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TMI Blog2024 (5) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. We proceed assessment year-wise for the sake of convenience and brevity. ITA. No. 1156/PUN./2023 - A.Y. 2014-2015 : 2. The assessee pleads the following substantive grounds in the instant appeal : 1. "The Ld. AO & CIT(A) ought to have treated the IPS subsidy received of Rs. 96,23,314/- under PSI scheme as Capital Asset neither liable to tax nor to be reduced from Block of asset. 2. The Ld. AO erred in and Ld CIT(A) erred in confirming that the amount of IPS subsidy of Rs. 96,28,314/- to be reduced from the cost of asset and thereby reducing the claim of depreciation by Rs. 14,44,247/-. 2.1. The Ld AO and Ld CIT(A) erred in not considering the fact though quantum of subsidy is based on investment in various assets the subsidy is given for developing backward areas and therefore it is capital in nature and not liable for tax and the said subsidy is received as one of incentives under PSI 2007. 3. The appellant craves its right to add to or alter the Grounds of Appeal at any time before or during the course of hearing of the case." 3. Both the learned representatives next invited our attention to the NFAC's detailed discussion affirming the assessment findings invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 43(1) of the Act whereas the appellant contended during the assessment proceedings that section 2(24)(xviii) is applicable from 1.4.2017 and doesn't apply for the present financial year. Perusal of section 2(24)(xviii) of the Act reveals that it is inserted by the Finance Act, 2015 w.e.f 01.04.2016 but this provision has also an exclusion of subsidy which is considered for determination of actual cost of the assets as per Explanation 10 to clause (1) of section 43. Therefore, the section 2(24)(xvii) is applicable for subsidy other than the subsidy for capital investment and the AO has rightly applied the Explanation 10 below to section 43(1) of the Act in the present case. It is pertinent to mention here that the appellant contests the applicability of Explanation 10 below to section 43(1) of the Act during the appellate proceedings. In view of above discussion, I am of the considered view that the subsidy received by the appellant on expansion of unit by investment in plant & machinery is capital in nature. Therefore, the amount of subsidy needs to be reduced from the cost of the asset resulting into reduction in quantum of depreciation on such assets. Therefore, the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narration of facts, we find that the assessee being a private limited company is engaged in manufacturing of steel at Jalna. The assessee-company had set up a mega project as defined in Government of Maharashtra's PSI 2007 in Jalna. Under the scheme PSI 2007 mega project the assessee has received capital incentive subsidy in different years from A.Y. 2010-11 to 2015-16.................... 10. Reverting to the facts of the present case, we find that in view of the above referred judgment, the whole purpose and the grant of subsidy under PSI 2007 by Government of Maharashtra was to promote industrial growth in the less developed areas of the State and also to provide employment in the area. Once this purpose is established the subsidy has to be a capital receipt. However, the position has changed w.e.f. 01.04.2016 relevant to A.Y. 2017-18 onwards with the amended provision of sub-clause (xviii) to sec. 2(24) of the Act. However, at present, we are concerned with A.Y. 2011-12 to 2015-16. Therefore, the amended provision of sec. 2(24) sub-clause (xviii) is not applicable to the years under consideration and thus as a natural consequence the subsidy received by the assessee would ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tify the financial aid, is not a payment, directly or indirectly, to meet any portion of the 'actual cost. The expression 'actual cost in section 43(1) of the Income-tax Act, 1961, needs to be interpreted liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from 'actual cost'. The amount of subsidy is not to be deducted from the 'actual cost' under section 43(1) for the purpose of calculation of depreciation etc." 11. The Hon'ble Gujarat High Court in the case of CIT vs. Swastik Sanitary Works Ltd., 286 ITR 544 (Guj.) following the principle laid down by the Hon'ble Supreme Court in the case of P.J. Chemicals Ltd. (supra) held that the subsidy is intended as an incentive to encourage entrepreneurs to move 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 "actual cost" as defined under the provisions of section 43(1) of the Act. Similarly, the Hon'ble Bombay High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t judicial consistency to accept the assessee's instant sole substantive ground and main appeal ITA. No. 1156/PUN./2023 in very terms. Ordered accordingly. 6. The Revenue's cross-appeal ITA. No. 1203/PUN./ 2023 pleads the following substantive grounds : 1. "The Ld. CIT(A) has erred in law and on facts in holding that for the purpose of section 80-IA the year in which the assessee chooses to claim deduction has to be treated as initial assessment year. 2. The Ld.CIT(A) has erred in law and on facts in holding that profit of the eligible business has to be computed without deducting therefrom brought forward losses or unabsorbed depreciation prior to the initial year of claim de hors the provision u/s 80IA(5) of the Act. 3. The Ld.CIT(A) has erred in law and on facts m ignoring that the assessee was in power generation business and holding that each windmill has to be taken as independent eligible business. 4. The Ld CIT(A) has erred in law and on facts in holding that each windmill unit has to be treated as standalone basis de hors the specific stipulation in Section 80-IA(5) of the Act. that 'profit and gains of eligible business' being power generation business have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al In the case of Goldmine Shares & Finance (P.) Ltd. (supra). However, the same could not be followed in view of the Hon'ble Madras High Court judgment in case of Velayudhaswamy Spinning Mills (P) Ltd. v. Asstt. CIT [2012] 21 taxmann.com 95/340 ITR 477. ITAT, Bangalore Bench in the case of Anil H Lad v. Dy.CIT [2012] 25 taxmann.com 454 (Bang.-Trib) did not follow the Special Bench decision of the Ahmedabad Bench Tribunal in view of above judgment of Madras High Court. Relevant portion of the order is reproduced for the sake of clarity: "From reading of the above, it is clear that the eligible business were the only source of income, during the previous year relevant to initial assessment year and every subsequent assessment years. When the assessee exercise option, the only losses of the years beginning from initial A. Y. alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does net allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the assessee u/s. 801 A for the quantum claimed by the assessee without diluting the same by the notional deduction of earlier loss and depreciation.' 9.3. In view of above, the CIT(A) was justified in directing the Assessing Officer to allow the deduction u/s. 80IA(4)(iv)(a) of the Act without deducting brought forward loss or unabsorbed depreciation prior to initial year on notional basis. This reasoned factual and legal finding of CIT(A) needs no interference from our side. We uphold the same. 9.4. As a result, the appeal filed by the Revenue is dismissed. 10. A similar issue came up in Revenue's appeal In assessee's own case in ITA. No. 2041/PN/2012 for A.Y. 2009-10. Facts being similar, so following the same reasoning, we uphold the order of CIT(A) on this issue." Respectfully following the decision of the jurisdictional ITAT in appellant's own case on identical issue, I hold that the appellant is entitled for deduction u/s. 80IA(4)(iv)(a) of the Act. Therefore, AO is directed to delete the disallowance made u/s 80IA(4)(iv)(a) of the Act. Thus, the ground of appeal number-1 is allowed." 8. The Revenue is equally indeed fair enough in not pinpointing a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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