9911796707
TMI Blog2021 (8) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... tribution and hence the same is in the nature of capital receipt, which cannot be taxed under the Act. CIT-A Once the amount is in the nature of capital receipt, question of reduction of said subsidy from the cost of plant machinery as per the provisions of section 43(1) of the Act does not arise. This proposition was supported by the decision of the Hon'ble Jurisdictional High Court of Madras in the case of M/s. Srinivas Industries [ 1991 (1) TMI 120 - MADRAS HIGH COURT] where it was held that amount of subsidy made available cannot be deducted from the cost of capital asset for the purpose of working out depreciation u/s. 43(1) - This proposition was further supported by the decision of the Hon'ble High Court of Rajasthan in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the purchase of assets required for setting up of a frozen veg/non veg food project as is evident from the terms and conditions mentioned in the annexure to the Sanction Letter. 3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored. 3. The brief facts of the case are that the assessee company is engaged in the business of food products, filed its return of income for the assessment year 2008-09 declaring loss of ₹ 3,88,25,456/-. The case has been subsequently, reopened u/s. 147 of the Income Tax Act, 1961 (hereinafter the 'Act') for the reasons recorded as per which income chargeable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly or indirectly by any other person or authority for the purpose of purchase of assets, then same needs to be reduced from the concerned cost of assets before claiming depreciation. Therefore, he has rejected explanation furnished by the assessee and reworked depreciation after reducing capital subsidy received from Government of India. 4. The assessee, being aggrieved by the assessment order preferred an appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has reiterated its submissions made before the AO and taken support from the decision of the Hon'ble Jurisdictional High Court of Madras in the case of M/s. Srinivas Industries vs. CIT, (1991) 188 ITR 22 and argued that amount of subsidy made available cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the ld. CIT(A) submitted that the ld. CIT(A) has rightly appreciated the facts in light of the decision of Hon'ble Jurisdictional High Court of Madras in the case of M/s. Srinivas Industries vs. CIT, supra and held that when capital subsidy was received for promotion of industries in backward areas, the sum partakes the nature of capital receipts which cannot be taxed under the Act and hence, the same need not to be deducted from the cost of asset as per provision of section 43(1) of the Act. 7. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. As per the provisions of section 43(1) of the Act, any part of cost of asset was directly or indirectly met by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that amount of subsidy made available cannot be deducted from the cost of capital asset for the purpose of working out depreciation u/s. 43(1) of the Act. This proposition was further supported by the decision of the Hon'ble High Court of Rajasthan in the case of CIT vs. Ambica Electrolytic Capacitor, supra. We, therefore are of the considered view that the AO was erred in reducing capital subsidy received for setting up of new food processing industry from the plant machinery for computing depreciation. The CIT(A) after considering relevant facts has rightly deleted addition made by the AO towards excess depreciation. Hence, we are inclined to uphold the findings of the ld. CIT(A) and dismiss the appeal filed by the Revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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