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TMI Blog2021 (4) TMI 1185X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as provided in the scheme. Considering the above scheme framed by the Govt. of India, under which, the assessee has received the subsidy, ld. Pr. CIT has not justified for this impugned AY revising the assessment framed u/s. 143(3) of the Act by exercising powers u/s. 263 of the Act. Therefore, the finding of the Pr. CIT that the subsidy amount received by the assessee attracts the provisions of Explanation 10 to section 43(1) of the Act is not proper and the same is not applicable to the case of the assessee. Therefore, we set aside the order passed by the Pr. CIT and restore the order of the AO. Appeal of the assessee is allowed. - ITA No. 684/H/2019 - - - Dated:- 6-4-2021 - Satbeer Singh Godara, Member (J) And Laxmi Prasad Sahu, Member (A) For the Appellant : H. Srinivasulu For the Respondents : Nivedita Biswas ORDER Per L. P. Sahu, AM This assessee's appeal for AY 2014-15 is directed against the Pr. CIT - 5, Hyderabad's order, dated 08/03/2019 involving proceedings u/s. 143(3)/263 of the Income Tax Act, 1961; in short the Act , on the following grounds of appeal: 1. On the facts and in the circumstances of the case and in contrary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing of the appeal, so as to enable the Honourable Members to decide this appeal according to law. 2. The brief facts of the case are that the assessee, a company, engaged in the business of milling paddy, rice and broken rice filed its return of income for the AY 2014-15 on 19-11-2014 declaring total income at ₹ 61,65,880/-. The case was selected for scrutiny under CASS and scrutiny proceedings were completed u/s. 143(3) of the IT Act on 07/01/2016 assessing the income at ₹ 70,15,880/- by making an addition of ₹ 8,50,000/-. 3. Thereafter, by virtue of powers vested under section 263 of the Income tax Act, 1961, the Pr. CIT called for the assessment records of the assessee company for the AY 2014-15. 3.1. On observation of the assessment records, the Pr. CIT noticed that the assessee-company received subsidy/grant-in-aid of ₹ 25 lakhs from the Ministry of Food Processing Industries (MFPI), Govt. of India, New Delhi. He observed that this subsidy amount was not routed through the P L account of the company for the current year and the total subsidy amount of ₹ 25 lakhs was shown by the assessee-company under Reserves , Surplus of the Bala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the food processing industries. It was not a subsidy for meeting any cost of any specific fixed asset. The Hon'ble Supreme Court in the case of CIT vs. P.J. Chemicals Ltd. (1994) 121 CTR (SC) 201 held as where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, it is not to meet any portion of the 'actual cost' for the purpose of calculation of depreciation. The Supreme Court in the case of CIT vs. Panni Sugars . Chemicals Ltd. (2008) 219 CTR (SC) 105 held that if the object of assistance under the subsidy scheme is to enable the assessee to set up a new unit or to expand 8.11 existing unit then the receipt of the subsidy would be on capital account. Reliance is also placed on the decision in the case of CIT vs. Reliance Industries Ltd. (2011) 339 ITR 632 (Bom) It is the quality or the nature of the payment that is decisive of the character of the payment and not the method of the payment or its measure The assessee-company relies upon the following decisions: 1. CIT Vs. Godavari Plywoods Ltd. (1987) 168 ITR 632 (AP) 2. Sasiri Extractions Ltd. vs. ACIT (2008) 307 ITR 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in giving a finding that the subsidy received from Ministry of Food Processing Industries, Government of India was intended to reduce the expenditure which the Assessee had incurred for acquiring Building and Plant and Machinery which would result in reduction of actual cost u/s. 43(1) read with explanation 10 of the Act. He contended that the Learned Pr. CIT did not examine the subsidy scheme of Ministry of Food Processing Industries, Government of India Dt. 20-4-2007 fully and relied on the sanction letter Dt. 18-9-2013 which does not contain the entire subsidy scheme of the Government. He further contended that the Learned Pr. CIT erred in applying the provisions of Section 2(24)(xviii) of the Act retrospectively for AY 2014-15 even though the provisions of Section 2(24)(xviii) are applicable from 01.04.2016. 5.1. The ld. AR submitted that the amount of subsidy received by the assessee-company is in the nature of Capital receipt and hence is rightly reflected by it in the Balance Sheet under the head 'Reserves and Surplus'. The character of subsidy in the hands of the assessee-company is of capital in nature for the reason that it is sanctioned under the scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Food Processing industries in the 11th Plan period i.e. w.e.f. 1st April 2007 through Banks/financial institutions to provide a thrust and wider coverage for food processing industries in the country and simultaneously decentralize the procedures for appraisal, grant of assistance and monitoring. 7.1. The salient features of the subsidy scheme of the Ministry of Food Processing Industries are as under: 1. The food processing Industry in India occupies a unique position in the Indian Economy in terms of its potential for employment generation, increasing the farmers income and export growth. The scheme for Technology upgradation/expansion/modernization/establishment being implemented by the Ministry of Food Processing Industries [MFPl] is aimed at upgrading of processing capabilities. 2. The scheme shall be operational w.e.f. 1st April, 2007. 3. Implementing agencies shall be Banks/Financial institutions. 4. The scheme will provide 25% of the cost of plant machinery and technical civil works subject to a maximum of ₹ 50,00,000/- in general areas and 33% up to ₹ 75,00,000/- in difficult areas like: Jammu and Kashmir, Himachal, Uttarakhand e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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