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TMI Blog2021 (9) TMI 1554X X X X Extracts X X X X X X X X Extracts X X X X ..... ustainable. 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 depreciation . Consequently, finding no illegality or infirmity in the impugned order passed by the ld. CIT (A), the appeal filed by the Revenue is hereby dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company that it has acquired the assets in the scheme of demerger approved by Hon'ble Delhi High Court and no part of cost of assets has been borne by the Government, AO proceeded to hold that the assets were acquired by demerged company out of the amount of excise duty exemptions which has been classified by the demerged company in its books of accounts as deferred Government grants and thereby reduced the cost of assets by an amount of Rs.78,32,12,592/- and consequently claim of depreciation has been recomputed by reducing the actual cost of assets by an amount of Rs.78,32,12,592/-. Accordingly, depreciation of plant & machinery amounting to Rs.20,37,338/- is allowed and the balance depreciation amounting to Rs.3,54,59,399 is disallowed and made addition thereof to the total income of the assessee. 3. Assessee carried the matter before the ld. CIT (A) by way of filing appeal who has deleted the addition by accepting the appeal of the assessee. Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal. 4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he excise duty refund is of the nature of revenue receipt, forming part of Profits and Gains, arising from business. The same is a revenue receipt, as has been held by Hon'ble Supreme Court, in the case of Commissioner of Income Tax Vs. Meghalaya Steels Ltd. [2016J 383 ITR 217 (SC) and therefore, this excise refund, being a revenue receipt, cannot be reduced from the cost of Plant & Machinery. From the above, it is clear that the Excise duty refund, is a revenue receipt, forming part of total taxable income and therefore, same cannot be reduced from the block of assets, in order to determine the actual cost of assets. In view of the above facts and circumstances, I am of the considered opinion that Excise duty refund, is not in the form of capital subsidy or grant, which can be reduced from the cost of assets. Therefore, I agree with the argument of the appellant and in facts and circumstances as discussed above, with due respect, I differ from the findings of Ld. CIT(A) in the earlier Assessment years i.e. for A Y. 2007-08 to A Y.2011-12 on the same issue and also, in view of the ratio laid down by Hon'ble Supreme Court, in the above referred case and the order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing company shall also be nil and as such, actual cost of asset is to be reduced by the amount of Rs.78,32,12,592/-. The ld. DR further contended that the excise duty is reimbursement to the assessee. 10. In the backdrop of the aforesaid facts and circumstances of the case and arguments addressed by the ld. AR of the parties to the appeal, the first question arises for determination in this case is:- "as to whether the assessee is entitled to claim benefit of statutory deduction u/s 80IC of the Act on additional income arising from disallowance of claim of depreciation and that the benefit of deduction u/s 80IC is admissible on profits enhanced by the disallowance made u/s 32 or that the claim of 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 profits and gains arising from the business and as such cannot be reduced from the cost of plant & machinery. So, the findings returned by ld. CIT (A) on this issue are confirmed. 14. In view of what has been discussed above, we are of the considered view that AO as well as CIT (A) have erred in making addition of Rs.6,40,38,391/- by disallowing the claim of depreciation of the asset made u/s 32 of the Act which would further entitle to the assessee the benefit of deduction u/s 80IC on profits enhanced by such disallowances made u/s 32 of the Act. Consequently, appeal filed by the assessee is partly allowed." So, respectfully following the aforesaid referred to order dated 17.09.2018 in assessee's own case, the issue under consideration is decided in assessee's favour." 10. Furthermore, coordinate Bench of the Tribunal in ITA No.823/Del/2015 for AY 2011-12 vide order dated 17.09.2018 also decided the identical issue in favour of the assessee by determining following findings :- "10. In the backdrop of the aforesaid facts and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/s 32 of the Act and in these circumstances, the claim of depreciation is revenue neutral. 13. So far as question of treating the refund of excise duty as part of the cost is concerned, it is the case of the assessee that the entire cost has been paid by the assessee for plant & machinery and as such, it cannot be reduced from the cost of asset. Ld. AR for the assessee relied upon order passed by CIT (A) dated 15.07.2016 in assessee's own case for AYs 2012-13 & 2013-14 wherein excise duty refund has not been treated in the form of capital subsidy or grant which can be reduced from the cost of assets. 14. Since findings returned by the ld. CIT (A) are based upon the decision rendered by Hon'ble Apex Court in 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 profits and gains arising from the business and as such cannot be reduced from the cos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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