FLENDER LTD, MUMBAI V. ADDL CIT RG 2, MUMBAI

ITA 1246/MUM/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6713 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 22-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU
• Keywords: Capital asset; Depreciation; Wrong claim; Corroborative evidences; Capital expenditure
• Section: 143(3); 142(1)

Judgement Text

1 ITA 1246/MUM/2017 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI MAHAVIR SINGH(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.1246/MUM/2017 (ASSESSMENT YEAR: 2006-07) FLENDER LIMITED (NOW MERGED WITH SIEMENS LTD) (THROUGH THEIR SUCCESSOR SIEMENS LTD), BIRLA AURORA TOWERS, LEVEL 21, PLOT NO.1080, DR. ANNIE BESANT ROAD, WORLI, MUMBAI-400 030 PAN : AAACF4154D VS THE DY.CIT, CIR,8(2)(1), MUMBAI APPELLANT RESPONDENT APPELLANT BY SHRI NITESH JOSHI RESPONDENT BY SHRI M.V. RAJGURU DATE OF HEARING 21-06-2018 DATE OF PRONOUNCEMENT 29-06-2018 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE CIT(A)-14, MUMBAI DATED 25-01-2017 AND IT PERTA INS TO AY 2006-07. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ['CIT(A)'] ERRED IN UPHOLDING THE DISALLOWANCE OF STOCK WRITTEN-OFF AGGREGATING TO RS. 58,62,102. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THAT THE CAPITAL SUBSIDY OF RS. 86,64,458 RECEIVED FROM THE GOVERNMENT OF BENGAL OUGHT TO BE ADJUSTED AGAINST ADDITIONS MADE DURING THE YEAR IN THE RELEVANT BLOCK OF ASSETS INSTEAD OF OPENING WDV. 2 ITA 1246/MUM/2017 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THAT A SUM OF RS. 31,63,319 OUT OF THE AG GREGATE CAPITAL SUBSIDY RECEIVED DURING THE YEAR OUGHT TO BE TREATED AS REVENUE RECE IPT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE REDUCTION MADE TO THE DEPREC IATION CLAIM BY RS. 6,70,013 ARISING DUE TO ADJUSTMENT OF CAPITAL SUBSIDY RECEIV ED FROM THE GOVERNMENT AGAINST THE ADDITIONS MADE DURING THE YEAR INSTEAD OF OPENI NG WDV. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF GEAR BOXE S COUPLING AND STANDARD ACCESSORIES, FILED ITS RETURN OF INCOME FO R AY 2006-07 ON 08-11- 2006 DECLARING TOTAL INCOME AT RS.20,76,50,964. TH E CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) AND 142(1) OF T HE ACT, ALONGWITH DETAILED QUESTIONNAIRE WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED VARIOUS DETAILS, AS CALLED FOR. THE ASS ESSMENT HAS BEEN COMPLETED U/S 143(3) ON 31-12-2009 DETERMINING THE TOTAL INCOME AT RS.22,94,16,980 BY MAKING VARIOUS ADDITIONS INCLUDI NG ADDITION TOWARDS DISALLOWANCE OF STOCK WRITTEN OFF AGGREGATING TO RS .58,62,102 AND RE- WORKING DEPRECIATION CLAIM ON PLANT & MACHINERY AFT ER ADJUSTING CAPITAL SUBSIDY RECEIVED FROM GOVERNMENT OF WEST BENGAL OF RS.86,64,458. 3. AGGRIEVED BY THE ASSESSMENT ORDER, ASSESSEE PREF ERRED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS ON THE ISSUE OF DISALLOWANCE OF STOCK WRITTEN OFF WHICH HAS BEEN REPRODUCED BY THE LD.CIT(A) AT PARA 2 ON PAGES 4 & 5 OF HIS ORDER. THE ASSESSEE ALSO FILED ELABORATE SU BMISSIONS ON THE ISSUE 3 ITA 1246/MUM/2017 OF WRONG CLAIM OF DEPRECIATION AND TREATMENT OF CAP ITAL SUBSIDY AMOUNTING TO RS.31,63,319 AS REVENUE RECEIPT WHICH HAS BEEN REPRODUCED BY THE LD.CIT(A) ON PAGE 6 OF HIS ORDER. INSOFAR AS ADDITION TOWARDS DISALLOWANCE OF STOCK WRITTEN OFF, THE SUM AND SUBSTANCE OF THE ARGUMENT OF THE ASSESSEE BEFORE THE LD.CIT(A) ARE T HAT THE ASSESSEE HAS WRITTEN OFF OBSOLETE AND NON USABLE RAW MATERIA L; HOWEVER, THE AO HAS ON MISTAKEN FACTS, WRONGLY NOTED THAT THE STOCK S WRITTEN OFF ARE ITEMS OF PLANT & MACHINERY IN THE NATURE OF CAPITAL EXPEN DITURE CANNOT BE ALLOWED AS DEDUCTION. INSOFAR AS ADJUSTMENT OF CAP ITAL SUBSIDY REVIVED FROM GOVERNMENT OF WEST BENGAL AND TREATMENT OF AN AMOUNT OF RS.31,63,319 AS REVENUE RECEIPT, THE ASSESSEE SUBMI TTED THAT IT HAS DEDUCTED CAPITAL SUBSIDY RECEIVED TOWARDS PLANT AND MACHINERY FROM THE OPENING WDV, WHEREAS THE AO HAS SET OFF AGAINST ADD ITION TO PLANT & MACHINERY MADE DURING THE YEAR TO RE-WORK DEPRECIAT ION WITHOUT UNDERSTANDING THE FACT THAT CAPITAL SUBSIDY RECEIVE D FROM GOVERNMENT OF WEST BENGAL PERTAINS TO AMOUNT INVESTED IN THE PROJ ECT WHICH NEEDS TO BE REDUCED FROM THE WDV OF THE BLOCK OF ASSETS. SI MILARLY, IN RESPECT OF TREATMENT OF SURPLUS SUBSIDY RECEIVED ON ACCOUNT OF RESIDENTIAL BUILDING, THE ASSESSEE SUBMITTED THAT AT NO STRETCH OF IMAGIN ATION, CAPITAL SUBSIDY RECEIVED FROM GOVERNMENT OF WEST BENGAL CAN BE TREA TED AS REVENUE RECEIPTS AS THE ASSESSEE HAS RECEIVED CAPITAL SUBSI DY @15% OF TOTAL 4 ITA 1246/MUM/2017 INVESTMENTS WHICH HAS TO BE RIGHTLY ADJUSTED AGAINS T BLOCK OF ASSETS. 4. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMI SSIONS OF THE ASSESSEE HELD THAT ALTHOUGH ASSESSEE CLAIMS TO HAVE WRITTEN OFF OBSOLETE AND UNUSED STOCK IN TRADE, IN VIEW OF THE CLEAR FINDING OF THE AO THAT THE ITEMS WRITTEN OFF BY THE ASSESSEE ARE IN T HE NATURE OF CAPITAL EXPENDITURE, THE ASSESSEE WAS ASKED TO PRODUCE NECE SSARY EVIDENCE TO PROVE THAT SAID ITEMS ARE IN FACT STOCK-IN-TRADE WH ICH ARE USED IN THE MANUFACTURE OF FINAL PRODUCTS; HOWEVER, THE ASSESSE E FAILED TO PRODUCE ANY SUPPORTING EVIDENCE IN THE FORM OF STOCK REGIST ER, ETC. THEREFORE, HE OPINED THAT THERE IS NO ERROR IN THE ORDER OF THE A O TO DISALLOW STOCK WRITTEN OFF OF RS.58,62,102. THE RELEVANT PORTION OF THE ORDER OF THE LD.CIT(A) IS EXTRACTED BELOW:_ 5.1 THE DETAILED SUBMISSION OF THE APPELLANT IS REPRODUCED ABOVE. IT IS NOTED THAT THE APPELLANT IS IN THE BUSINESS OF MANUFACTURING OF GE AR BOX, COUPLING AND STANDARD ACCESSORIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF, IT WAS CATEGORICALLY THAT THESE BEVEL SETS ARE USED FOR PRODUCTION PROCESS FOR GEAR BOX AND DU E TO 'HIGHER FRICTION LOSS AND LOWER SURFACE FINISH AND ACCURACY SUCH ITEMS ARE NO LONGER HE SUB MISSION MAKES IT VERY CLEAR THAT THESE ITEMS ARE PART OF PRODUCTION PROCESS OR MANUFACTURI NG AS THESE HAVE LOST THE SURFACE FINISH AFTER PROLONGED USE. AS REGARDS THE FRESH SUBMISSI ON THAT THESE ARE PART OF STOCK IN TRADE NO SUPPORTING EVIDENCE IS PRODUCED IN THE FORM OF STOC K REGISTER ETC EITHER BEFORE A.O OR DURING APPELLATE PROCEEDING. FURTHER, IF THESE ARE PART OF STOCK IN TRADE, THEN THERE IS NO CORRESPONDING SCRAP VALUE IS SHOWN AS SUBSTANTIAL AMOUNT OF RS 5,8,62,102/- HAS BEEN WRITTEN OFF. LOOKING INTO THE FACTS OF THE CASE, IN MY OPINION THE AO HA S CORRECTLY TAKEN ACTION ON THE BASIS OF SUBMISSION MADE AND FACTS OF THE CASE. AS REGARDS CAPITAL SUBSIDY RECEIVED FROM GOVERNMENT OF WEST BENGAL UNDER INDUSTRIAL DEVELOPMENT INCENTIVE SCHEME, 2000 FOR EXPANSION PROGRAMME OF KHARAGPUR FACTORY OF THE ASSESSEE, THE CIT(A) OBSERVED THAT THE ENTIRE SUBSIDY HAS BEEN RECEIVED FOR THIS YEAR, THEREFORE, TO SAY 5 ITA 1246/MUM/2017 THAT SUCH SUBSIDY IS IN RESPECT OF EARLIER YEARS IS WITHOUT ANY SUPPORTING EVIDENCES AND HENCE CANNOT BE ACCEPTED. FURTHER, I N THAT CASE, THE MATCHING OF THE SUBSIDY OF THE ITEMS IN THE RESPECT IVE YEAR NEEDS TO BE DONE WHICH IS ALSO NOT DONE. UNDER THESE FACTS, HE OPINED THAT THE SUBSIDY HAS TO BE REDUCED FROM THE ADDITION MADE DU RING THIS YEAR AND NOT FROM THE OPENING WDV. SIMILARLY, THE BALANCE A MOUNT OF RS.33,79,139 HAS BEEN REDUCED BY THE ASSESSEE FROM OPENING WDV OF THE NON RESIDENTIAL BUILDING WHILE THE AO HAS REDUC ED RS.2,15,870 TO THE EXTENT OF ADDITION TO THE NON RESIDENTIAL BUILDING IN THIS YEAR AND THE BALANCE AMOUNT OF RS.31,63,319 IS WORKED OUT AS REV ENUE RECEIPT FOR THE REASON THAT SUBSIDY RECEIVED IN EXCESS OF INVES TMENT IN FIXED ASSET IS REVENUE IN NATURE, THEREFORE, OPINED THAT THERE IS NO ERROR IN THE ORDER OF THE AO IN TREATING EXCESS SUBSIDY RECEIVED AS REVE NUE RECEIPT. THE RELEVANT PORTION OF THE ORDER OF THE LD.CIT(A) IS E XTRACTED BELOW:- 8. AS REGARDS GROUND NO. 5, THE FACTS ARE THAT THE APPELLANT HAS RECEIVED CAPITAL SUBSIDY OF RS 86,64,458/- FROM WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION UNDER ITS INCENTIVE SCHEME 2000 FOR EXPANSION PROGRAMME OF KHARAGPUR FA CTORY OF THE COMPANY. THE ENTIRE CAPITAL SUBSIDY IS RECEIVED IN THIS YEAR. THEREFORE THE AO HAS REDUCED THE CAPITAL SUBSIDY AMOUNTING TO RS 52,85,320/- WHICH WAS USED FOR ADDI TION TO PLANT AND MACHINERY FROM THE ADDITIONS OF PLANT AND MACHINERY IN THIS YEAR. THE APPELLANT HOWEVER HAS REDUCED THIS AMOUNT FROM THE OPENING WDV OF PLANT AND MACHINERY IN THIS YEAR ON THE PREMISE THAT THE AMOUNT HAS BEEN RECEIVED IN RESPECT OF EARLIER YEARS. SIMI LARLY THE BALANCE OF RS 33,79,139/- HAS BEEN REDUCED BY THE APPELLANT FROM OPENING WDV OF THE NO N RESIDENTIAL BUILDING WHILE THE AO HAS REDUCED RS 2,15,820/- TO THE EXTENT OF ADDITION TO THE NON RESIDENTIAL BUILDING IN THIS YEAR AND THE BALANCE AMOUNT OF RS 31,63,319/- IS WORKED OUT AS REVENUE RECEIPT. 8.1 THE DETAILED SUBMISSION OF THE APPELLANT IS REP RODUCED ABOVE. AS DISCUSSED ABOVE, THE ENTIRE SUBSIDY HAS BEEN RECEIVED IN THIS YEAR. THER EFORE TO SAY THAT SUCH SUBSIDY IS IN RESPECT OF EARLIER YEARS WITHOUT ANY SUPPORTING EVIDENCE IS NOT ACCEPTABLE. 5. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND 1 IS 6 ITA 1246/MUM/2017 ADDITION TOWARDS STOCK WRITTEN OFF OF RS.58,62,102. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) FAILED TO APP RECIATE THE FACTS IN RIGHT PERSPECTIVE WHEN THE ASSESSEE HAS FILED EXPLA NATION BEFORE THE AO ALONGWITH EVIDENCES TO JUSTIFY THAT STOCK WRITTEN O FF PERTAINS TO RAW MATERIALS WHICH ARE OBSOLETE AND UNUSABLE. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAS WRITTEN OFF BEVEL S ETS CONSISTING OF BEVEL GEARS AND BEVEL FINION SHAFTS WHICH ARE USED IN THE PRODUCTION PROCESS OF GEAR BOX. IT IS FURTHER SUBMITTED THAT, OWING TO HIGHER FRICTIONAL LOSS UNDER LOAD TRANSMISSION, LOWER SURF ACE FINISH AND ACCURACY IT WAS DECIDED BY THE ASSESSEE NOT TO USE SUCH STOC K ANY LONGER IN THE PRODUCTION PROCESS, AND ACCORDINGLY, THE SAME BEING UNUSABLE WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT. THE AO ON COM PLETE MISUNDERSTANDING OF THE AFORESAID FACTS HAS DISALLO WED IMPUGNED AMOUNT BY STATING THAT STOCK WRITTEN OFF IS IN THE NATURE OF CAPITAL EXPENDITURE. 6. THE LD.DR, ON THE OTHER HAND, STRONGLY SUPPORTED THE ORDER OF THE LD.CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. ALTHOUGH THE ASSESSEE CLAIMS TO HAVE FU RNISHED NECESSARY EVIDENCE TO PROVE THAT THE AMOUNT WRITTEN OFF PERTA INS TO RAW MATERIALS. NO DOUBT, STOCKS WRITTEN OFF IN RESPECT OF RAW MATE RIALS IS CHARGEABLE TO 7 ITA 1246/MUM/2017 P&L ACCOUNT, BUT IT IS THE DUTY OF THE ASSESSEE TO PROVE BEYOND DOUBT BEFORE THE AUTHORITIES THAT SUCH WRITE OFF IS RAW M ATERIALS, WHICH ARE USED IN THE PRODUCTION PROCESS OF FINAL PRODUCTS. SINCE THE ASSESSEE HAS FAILED TO PRODUCE ANY KIND OF EVIDENCE BEFORE THE L OWER AUTHORITIES, WE DEEM IT APPROPRIATE TO SET ASIDE THE ISSUE TO THE F ILE OF THE AO TO CONSIDER AFRESH THE ISSUE IN THE LIGHT OF CLAIM OF THE ASSESSEE THAT STOCK WRITTEN OFF PERTAINS TO RAW MATERIALS. THE ASSESSE E IS DIRECTED TO FURNISH NECESSARY EVIDENCE BEFORE THE AO. IF THE AO FOUND THAT THE STOCK WRITTEN OFF PERTAINS TO RAW MATERIAL, THEN THE AO I S DIRECTED TO ALLOW STOCK WRITTEN OFF RS.58,62,102. 8. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATIO N IS ADJUSTMENT OF CAPITAL SUBSIDY RECEIVED FROM GOVERNMENT OF WEST BE NGAL AND RE- CALCULATION OF DEPRECIATION AND ALSO TREATMENT OF E XCESS CAPITAL SUBSIDY RECEIVED AS REVENUE RECEIPT OF RS.31,63,319. THE L D.AR FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RECEIVED C APITAL SUBSIDY OF RS.86,64,459 FROM WEST BENGAL INDUSTRIAL DEVELOPMEN T CORPORATION UNDER WEST BENGAL INCENTIVE SCHEME, 2000 AND OUT OF WHICH AN AMOUNT OF RS.52,85,320 PERTAINS TO PLANT & MACHINERY AND B ALANCE AMOUNT OF RS.33,79,139 PERTAINS TO NON-RESIDENTIAL BUILDING. THE ASSESSEE HAS REDUCED CAPITAL SUBSIDY RECEIVED TOWARDS PLANT & MA CHINERY FROM THE OPENING WDV OF BLOCK AND COMPUTED DEPRECIATION. TH E ASSESSEE ALSO 8 ITA 1246/MUM/2017 REDUCED CAPITAL SUBSIDY RECEIVED TOWARDS NON RESIDE NTIAL BUILDING FROM OPENING WDV OF THE BLOCKS. THE AO HAS RE-WORKED DE PRECIATION CLAIMED ON PLANT AND MACHINERY AND NON-RESIDENTIAL BUILDING, AFTER REDUCING CAPITAL SUBSIDY RECEIVED FROM GOVERNMENT O F WEST BENGAL FROM THE AMOUNT OF PLANT & MACHINERY ADDED TO THE BLOCK DURING THE YEAR UNDER CONSIDERATION AND NON RESIDENTIAL BUILDING DU RING THE YEAR UNDER CONSIDERATION ON THE GROUND THAT ANY CAPITAL SUBSID Y RECEIVED DURING THE YEAR PERTAINS TO ACQUISITION OF CAPITAL ASSETS FOR THE YEAR UNDER CONSIDERATION. ACCORDING TO THE AO, ASSESSEE HAS F AILED TO FILE ANY EVIDENCE TO PROVE THAT CAPITAL SUBSIDY RECEIVED FRO M GOVERNMENT OF WEST BENGAL PERTAINS TO EARLIER PERIOD. IT IS THE CONTENTION OF THE ASSESSEE THAT CAPITAL SUBSIDY RECEIVED FROM GOVERNM ENT OF WEST BENGAL UNDER WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATIO N INCENTIVE SCHEME, 2000 FOR EXPANSION PLAN UNDERTAKEN AT THE K HARAGPUR FACTORY AND THE SUBSIDY RECEIVED WAS ON ACCOUNT OF ASSETS A LREADY CREATED AND IN TERMS OF EXPLANATION 10 TO THE PROVISO TO SECTIO N 43(1) OF THE ACT, THE ASSESSEE DULY REDUCED THE SAME FROM ITS OPENING WDV OF THE RESPECTIVE BLOCK OF ASSETS. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS REDUCED CAPITAL SUBSID Y RECEIVED FROM GOVERNMENT OF WEST BENGAL FROM OPENING WDV OF RESPE CTIVE BLOCK OF 9 ITA 1246/MUM/2017 ASSETS, VIZ. PLANT AND MACHINERY AND FROM THE NON R ESIDENTIAL BUILDING AND COMPUTED DEPRECIATION ACCORDINGLY. THE ASSESEE FURTHER CLAIMS THAT CAPITAL SUBSIDY RECEIVED FROM GOVERNMENT PERTAINS TO EARLIER PERIOD ON ACCOUNT OF ASSETS ALREADY CREATED. ALTHOUGH ASSESS EE CLAIMS TO HAVE RECEIVED CAPITAL SUBSIDY TOWARDS ASSETS ALREADY CRE ATED IN THE BOOKS OF ACCOUNT, NO EVIDENCE HAS BEEN FILED BEFORE THE AO O R CIT(A) TO PROVE THAT SUCH CAPITAL SUBSIDY HAS BEEN RECEIVED PERTAIN S TO EARLIER PERIOD ON ASSETS ALREADY CREATED. NO DOUBT, ANY CAPITAL SUBS IDY RECEIVED FROM THE GOVERNMENT UNDER INCENTIVE SCHEME IS TO BE REDUCED FROM THE ASSETS ALREADY ACQUIRED IN EARLIER PERIOD. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE NEEDS TO BE RE-EXAMINED BY THE AO IN THE LIGHT OF THE CLAIM OF THE ASSESSEE THAT CAPITAL SUBSIDY RECEIVED FROM STATE GOVERNMENT PERTAINS TO EARLIER PERIOD. IF THE AO F OUND THAT SUCH SUBSIDY PERTAINS TO EARLIER PERIOD, THEN THE AO IS DIRECTED TO ALLOW DEDUCTION FROM OPENING WDV OF RESPECTIVE BLOCK OF ASSETS. THE ASS ESSEE IS DIRECTED TO FILE NECESSARY EVIDENCE TO PROVE ITS CLAIM. 9. INSOFAR CAPITAL SUBSIDY OF RS.31,63,319 AS REVEN UE RECEIPT, WE FIND THAT THE AO HAS WRONGLY TREATED CAPITAL SUBSIDY REC EIVED FROM STATE GOVERNMENT AS REVENUE RECEIPT WITHOUT APPRECIATING THE BASIC FACT THAT THE STATE GOVERNMENT HAS GIVEN CAPITAL SUBSIDY @15% OF TOTAL INVESTMENT MADE IN ASSETS. WHEN THE STATE GOVERNME NT HAS GIVEN 10 ITA 1246/MUM/2017 SUBSIDY AMOUNT OF 15% OF TOTAL ASSETS CREATED BY TH E ASSESSEE, THERE IS NO MEANING FOR THE AO TO REDUCE IT FROM THE ASSETS CREATED DURING THE CURRENT YEAR TO TREAT THE BALANCE AMOUNT AS REVENUE RECEIPTS. THEREFORE, SE WET ASIDE THIS ISSUE ALSO TO THE FILE OF THE AO TO CAUSE NECESSARY ENQUIRIES IN THE LIGHT OF CLAIM OF THE AS SESSEE THAT SUCH CAPITAL SUBSIDY PERTAINS TO EARLIER PERIOD. IF THE AO FINDS THAT THE CAPITAL SUBSIDY RECEIVED FROM GOVERNMENT PERTAINS TO EARLIE R PERIOD, THEN THE AO IS DIRECTED TO ALLOW DEDUCTION FROM OPENING WDV OF THE BLOCK OF ASSETS. THE ASSESSEE IS DIRECTED TO FILE NECESSARY EVIDENCE. IN ANY CASE, CAPITAL SUBSIDY CANNOT BE TREATED AS REVENUE RECEIPT. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED, FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2018. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 29 TH JUNE, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER SR.PS, ITAT, MUMBAI