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TMI Blog2015 (3) TMI 1151X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case are that, the assessee was engaged in the business of manufacturer of Pressparts & Fabricated Assemblies & Painting various Pressparts and fabricated items. During the year under consideration, the assessee had received Rs. 15 lakhs Special Capital Incentive Subsidy under the Package Scheme of Incentive, 1993 which has been claimed as capital receipt by the assessee. Under the scheme, Government of Maharashtra had proposed that where the industries are shifted outside Bombay-Thane-Pune Belts, Special Capital Incentive in the form of additional sales tax incentive, instead of cash grant was offered. The eligible SSI unit was entitled to draw the incentive after completion of all initial and final steps and the same was to be computed on the basis of fixed capital investment actually made by the eligible SSI unit. The Assessing Officer was of the view that the subsidies were capital or revenue in nature is to be decided from the nature of subsidies. Merely because subsidies have been granted for encouraging the setting up of industries in a particular area of the State, does not establish that it is capital in nature. Further, under the scheme, the units were eligi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Laval India Ltd. Vs. DCIT (2008) 117 TTJ 902 (Pune) ii) CIT Vs. Janak Steel Tubes (P) Ltd., 179 ITR 536 (P&H) iii) CIT Vs. Jinal Bros. Rice Mills, 179 ITR 470 (P&H) 5. The Assessing Officer was therefore, directed to reduce the cost of assets in respect of which the subsidy had been received and allow the depreciation on the reduced cost of assets. 6. The assessee is in appeal against the order of CIT(A). 7. The learned Authorized Representative for the assessee pointed out that the Special Capital Incentive received as per the Maharashtra Package Incentive Scheme was establishing units in backward areas of State and not for acquiring capital assets and only mode of computation of subsidy was certain percentage of investment in capital assets subject to ceiling limit. The plea of the learned Authorized Representative for the assessee was that the subsidy was by way of capital contribution for establishing industry in backward area and was a capital receipt which would not reduce the cost or WDV of the asset for the purpose of depreciation. Reliance in this regard was placed on the ratios laid down by Kolkata Bench of the Tribunal in DCIT Vs. Rasoi Ltd. (2014) 46 taxmann.co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition proposed by the Assessing Officer was that in the alternate Explanation 10 to section 43(1) of the Act is applicable and the value of capital incentive is to be reduced from the cost of assets in respect of which the said subsidy had been received and the CIT(A) has applied the same. 10. The perusal of the Package Scheme of Incentive, 1993 placed at pages 21 to 44 reflect that the purpose of the scheme was to establish industries in the underdeveloped areas of the Maharashtra State under which the Government appointed SICOM Ltd. to act as an agent of the Government for the implementation of the scheme. Under the 1993 scheme, the procedures were framed and the entrepreneur was entitled to special capital incentive of varying percentage of the gross fixed capital investment, subject to ceiling in respect of eligible unit, provided where the entrepreneur does not opt for availing sales tax incentive under Part-III of 1993 scheme. Under the said scheme a grant of Rs. 15 lakhs was disbursed to the assessee. 11. We find that similar issue of taxability of the capital incentive received under the Package Scheme Incentive, 1993 arose before the Tribunal in ACIT Vs. M/s. Endress + ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, ground of appeal No.3 raised by the Revenue is dismissed." 13. The issue before us is restricted to the invoking of Explanation 10 to section 43(1) of the Act, under which it is provided that where portion of cost of asset acquired by the assessee has been met directly or indirectly by the Central Government or the State Government or any Authority established under any law or by any other person, in the form of subsidy or grant or reimbursement, then so much of the cost as is relatable to such subsidy or grant or reimbursement, shall not be included in the actual cost of the asset to the assessee. It is further provided thereunder that where such subsidy or grant or reimbursement of such nature cannot be directly relatable to the asset acquired, so much of the amount which bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee. In other words, in order to invoke the provisions of Explanation 10 to section 43(1) of the Act, it is necessary to establish that the subsidy was directly or indirectly utilized for meeting the cost or portion of cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the actual cost and thus it falls outside the ken of Expln. 10 to s. 43(1) of the Act. In the light of the above discussion, we are of the view that for the purpose of computing depreciation allowable to the assessee, the subsidy amount cannot be reduced from the cost of the capital asset. The AO is directed accordingly." 14. The perusal of the Package Scheme of Incentive, 1993 reflect that the scheme was formulated to give incentive for setting up the industries in certain belts of Maharashtra and for the purpose of working out the amount of subsidy, though the cost of eligible investment was taken as the base, but the said subsidy was not specifically intended to meet the cost of assets. In view thereof, it could not be held that the incentive received by the assessee under the Package Scheme of 1993 in the form of subsidy was covered under provisions of Explanation 10 to section 43(1) of the Act and consequently, the subsidy amount was not to be reduced from the cost of the assets. Accordingly, the Assessing Officer is directed not to reduce the value of the subsidy from the cost of assets while allowing depreciation on the said assets of the assessee. 15. In the result ..... X X X X Extracts X X X X X X X X Extracts X X X X
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