M/S TIRANGA PULSES, Akola V. CIT-III, Nagpur

ITA 138/NAG/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1677 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 15-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: S C THAKAR; C J THAKAR
• Keywords: Depreciation
• Section: 143(3); 6; 263; 63; 10

Judgement Text

1 ITA NO. 138/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 138 /NAG/2013 ASSESSMENT YEAR: 2008 - 09. M/S TIRANGA PULSES, COMMISSIONER OF PLOT N O. F - 16/1, PHASE - II, V/S. INCOME TAX - III, MIDC, AKOLA. NAGPU R. PAN AACFT3302J. APPELLANT. RESPONDENT. APPELLANT BY : SHRI C.J. THAKAR & SHRI S.C. THAKAR. RESPONDENT BY : SHRI NARENDRA KANE. DATE OF HEARING : 02 - 07 - 2 015 DATE OF PRONOUNCEMENT : 28 TH AUGUST, 2015 O R D E R PER MUKUL K. SHRAWAT, J.M. . THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER OF LEARNED CIT(APPEALS) - I II, NAGPUR DATED 07 - 02 - 2013 PASSED UNDER SECTION 263 OF I.T. ACT . 2. WHILE PASSING THE IMPUGNED ORDER UNDER SECTION 263 OF I.T. ACT FOR ASSESSMENT YEAR 2008 - 09 THE LEARNED COMMISSIONER HAS REFERRED THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 143(3) DATED 04 - 11 - 2010 (ASSTT.YEAR 2008 - 09) FOR THE REASON THAT THE A SSESSEE FIRM HAD RECEIVED SUBSIDY FROM DIC, AKOLA BUT THE COST WAS NOT ADJUSTED BY THE AMOUNT OF SUBSIDY AND THE DEPRECIATION WAS CORRECTLY GRANTED. THE FACTS I N BRIEF WERE THAT THE ASSESSEE WAS PLANNING TO SETUP A 2 ITA NO. 138/NAG/2013 NEW DAL MILL AND THE ESTIMATED COST OF THE PROJECT WAS ` .86.50 LAKHS. THE ASSESSEE HAS RECEIVED ` .25 LAKHS AS CAPITAL INCENTIVE UNDER A PACKAGE SCHEME OF INCENTIVE 2009 FROM THE GOVERNMENT OF MAHARASHTRA. ACCORDING TO THE LEARNED COMMISSIONER THE SAID AMOUNT OF ` .25 LAKHS WAS RECEIVED FROM DISTRICT INDUSTRIES CENTRE, AKOLA BY WAY OF SPECIAL CAPITAL INCENTIVE. HE HAS MENTIONED THAT IN VIEW OF E XPLANATION 10 TO SECTION 43(1) WHICH WAS EFFECTIVE FROM 01 - 04 - 1999 THE SUBSIDY SO RECEIVED WAS REQUIRED TO BE REDUCED F RO M THE ACTUAL COST OF THE ASSET FOR THE PURPOSE OF ALLOWING DEPRECIATION. THEREFORE, HE HAS FINALLY DIRECTED THE ASSESSING OFFICER TO REDUCE THE SAID AMOUNT OF SUBSIDY FROM THE COST OF THE ASSET AND COMPUTE THE DEPRECIATION ACCORDINGLY. FOR THE SAKE OF REFE RENCE THE DIRECTION OF THE LEARNED COMMISSIONER IS REPRODUCED BELOW : ALLUDING TO THE DECISIONS (SUPRA), I HOLD THAT SUBSIDY OF ` . 25 LACS RECEIVED FROM THE DIC IS STATUTORILY REQUIRED TO BE REDUCED FROM THE COST OF ASSETS FOR THE PURPOSE OF COMPUTING DEPRECIATION IN TERMS OF EXPLANATION 10 TO SECTION 43(1). THE A.O. IS DIRECTED TO ALLOW SUCH DEPRECIATION ONLY AFTER ADJUSTMENT OF SUBSIDY IN THE RATIO OF THE WEIGHTAGE GIVEN IN ELIGIBILITY CERTIFICATE TO VARIOUS BLOCK OF ASSETS. 3. THE APPELLANT HAS CHALLENGED THE ORDER PASSED UNDER SECTION 2 6 3 OF I.T. ACT ON THE GROUND THAT THE SAME WAS BAD IN LAW AND DECIDED WITHOUT GIVING PROPER OPPORTUNITY AND ALSO NOT CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. LEARNED A.R. HAS PLACED BEFORE US A DECISION OF ITAT, NAGPUR BENCH PRONOUNCED IN THE CASE OF M/S SURAJDEV INDUSTRIES, ITA NO. 07/NAG/2013 ASSESSMENT YEAR 2008 - 09 DATED 24 - 04 - 2015 FOR THE LEGAL PROPOSITION THAT EVEN AFTER THE INSERTION OF EXPLANATION 10 THERE IS NO BLANKET MANDATE THAT ALL TYPE OF CAPI TAL SUBSIDIES HAVE TO BE REDUCED FROM THE COST OF THE ASSET. HE HAS PLEADED THAT THE SCHEME WAS PRONOUNCED FOR THE DEVELOPMENT OF INDUSTRIES IN THE STATE. LEARNED A.R. HAS ALSO PLACED RELIANCE ON AN ANOTHER DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF CAP ITAL FOODS EXPORTS (P) LTD. 139 ITD 584 FOR THE LEGAL PROPOSITION THAT IN THE 3 ITA NO. 138/NAG/2013 ABSENCE OF MATERIAL TO SHOW THAT SUBSIDY HAD BEEN GRANTED TO MEET THE COST OF PLANT AND MACHINERY, THEN THE DISALLOWANCE OF DEPRECIATION CORRESPONDING TO SUBSIDY WAS NOT LEGALLY CORRECT. HE HAS PLEADED THAT IN T HE LIGHT OF SEVERAL DECISIONS ON THIS SUBJECT IT IS A SETTLED LEGAL POSITION THAT THE SUBSIDY GRANTED SPECIFICALLY TOWARDS A PARTICULAR ASSET IS REQUIRED TO BE REDUCED FROM THE COST ; OTHERWISE NOT. 4. ON THE OTHER HAND, FR OM THE SIDE OF THE REVENUE, LEARNED D.R., MR. NARENDRA KANE APPEARED AND ARGUED THAT THE LEARNED COMMISSIONER HAS RIGHTLY INVOKED THE JURISDICTION UNDER SECTION 263 OF I.T. ACT BECAUSE THE ASSESSING OFFICER HAS NOT EXAMINE D THIS ASPECT WHEN THE ASSESSMENT WAS FINALIZED. LEARNED D.R. HAS PLEADED THAT ALTHOUGH THE ASSESSMENT WAS MADE UNDER SECTION 143(3) OF I.T. ACT BUT THE ASSESSING OFFICER HAD FAILED TO EXAMINE THE QUESTION OF CORRECT COMPUTATION OF DEPRECIATION SPECIALLY WHEN THE RECORDS HAVE REVEALED THA T THE ASSESSEE HAD RECEIVED THE CAPITAL SUBSIDY. IN SUPPORT OF THE ARGUMENTS HE HAS PLACED RELIANCE ON STEEL AUTHORITY OF INDIA LTD. 348 ITR 150 (DEL.) WHEREIN IT WAS HELD THAT WHEN THE LOAN WAS GRANTED BY THE GOVERNMENT TO MEET A PORTION OF THE COST OF T HE ASSET THEN THE DEPRECIATION COULD BE ALLOWED ON THE REDUCED COST. LEARNED D.R. HAS INFORMED THAT THE QUESTION REFERRED TO THE HONBLE COURT WAS DECIDED IN FAVOUR OF THE REVENUE AND THE SAID APPEAL OF THE ASSESSEE WAS DISMISSED. 5. WE HAVE CAREFULLY EXAM INED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW IN THE LIGHT OF THE CASE LAWS CITED AND THE ARGUMENTS MADE BY BOTH THE SIDES. AT THE OUTSET IT IS WORTH TO MENTION THAT ON PERUSAL OF THE SAID ASSESSMENT ORDER IT IS EVIDENT THAT THERE WAS NO DISCUSSION ON THE ISSUE AS RAISED BY LEARNED COMMISSIONER UNDER SECTION 263 OF I.T. ACT WHICH MEANS THAT THE ASSESSING OFFICER HAS ALLOWED THE DEPRECIATION AS CLAIMED BY THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT IN A SITUATION WHEN THE LEARNED COMMISSIONER ON EXA MINATION OF THE RECORDS HAVE NOTICED THAT THE ASSESSEE HAS RECEIVED THE SUBSIDY WHICH WAS NOT 4 ITA NO. 138/NAG/2013 DISCUSSED BY THE ASSESSING OFFICER AND THE AMOUNT OF SUBSIDY WAS NOT REDUCED FROM THE COST OF THE ASSET THEN THE QUESTION OF CORRECT COMPUTATION OF DEPRECIATION C AN BE EXAMINED BY INVOKING THE PROVISIONS OF SECTION 263 OF I.T. ACT. 5.1 HOWEVER, THE NEXT QUESTION IS THAT WHETHER THE LEARNED COMMISSIONER WAS LEGALLY CORRECT TO DIRECT THE ASSESSING OFFICER TO REDUCE THE AMOUNT OF THE SUBSIDY FR O M THE COST OF THE ASSET BY INVOKING THE PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) FOR THE PURPOSE OF COMPUTATION OF DEPRECIATION. IN OUR CONSIDERED OPINION THIS ISSUE CAN ONLY BE DECIDED AFTER EXAMINING THE PURPOSE OF THE INCENTIVE SCHEME PRONOUNCED BY THE GOVERNMENT AND ALSO THE NATURE OF THE SUBSIDY RECEIVED BY AN ASSESSEE. EVEN IN THE CASE OF SURAJDEV INDUSTRIES (SUPRA) IN WHICH BOTH OF US ARE SIGNATORIES, INCENTIVE SCHEME WAS EXAMINED IN THE LIGHT OF FEW CASE LAWS AND THE PROVISIONS OF THE ACT. A F INDING ON FACT WAS GIVEN THAT THE SCHEME IN QUESTION WAS PERUSED AND IT WAS FOUND THAT THE SAME WAS MEANT FOR THE PURPOSE OF DEVELOPMENT OF INDUSTRIES IN THE BACKWARD REGION OF VIDARBHA. THEREFORE, FROM THE TEXT OF FEW CASE LAWS AS CITED FROM THE SIDE OF THE APPELLANT IT IS VERY MUCH CLEAR THAT THE RESPECTED COURTS HAVE FIRST EXAMINED THE SCHEME AS WELL AS NATURE OF PAYMENT AND THEN IF FOUND THAT THE SAME WAS NOT GRANTED TOWARDS THE COST OF THE ASSET BUT FOR THE PURPOSES OF DEVELOPMENT OF INDUSTRIES THEN T HE VIEW WAS EXPRESSED THAT SUCH INCENTIVE SCHEME WAS OUT OF THE PURVIEW OF EXPLANATION 10 TO SECTION 43(1) OF I.T. ACT. AS AGAINST THAT, LEARNED COMMISSIONER IN THE IMPUGNED ORDER HAS SIMPLY DISCUSSED FEW CASE LAWS WITHOUT EXAMINING THE FACTS INVOLVED AND THE NATURE OF INCENTIVE SCHEME PRONOUNCED BY THE GOVERNMENT AND DIRECTED THE ASSESSING OFFICER TO ADJUST THE CLAIM OF DEPRECIATION. IN OUR HUMBLE OPINION IT WAS MORE JUSTIFIABLE ON HIS PART IF HE HAD GIVEN A DIRECTION TO THE ASSESSING OFFICER TO EXAMINE T HE FACTS OF THE CASE AND THEN DECIDE AS PER THE LAW APPLICABLE. THEREFORE, WE ARE OF THE VIEW THAT THE DIRECTIONS GIVEN BY LEARNED COMMISSIONER TO RECOMPUTE 5 ITA NO. 138/NAG/2013 THE DEPRECIATION AFTER ADJUSTMENT OF SUBSIDY IS NOT SUSTAINABLE IN THE EYES OF LAW. THEREFORE, THE DIRECTIONS GIVEN VIDE PARA 4, REPRODUCED SUPRA, ARE HEREBY MODIFIED. HENCE THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE PURPOSE OF THE SCHEME AND THE NATURE OF PAYMENT IN THE LIGHT OF THE ACCOUNTS OF THE ASSESSEE AS WELL AS THE CASE LAWS ALREADY PRONO UNCED ON THIS ISSUE BY SEVERAL COURTS. THE ASSESSING OFFICER IS ALSO DIRECTED TO EXAMINE THE FACTS OF THIS CASE IN THE LIGHT OF THE DECISION OF ITAT, NAGPUR BENCH DISCUSSED ABOVE BECAUSE OF THE PRIMARY REASON THAT WHETHER THE ASSESSEE HAS ALSO RECEIVED THE INCENTIVE UNDER THE PACKAGE SCHEME OF INCENTIVE 1993 PRONOUNCED BY THE STATE GOVERNMENT OF MAHARASHTRA OUGHT TO HAVE BEEN EXAMINED. 6. IN THE RESULT, THE ORDER PASSED UNDER SECTION 263 BY THE LEARNED COMMISSIONER IS MODIFIED AND THE GROUNDS RAISED BY TH E ASSESSEE MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES BECAUSE THE MATTER HAS BEEN RESTORED BACK FOR DENOVO CONSIDERATION AT THE STAGE OF THE ASSESSING OFFICER. 7. APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON T HIS 28 TH DAY OF AUGUST, 2015. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) (ACCOUNTANT MEMBER. JUDICIAL MEMBER NAGPUR, DATED: 28 TH AUGUST, 2015. 6 ITA NO. 138/NAG/2013 COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. TRUE COPY. BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR