2013 (1) TMI 37 - AT - Income Tax

Deduction u/s 10A Export proceeds not received within six month Draft misplace by bank - Assessee was engaged in the business of manufacturing and export of processed food products Assessee contended that foreign remittances had been sent by the foreign buyer to the banker who misplaced the same and therefore since remittances were received in India claim of deduction should be allowed Held that - Unless the foreign remittances are credited in the account of assessee or at least credited in the account of the bank it cannot be said that the export proceeds have been received in or brought into India. It is not clear whether these remittances have been included in the total turnover in the P&L account. We therefore direct the AO to re-compute deduction under section 10A by including the said remittances in the total turnover and by excluding the same from export turnover and excess claim if any will be disallowed. The profit of business will be computed excluding the remittances in the total turnover. In favour of revenue Disallowance of depreciation on plant and machinery - Treatment of subsidy received from the Government in the computation of depreciation on p&m Held that - There is nothing on record to show that subsidy had been granted by the govt. towards any specific asset or p&m. Therefore merely because amount received had been utilized for acquisition of p&m it cannot be said that subsidy was to meet cost of any asset. It is a settled legal position that only subsidy granted specifically towards a particular asset has to be reduced from cost of that asset while computing depreciation. There is no material to show that the subsidy in this case had been granted to meet cost of p&m the disallowance of depreciation corresponding to subsidy cannot be upheld. In favour of assessee

Summary

Issues:
1. Disallowance of deduction under section 10A.
2. Disallowance of depreciation on plant and machinery.

Issue 1: Disallowance of deduction under section 10A:
The appellant contested the disallowance of deduction under section 10A for export proceeds not received within the stipulated period. The AO disallowed the claim due to lack of concrete proof of remittances being received in India. The CIT(A) upheld the disallowance stating that the certificate provided did not prove the remittances were credited to the appellant's account. The appellant argued that the remittances were received by bankers in India, fulfilling statutory requirements. The Tribunal noted that unless remittances were credited to the appellant's account or the bank's account, they were not considered received in India. The Tribunal directed the AO to re-compute deduction under section 10A, excluding the uncredited remittances from export turnover.

Issue 2: Disallowance of depreciation on plant and machinery:
The dispute centered on the reduction of depreciation due to a subsidy received by the appellant. The AO reduced depreciation corresponding to the subsidy amount, which the CIT(A) confirmed. The appellant argued that the subsidy was general and not specific to any asset, thus should not reduce asset cost. The Tribunal observed that the subsidy letter did not specify it was for any particular asset. As the subsidy was not granted for a specific asset, the disallowance of depreciation corresponding to the subsidy was unwarranted. The Tribunal set aside the CIT(A)'s decision, allowing the appellant's claim for depreciation.

In conclusion, the Tribunal partly allowed the appellant's appeal, directing the AO to re-compute deduction under section 10A and allowing the claim for depreciation on plant and machinery due to the general nature of the subsidy received.