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2019 (6) TMI 1625 - AT - Income TaxApplicability of Explanation 10 to Section 43(1) - amount was released as grant and latter it was treated as loan in terms of G.Odepreciation on the assets acquired out of the amount granted by the Government of Tamilnadu, Disaster Management and Mitigation Department - CIT(A) erred in giving relief to the assessee by treating the impugned receipt in question as interest free loan and allowing the depreciation claim against assets acquired from the said receipt despite the Tamil Nadu Government G.O. dated 18.07.2005 classifying it as Gran - HELD THAT - The amount was received from Government of Tamil Nadu originally in the form of grant and subsequently it was classified as interest free loan vide G.O. (Ms) No.22, dated 03.02.2016. Therefore, this amount cannot be treated as grant attracting Explanation 10 to Section 43(1) of the Act. In the circumstances, the order of the ld. CIT(A) is based on the proper appreciation of evidence on record. We do not find any perversity in findings of the ld. CIT(A) - Decided against revenue.
Issues:
- Appeal against orders of ld. Commissioner of Income Tax (Appeals) for assessment years 2014-15 and 2015-2016. - Applicability of Explanation 10 to Section 43(1) of the Income Tax Act. - Classification of receipt as interest-free loan or grant. Analysis: Issue 1: Appeal against orders of ld. Commissioner of Income Tax (Appeals) for assessment years 2014-15 and 2015-2016 The Appellate Tribunal ITAT Chennai heard two appeals filed by the Revenue against orders of the ld. Commissioner of Income Tax (Appeals) for the assessment years 2014-15 and 2015-2016. The Tribunal decided to dispose of both appeals through a common order due to the involvement of identical facts and issues in both cases. Issue 2: Applicability of Explanation 10 to Section 43(1) of the Income Tax Act The central issue in the present appeal revolved around the interpretation and application of Explanation 10 to Section 43(1) of the Income Tax Act. This provision deals with the treatment of the cost of an asset acquired by the assessee with financial assistance from the Central Government, State Government, or any other authority in the form of a subsidy, grant, or reimbursement. The Tribunal examined whether the amount received from the Government of Tamil Nadu, initially as a grant and later reclassified as an interest-free loan, should be considered a grant under Explanation 10 to Section 43(1) of the Act. Issue 3: Classification of receipt as interest-free loan or grant The respondent-assessee, Tamilnadu Maritime Board, received an amount from the Government of Tamil Nadu, which was initially treated as a grant. Subsequently, this amount was reclassified as an interest-free loan through a government order. The Tribunal analyzed the nature of this receipt and concluded that the reclassification of the amount as an interest-free loan post facto did not alter its original character as a grant. Therefore, the Tribunal upheld the decision of the ld. Commissioner of Income Tax (Appeals) to allow the depreciation claim against assets acquired from this amount, dismissing the Revenue's appeal for both assessment years 2014-15 and 2015-2016. In conclusion, the Appellate Tribunal ITAT Chennai dismissed the appeals filed by the Revenue for the assessment years 2014-15 and 2015-2016, based on the proper interpretation of Explanation 10 to Section 43(1) of the Income Tax Act and the classification of the receipt as an interest-free loan or grant.
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