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TMI Blog2016 (5) TMI 1603X X X X Extracts X X X X X X X X Extracts X X X X ..... e appreciate this fair stand to uphold the CIT(A) s findings under challenge. This second substantive ground fails. - ITA Nos. 1336 & 1337/Ahd/2013 - - - Dated:- 31-5-2016 - Shri Pramod Kumar, Accountant Member And Shri S. S. Godara, Judicial Member For the Revenue : Shri Narendra Singh, Sr. D.R. For the Assessee : Shri Sanjay R. Shah, A.R. ORDER PER : S. S. GODARA, JUDICIAL MEMBER:- These two assessee s appeals for A.Y. 2007-08 2009-10, arise from order of the CIT(A)-IV, Baroda dated 04-02-213 22-02- 2013 in appeal nos. CAB/IV-A-305/2011-12 CAB/IV-A-378/2011- 12, in proceedings under section 143(3) r.w.s. 147 of the Income Tax Act, 1961; in short the Act . We proceed assessment year wise for the sake of convenience and brevity. ASSESSMENT YEAR 2007-08 ITA 1336/Ahd/2013 2. The assessee s twin substantive grounds challenge validity of reopening as well as section 14A r.w. Rule 8D disallowance of Rs. 11,79,478/- made by the Assessing Officer and affirmed in the lower appellate proceedings. 3. This assessee is a corporate society processing milk and also producing milk products, cattle feed, malted milk food chocolates and allied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 determining total income at Rs.7,33,02,921/-. 2. It is found on verification of the records that- The assessee company is engaged in the business of processing of milk and manufacturing of milk products, cattle feed, malted milk food, chocolates and other allied products. The return of income was filed on 29/10/2007 declaring total income at Rs. Nil. It was found that the disallowance of Rs.23,46,232/- was made u/s. 14A of the Act, considering the net interest expenses of Rs.4,53,81,000/- as against total interest expenses of Rs.7,05,14,000/-. The interest expenses interest income were declared at Rs.7,05,14,000/- Rs.2,51,33,000/- respectively and net interest expenses were derived at Rs.4,53,81,000/- (Rs.7,05,14,000/- minus Rs.2,51,33,000/-). Such netting of interest expenditure is not envisaged u/s. 14A of the Act r.w. Rule 8D of the Rules. The provisions of Rule 8D(2)(ii) of I.T. Rules, 1962 provides that the amount of expenditure by way of interest is to be considered for working out the expenditure in relation to income which does not form part of the total income for disallowance U/s. 14A of the Act. The provisions of Rule does not provide for netting of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s against netting formula. The Revenue fails to rebut the above stated legal and factual position. We hold in these facts that both the assessee s grounds deserves to succeed on validity of reopening as well as merits. ITA 1336/Ahd/2013 is allowed. ASSESSMENT YEAR 2009-10 ITA 1337/Ahd/2013 10. This appeal raises the following substantive grounds:- 1. The order passed by the learned CIT(A) is bad in law and contrary to the provisions of law facts. It is submitted that it be so done now. 2. The learned CIT(A) erred in confirming the order of AC) by disallowing the claim of depreciation of Rs.45,90,466/- on portion of plant and machinery received towards grant/subsidy from National Dairy Development Board under 70% loan and 30% grant scheme. Your appellant submits that 30% grant has been received towards the project as a whole and hence, it is entitled to depreciation on the entire cost of the assets installed and put to use without deducting the grant portion. It is submitted that it be so allowed now. 2.1 The learned CIT(A) erred in law and on facts in holding that Explanation 10 to section 43(1) of the Act would apply in respect of assets acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or any authority established under any law or by any other person in the form of subsidy or grant or reimbursement (by whatsoever name called), 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 the submission of the assessee that this Explanation would apply to the assets which are acquired post-insertion of this Explanation. 5.2. The issue which requires examination is whether the assessee is entitled for depreciation on the entire amount including the grant potion. The Hon ble Jurisdictional High Court in the case of ACIT vs. Gujarat Co-op. Milk Mktg. Federation Ltd. in Tax Appeal No.113 of 2008 dated 20/04/2010 had formulated question of law which reads as under:- Whether on the facts and in the circumstances of the case and in law, the ITAT was right in law in holding that assessee is entitled to claim depreciation on the 30% of the value of the plant and machinery received by way of grant from NDDB under 70% Loan and 30% Grant Scheme? . T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n while allowing the depreciation. The appeal on this point fails . The apex Court has pointed out that expression actual cost needs to be interpreted liberally. Subsidy of the nature we are concerned with, does not partake of the incidents which attract the conditions for their deductibility from actual cost . In view of that, answer to question No. 2 must be in the affirmative, i.e., in favour of the assessee and against the Revenue. 5.4. The Revenue has placed reliance on the decision of Coordinate Bench (ITAT A Bench Ahmedabad) passed in ITA No.1372/Ahd/2010 for AY 2005-06 in the case of Vidya Dairy vs. ACIT, dated 12/07/2013, wherein the Coordinate Bench has decided this issue in para-8 by observing as under:- 8. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the Assessee had received grant from NDDB prior to 1995 but the agreement was executed between the Assessee and NDDB on 21.7.1999. The Assessee has not worked out the depreciation for the period prior to 1.4.2001 though the grant was received prior to 1995 as according to the Assessee Explanation 5 to section 32 were inserted with effect from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal is that the provision for reduction of subsidy from cost of machinery was introduced by the above amendment only with effect from 01/04/1999 and so much so, it does not apply to investments made any time prior to that which in this case is before 31/03/1998. Since the Tribunal allowed assessee's appeal, the Department filed this appeal before us challenging the findings of the Tribunal 5. After hearing both sides we are unable to interfere with the orders of the Tribunal because the Tribunal has followed the decision of the Honourable Supreme Court in the case of CIT v. P.J. Chemicals Ltd. [1994] 210 ITR 830 / 76 Taxman 611. Further we do not know on what basis the Department can introduce retrospectivity to the amendment introduced when the Legislature has not done so. Obviously, the above amendment is prospective in nature and the same applies to investments 'made on plant and machinery and other depreciable assets after 01/04/1999. So much so, we uphold the order of the Tribunal and dismiss the appeal on this issue. Therefore, in the light of the judgement of Hon ble Gujarat High Court in the case of Mahesana District Co-operative Milk Producers U ..... X X X X Extracts X X X X X X X X Extracts X X X X
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