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TMI Blog2022 (4) TMI 1486X X X X Extracts X X X X X X X X Extracts X X X X ..... UPREME COURT] . As regards to the applicability of Proviso to Explanation 10 to section 43(1) which was inserted in the Statute w.e.f. 1.4.1999 by the Finance Bill (2) of 1998, the Proviso take cares of situation where such subsidy, grant or reimbursement is such nature that subsidy, grant or reimbursement cannot be directly relatable to the assets acquired by an assessee. In such a situation, the Proviso envisages that so much of amount which bears to the total subsidy, reimbursement or grant, the proportion as such assets bears to all the assets in respect of or with reference to which subsidy or grant is so received shall be deducted in the actual cost of the asset of the assessee. Thus, the proviso envisages adjustment of subsidy in the assets of the assessee. We hold that the amount of subsidy is not to be deducted from the actual cost u/s 43(1) for the purpose of calculation of depreciation and the provisions to Explanation 10 to section 43(1) have no application to the facts of the present case. We are forfeited in taking this view by the decision of Welspun Steel Ltd [ 2019 (3) TMI 397 - BOMBAY HIGH COURT] This decision being that of Jurisdictional High Court is bindi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly by the Central Government, the State Government or any authority then such subsidy shall not be included in the actual cost of asset. 4. The CIT (A) ought to have considered that impugned incentives are taxable as per Scheme (Para 3.4), the subsidy/incentive is available after commencement of commercial production, as the same is in the nature of interest subsidy, electricity duty exemption, royalty refund, octroi, entry tax refund etc. 5. For these and such other reasons as may be urged at the time of hearing, the order of the CIT(A) may be vacated and that of the Assessing Officer be restored. 6. The appellant craves, leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon ble Tribunal. 3. The brief facts of the case are that the respondent-assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of manufacturing of automobile goods and job works. The return of income for the assessment year 2014-15 was filed on 30.11.2014 declaring loss of Rs.16,07,49,235/-. Against the said return of income, the assessment was completed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Incentives 2007 outlines the eligibility criteria, quantum of incentives and monitoring mechanism for administering the incentives. 4. The Assessing Officer was of the opinion that the subsidy of Rs.36,08,69,967/- received from the Government of Maharashtra is only to meet the cost of the fixed assets relying on the eligibility certificate dated 22.03.2012 and, therefore, Assessing Officer is of opinion that the amount of the subsidy should be reduced from the cost of depreciable assets in terms of the provisions of Explanation 10 to section 43(1) of the Act and Proviso thereto placing reliance on the decision of the Hon ble Karnataka High Court in the case of CIT vs. Shree Renuka Sugars Ltd., 28 taxmann.com 268 (Kar.) and the decision of the ITAT, Hyderabad Bench-A in the case of Exaband (India) (P) Ltd. vs. ACIT. 5. Being aggrieved by the order of assessment, an appeal was filed before the ld. CIT(A), who vide impugned order held that merely because the quantum of subsidy is granted in term of certain percentage of total investments made by the appellant in the fixed assets, it does not mean that the subsidy is granted to meet the cost of any units. Accordingly, the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual costs of assets u/s 43(1) for the purpose of allowing the depreciation u/s 32 of Act. No doubt, the subsidy was granted in terms of the certain percentage of fixed assets to be disbursed in the form of refund of octroi, electricity duty exemption, entry tax refund, VAT etc. over a period of 8 years. Then the next question, that arises for consideration in such circumstances is that, can be it said that subsidy is granted to meet the cost of the actual fixed assets, merely because the amount of subsidy is calculated in term of certain percentage of investment in fixed assets. The Hon ble Supreme Court had an occasion to consider the identical issue in the case of CIT vs. P.J. Chemicals Ltd., 210 ITR 830 and after review of the case law on the point, the Hon ble Supreme Court held as under :- Where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the 'actu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculation of depreciation and the provisions to Explanation 10 to section 43(1) have no application to the facts of the present case. We are forfeited in taking this view by the decision of the Hon ble Bombay High Court in the case of Welspun Steel Ltd. cited supra. This decision being that of Jurisdictional High Court is binding on us. Therefore, it is not necessary for us to deal with the decision of the Hon ble Delhi High Court in the case of Steel Authority of India Ltd. (supra) and the Hon ble Karnataka High Court in the case of Shree Renuka Sugars Ltd. (supra) relied upon by the ld. CIT-DR. Therefore, we do not find any merit in the ground of appeal no.2 and 3 filed by the Revenue. Accordingly, ground of appeal no.2 and 3 stands dismissed. 13. The Revenue vide his ground of appeal no.4 seeks finding from the Tribunal that the amount of capital subsidy received should be held as revenue in nature . At the outset, we find that this ground of appeal no.4 does not arise out of the assessment order neither does arise out of the order of the ld. CIT(A). Further, it is only from the assessment year 2016-17 by enacting the provisions of sub-clause (xviii) to section 2(24) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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