9911796707
TMI Blog2021 (9) TMI 1554X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in relying upon the Hon'ble Supreme Court decision in the case of CIT vs. Meghalya Steel Ltd. wherein it was held that excise duty refund is a revenue receipt forming part of profits and gains, arising from business while dealing with deduction claimed u/s 80IBIIC of the Act whereas the issue under consideration is claim of depreciation in a situation in which the deferred government grants have been utilized by the demerged company in a direct manner in pursuance of notification issued under Central Excise Act, 1944. 4. That the grounds of appeal are without prejudice to each other." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee company came into existence pursuant to a scheme of demerger approved by Hon'ble Delhi High Court vide order dated 11.09.2007 as a result of demerger of latex rubber thread unit of M/s. Dharampal Satyapal Ltd. having its manufacturing unit at Agartala. Assessee company by filing return of income for the year under assessment declared a net loss of Rs.13,43,34,403/- and has claimed depreciation amounting to Rs.2,82,24,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of assets to the assessee company shall be reduced by the amount of deferred Government grants utilized for acquisition of such assets whether by the demerged company or by the resulting company" and as such, AO has not reduced the cost during the year under consideration. 6. However, on the other hand, ld. AR for the assessee to repel the contentions raised by the ld. DR contended that the issue in question is covered in favour of the assessee in its own case decided by the coordinate Bench of the Tribunal in Assessment Years 2010-11, 2011-12 and 2012-13 & 2013-14 in ITA Nos.4990/Del/2014, 823/Del/2015, and 5129 & 5130/Del/2016 respectively. 7. At the same time, ld. DR for the Revenue has failed to bring on record distinguishable facts, if any, qua the year under assessment vis-à-vis earlier years. 8. Ld. CIT (A) by following earlier year order passed by his predecessor for AY 2012-13 and 2013-14, subsequently confirmed by the Tribunal, deleted the disallowance made on account of depreciation claimed by the assessee by returning following findings :- " The appellant has further submitted that on the same issue of disallowance of depreciation, additions have been made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Del/2014 for AY 2010-11 which is on identical facts, operative part of which is extracted for ready perusal as under :- "9. We have considered the submissions of both the parties and perused the material available on the record. It is noticed that an identical issue having similar facts was a subject matter of the assessee's appeal in ITA No.823/Del/2015 for the assessment year 2011-12 wherein vide order dated 17.09.2018, the relevant findings have been given in paras 6 to 14 which read as under: "6. Undisputedly, flexible packaging unit of M/s. Dharampal Satyapal Ltd. was demerged into the assessee company. The Id. AR for the assessee contended that no portion of cost of asset acquired by the assessee company was met out of the grant or subsidy or reimbursement of the Government or any other person rather cost of the assets in the hands of assessee company are as per demerger scheme approved and as such, there is no question of reducing the cost of asset and depreciation. 7. However, the AO as well as Id. CIT (A) by invoking the Explanation 7 to section 43 (1) of the Act proceeded to hold that the actual cost of the asset to the assessee company which is a resulting compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance. 4. Accordingly, henceforth, appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/Tribunals may be withdrawn / not pressed upon. The above may be brought to the notice of all concerned." 12. Bare perusal of the operative part of the Circular(supra)goes to prove that disallowance made by the assessee u/s 32 of the Act relating to business activity against which deductions have been claimed under Chapter VI-A, as in the instant case, results in enhancement of the profits of the eligible business and that deduction under Chapter VI-A is admissible on profits so enhanced by the disallowance. In these circumstances, the claim of depreciation made by the assessee company of Rs.6,40,38,391/- is allowable deduction and as such, the benefit of deduction u/s 80IC is allowable on profits enhanced by the disallowance made u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation is revenue neutral?" 11. Before proceeding further, the relevant para of Circular No.37/2016 dated 02.11.2016 issued by the CBDT, relied upon by the ld. AR for the assessee, is extracted as under :- " Chapter VI-A of the Income-tax Act, 1961 ("the Act"), provides for deductions in respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such as disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B etc., of the Act. At times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. Doubts have been raised as to whether such higher profits would also result in claim for a higher profit-linked deduction under Chapter VI-A. ..... 3. In view of the above, the Board has accepted the settled position that the disallowances made under sections 32, 40(a)(ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently, appeal filed by the assessee is partly allowed." 11. In view of what has been discussed above and following the orders passed by the coordinate Bench of the Tribunal in Assessment Years 2010-11, 2011-12 and 2012-13 & 2013-14 (supra) which are based upon the decision rendered by Hon'ble Apex Court in case of CIT vs. Meghalaya Steels Ltd. (2016) 383 ITR 217 (SC), we are of the considered view that the excise refund is in the nature of revenue receipt forming part of the profit and gains arising from the business and as such cannot be reduced from the cost of plant & machinery. In these circumstances, the contentions raised by the ld. DR for the Revenue are not sustainable. 12. So, ld. CIT(A) passed the impugned order by following the earlier years order passed by his predecessor, subsequently confirmed by the Tribunal, by rightly reaching the conclusion that, "the assets acquired by demerged company, M/s. Dharampal Satyapal Ltd., out of the amount of excise duty refund, accounted as deferred Government grants in its books of account does not carry any force to make reduction in the cost of assets and thereby deleted the addition made on account of disallowance of depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
