had to be considered in the manner provided in section 43(1) of the Act that the AO was justified in reducing the grant in question? - Held that - We find that the AO had not invoked the provisions of section 43(l) Expl.(10) while completing the assessment although he had held that government grants on capital assets would affect depreciation allowable to the assessee and that the revenue grants and subsidies were taxable. Thus it is clear that the issue of actual cost as per the provisions of section 43(1) of the Act was not deliberated upon or decided by the AO. It was the FAA who held that the AO should have invoked the provisions of section 43(l)Expl.(10). In our opinion the AO had no chance to examine the letter dated 03.03.2009 of the Assam Govt. and take a decision about the issue-especially the contribution by the Govt. as promotor s quota. In our opinion the matter need further verification and investigation. Therefore in the interest of justice we are remitting back the issue to the file of the AO for fresh adjudication. He is directed to decide the assessee issue afresh after considering the material to be produced by the assessee and the judgment of Bharat Sanchar Nigam Ltd. v. Dy. CIT 2013 (5) TMI 416 - DELHI HIGH COURT . - Decided in favour of the assessee for statistical purposes.
Issues involved:
1. Reduction from the cost of fixed assets provided by the Government of Assam affecting depreciation. 2. Interpretation of provisions of section 43(1) of the Income Tax Act regarding grants received for capital assets. Issue 1: Reduction from the cost of fixed assets provided by the Government of Assam affecting depreciation. The appellant challenged the orders for the assessment years 2006-07 and 2007-08, questioning the reduction from the cost of fixed assets provided by the Government of Assam, leading to reduced depreciation. The appellant argued that the reduction was erroneous and affected the depreciation calculation. The AO reduced the opening balance of Plant and Machinery with the capital grant amount received. The First Appellate Authority (FAA) upheld the AO's decision, stating that the grant received had to be considered as per section 43(1) of the Act. The appellant contended that the AO wrongly applied section 43(1), arguing that the amount provided by the owner towards capital assets should not be reduced. The appellant claimed that the State government's contribution should not fall under section 43(1) as it was not a subsidy but the owner's contribution. The Tribunal found that the AO did not consider the provisions of section 43(1) Expl.(10) and remitted the issue back to the AO for fresh adjudication, directing a reevaluation based on additional material to be provided by the appellant. Issue 2: Interpretation of provisions of section 43(1) of the Income Tax Act regarding grants received for capital assets. The Tribunal observed that the AO did not properly apply the provisions of section 43(1) while assessing the impact of government grants on capital assets. The FAA held that the AO should have invoked section 43(1) Expl.(10) in this regard. The appellant argued that the State government's contribution should not be considered under section 43(1) as it was the owner's contribution, not a subsidy. The Tribunal noted that further verification and investigation were necessary to determine the nature of the grants received and directed the AO to reexamine the issue in light of additional material and relevant case law. The Tribunal decided in favor of the appellant for both assessment years, partially allowing the appeals. In conclusion, the Tribunal's judgment focused on the correct application of provisions related to government grants affecting depreciation and the interpretation of section 43(1) of the Income Tax Act concerning grants received for capital assets. The decision highlighted the need for a thorough reassessment by the AO based on all available evidence and legal precedents.
|
