DCIT, Circle - 4, Kolkata, Kolkata V. M/s. Rasoi Ltd, Kolkata

ITA 1398/KOL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78247 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2014
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 17-10-2011
• Court: TRIBUNAL
• Assessee Lawyers: S M SURANA
• Keywords: Capital asset; Depreciation; Capital receipt
• Section: 143(3); 14A; 10

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' ' ' ' / I.T.A NO.1398/KOL/2011 #$ %& #$ %& #$ %& #$ %&/ // / ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX, VS. RASOI LTD . CIRCLE-4, KOLKATA (PAN: AABCR4050P) (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 02.04.2014 DATE OF PRONOUNCEMENT: 02.04.2014 FOR THE APPELLANT: SHRI BISWANATH DAS, JCIT, SR. DR FOR THE RESPONDENT : SHRI S. M. SURANA, ADVOCATE / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-IV, KOLKATA IN APPEAL NO. 195/CIT(A)-IV/2009-10 DATED 29.06.2011. ASSESSMENT WAS FRAMED BY ITO, WARD-4(1), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORDER DATED 31.12. 2009. 2. THE FIRST ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) ALLOWING DEPRECIATION AS AGAINST THE DISALLOWANCE MADE BY AO BY APPLYING EXPLANATION (10) TO SECTION 43(1) OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLL OWING GROUND NO.1: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD . CIT(A) ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS.60,68,025/- ON ACCOUNT OF DE PRECIATIONS WITHOUT APPRECIATING THE FACT THAT IN THE INSTANT CASE THE A.O. CORRECTL Y MADE THE SAID DISALLOWANCE BY APPLYING EXPLANATION-10 TO SECTION 43(1). 3. BRIEFLY STATED FACTS ARE THAT DURING THE YEAR UN DER CONSIDERATION, THE ASSESSEE COMPANY RECEIVED A SUM OF RS.4,50,07,248/- AS INCENTIVE SUB SIDY FROM GOVT. OF WEST BENGAL UNDER WEST BENGAL INCENTIVE SCHEME, 1999 FOR SETTING UP OF IND USTRIAL PROJECTS IN THE STATE OF WEST BENGAL. VIDE THIS SCHEME THE MAXIMUM LIMIT OF THE SUBSIDY WAS RESTRICTED WITH REFERENCE TO THE VALUE OF FIXED CAPITAL INVESTED IN LAND, BUILDI NG AND PLANT & MACHINERY BUT NO PART OF THE SUBSIDY WAS SPECIFICALLY INTENDED TO SUBSIDE THE CO ST OF ANY FIXED ASSETS AND, THEREFORE, CANNOT BE CONSIDERED AS PAYMENT MADE TO MEET A PORTION OF THE COST OF THE ASSET. ACCORDINGLY, THE ASSESSEE MADE A CLAIM AND THE AMOUNT OF SUBSIDY REC EIVED WAS NOT REDUCED FROM THE ACTUAL 2 ITA NO. 1398/K/2011 RASOI LTD. , AY 2007-08 COST/WDV OF FIXED ASSETS FOR THE PURPOSE OF COMPUTI NG DEPRECIATION. THE ASSESSEE CLAIMED THAT DURING THE YEAR UNDER CONSIDERATION THERE WAS NO ADDITION TO FIXED ASSETS IF NETTED AGAINST DEDUCTION. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALLOCATED THE AMOUNT OF SUBSIDY RECEIVED DURING THE YEAR TO VARIOUS FIXED A SSETS AND REDUCED ALLOCATED AMOUNT FROM THE WDV OF THOSE BROUGHT FORWARD FROM LAST YEAR AND THE REBY REDUCED THE DEPRECIATION CLAIMED. THE AO DISALLOWED DEPRECIATION TO THE EXTENT OF RS. 60,68,025/- ON THE REASON THAT COST OF ASSET EQUIVALENT TO THE AMOUNT OF SUBSIDY RECEIVED DURING THE YEAR HAVE BEEN REIMBURSED BY THE STATE OF WEST BENGAL AGAINST COST OF ASSETS THROUGH THE I NCENTIVE SCHEME. ACCORDING TO AO, SUBSIDY RECEIVED FROM GOVT. OF WEST BENGAL WAS GIVEN AS ENC OURAGEMENT FOR SETTING UP OF INDUSTRIES IN THE STATE OF WEST BENGAL AND NO PORTION OF COST OF ANY ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MADE DIRECTLY OR INDIRECTLY BY THE SAID INCENTIVE S CHEME. 4. AGGRIEVED AGAINST THE DISALLOWANCE OF DEPRECIATI ON, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO ALLOWED THE CLAIM OF THE ASSESSEE VIDE PARA 4.3 OF HIS APPELLATE ORDER AS UNDER: 4.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSION MADE BY APPELLANT AND FACTS NARRATED BY A.O. IN ASSESSMENT ORDER. THE FACTS WHICH IS NOT DISPUTED FOR THE YEAR UNDER CONSIDERATION, THE A0 HAD CONSIDERED THE SUBJECT GO VT. SUBSIDY AS CAPITAL RECEIPT ACCEPTING THE APPELLANTS CONTENTION THAT THE SAID SUBSIDY WAS GIVEN FOR ENCOURAGING THE SETTING UP OF INDUSTRIES TO REALIZE THE POSSIBILITY OF INDUSTRIAL RESURGENCE OF THE STATE OF WEST BENGAL. IT IS ALSO UNDISPUTED THAT IN THE SCRU TINY ASSESSMENTS OF THE APPELLANT FOR ASST. YR. 2003-04 AND 2004-05, THE SAID SUBSIDY WAS CONSIDERED AS CAPITAL RECEIPT ACCEPTING THE APPELLANTS SAID CONTENTION. IN THOSE ASSESSMENTS, THE RESPECTIVE SUBSIDY AMOUNTS WERE NOT REDUCED FROM THE COST OF ASSETS FO R CALCULATION OF DEPRECIATION ACCEPTING THE APPELLANTS CONTENTION THAT SUBSIDY A MOUNT HAD NOT MET COST OF ANY ASSET DIRECTLY OR INDIRECTLY. HENCE, IT IS AN ACCEPTED PO SITION OF THE DEPARTMENT THAT THE SUBJECT SUBSIDY WAS NOT GIVEN TO MEET DIRECTLY OR I NDIRECTLY THE COST OF ANY ASSETS OF THE APPELLANT. IT WAS HELD BY THE SUPREME COURT IN THE CASE OF C1T VS. P.J. CHEMCALS LTD.(1994). 210 ITR 830(SC) THAT GOVERNMENT SUBSIDY , IT IS NO UNREASONABLE TO SAY, IS AN INCENTIVE NOT FOR THE SPECIFIC PURPOSE OF MEETIN G A PORTION OF THE COST OF THE ASSETS, THOUGH QUANTIFIED AS OR GEARED TO A PERCENTAGE OF S UCH COST. IF THAT BE SO, IT DOES NOT PARTAKE OF THE CHARACTER OF A PAYMENT INTENDED EITH ER DIRECTLY OR INDIRECTLY TO MEET THE ACTUAL COST. SIMILARLY, IN THE CASE OF SASISRI EXTRACTIONS LTD. VS. AC1T (2008) 307 ITR (AT) 127 (VISAKHAPATNAM), IT WAS HELD THAT WE HAVE CAREFULL Y CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN OUR CONSIDERED OPINON, EVEN AFTER INSERTION OF EXPLANATION- 10 TO SECTION 43(1) OF THE ACT, THE BASIC PRINCIPLE UNDERLYING IN THE DECISION OF THE APEX COURT IN THE CASE OF P.J. CHEMICALS LTD. (1994) 210 ITR 830, STILL HOLD THE FIELD. THEIR LORDSHIPS ANALYSED THE EXPRESSION MET DIRECTLY OR INDIRECTLY TO COME TO THE CONCLUSION THAT ONLY IN A CASE WHERE A SUBSIDY OR OTHER GRANT WAS GIVEN OFFSET THE COST OF AN ASSET, SUCH PAYMENT /GRANT WOULD FALL WITHIN THE EXPRESSIO N MET WHEREAS THE SUBSIDY RECEIVED MERELY TO ACCELERATE THE INDUSTRIAL DEVELOPMENT OF THE STATE CANNOT BE CONSIDERED AS PAYMENTS MADE SPECIFICALLY TO MEET A PORTION OF THE COST OF THE ASSETS. A CAREFUL PERUSAL OF TARGET 2000 SCHEME SHOWS THAT THE SCHEME WAS INTENDED TO ACCELERATE INDUSTRIAL DEVELOPMENT OF THE STATE AND THE INCENTIVE WAS GIVEN FOR SETTING UP OF INDUSTRIAL IN ANDHRA PRADESH AND FOR THE PURPOSE OF DETERMINING THE AMOUNT OF 3 ITA NO. 1398/K/2011 RASOI LTD. , AY 2007-08 SUBSIDY TO BE GIVEN THE COST OF ELIGIBLE INVESTMENT WAS TAKEN AS THE BASIS, THOUGH IT WAS NOT SPECIFICALLY INTENDED TO SUBSIDISE THE COST OF THE CAPITAL. UNDER THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE INCENTIVE IN THE FORM O F SUBSIDY CAN NOT BE CONSIDERED AS A PAYMENT. DIRECTLY OR INDIRECTLY TO MEET ANY PORTION OF THE ACTUAL COST AND THUS IT FALLS OUTSIDE, THE KEN OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT. IN THE LIGHT OF THE ABOVE DISCUSSON, WE ARE OF THE VIEW THAT FOR THE PURPOSE OF COMPUTING DEPRECIATON ALLOWABLE TO THE ASSESSEE, THE SUBSDY AMOUNT CANNOT BE REDUC ED FROM THE ACTUAL COST OF THE CAPITAL ASSET. THE ASSESSING OFFICER IS DIRECTED ACCORDINGL Y. RESPECTFULLY FOLLOWING THE AFORESAID JUDGEMENTS, CO NSIDERING THE FACT THAT NO SUCH REDUCTION OF SUBSIDY FROM COST OF ASSETS WAS DONE I N SCRUTINY ASSESSMENT OF EARLIER YEARS AND ALSO CONSIDERING THAT THERE IS NO DISPUTE ABOUT THE PROPOSITION THAT THE SUBJECT SUBSIDY HAD BEEN GIVEN AS AN ENCOURAGEMENT FOR SETT ING UP OF INDUSTRIES FOR REALZATION OF POSSIBILITY OF INDUSTRIAL RESURGENCE OF THE STAT E, THE ACTION OF THE A/O IN REDUCING THE SUBSIDY FROM THE COST OF THE ASSETS IS NOT JUSTIFIE D AND CONSEQUENT REDUCTION OF DEPRECIATION CANNOT BE UPHELD. ACCORDINGLY, THIS GR OUND OF APPEAL IS ALLOWED. AS THE MAIN GROUND HAS BEEN ALLOWED THERE IS NO NEED TO AD JUDICATE ABOUT ALTERNATIVE GROUNDS TO GROUND NO. 1. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BEFORE US LD. COUNSEL FOR THE ASSESSEE RELIED ON AS SESSEES PAPER BOOK AND REFERRED TO PAGES 1 TO 50. LD. COUNSEL FOR THE ASSESSEE FIRST OF ALL D REW OUR ATTENTION TO COPY OF WEST BENGAL INCENTIVE SCHEME 1999 (IN SHORT SCHEME), WHICH IS ENCLOSED IN ASSESSEES PAPER BOOK AT PAGES 1 TO 34, AS NOTIFIED BY NOTIFICATION NO. 580- C1/H DATED 22 ND JUNE, 1999. LD. COUNSEL FOR THE ASSESSEE REFERRED TO INNER PAGE 7 OF THE SCHEME WHEREBY THE DEFINITION OF FIXED CAPITAL INVESTMENT IS DESCRIBED IN CLAUSE (XXII) AS UNDER: XXII) FIXED CAPITAL INVESTMENT MEANS INVESTMENT MADE IN LAND, BUILDING, PLANT AND MACHINERY AND EQUIPMENT INSTALLED FOR POLLUTION CON TROL MEASURES OF THE APPROVED PROJECT OF THE ELIGIBLE UNIT ON OR AFTER THE 1ST AP RIL, 1998 SUBJECT TO OTHER CONDITIONS LAID DOWN IN PARAGRAPH 6 OF THE 1999 SCHEME. LD. COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTIO N TO CLAUSE (XIII) WHERE THE DEFINITION OF GROSS VALUE OF THE FIXED ASSETS IS DEFINED AS UNDER: XXIII) GROSS VALUE OF THE FIXED ASSETS OF THE UN IT MEANS THE GROSS FIXED CAPITAL INVESTMENT AS IN STOOD AT THE END OF PREVIOUS YEAR PLUS THE FIXED CAPITAL INVESTMENT MADE DURING THE YEAR MINUS THE VALUE OF FIXED ASSETS DIS POSED OF DURING THE YEAR. HE FURTHER DREW OUR ATTENTION TO BENEFIT GIVEN IN S ALES TAX AND THE RELEVANT INNER PAGES 17-18 OF THE SCHEME READS AS UNDER: 10. SALES TAX: 10.1 SALES TAX DEFERMENT/REMISSION ON SALE OF FINI SHED GOODS. 10.1.1. A NEW UNIT FOR ITS APPROVED PROJECT SHALL B E ELIGIBLE FOR DEFERRED PAYMENT OF SALES TAX DUE FOR PAYMENT BY IT OR ALTERNATIVELY FO R REMISSION OF SALES TAX DUE FOR 4 ITA NO. 1398/K/2011 RASOI LTD. , AY 2007-08 PAYMENT BY IT, FOR THE PERIOD AND SUBJECT TO CEILIN G AS MENTIONED BELOW DEPENDING ON LOCATION OF THE UNIT: GROUP A AREA GROUP B AREA GROUP C AREA I) II) DEFERMENT OF SALES TAX DUE FOR PAYMENT BY THE UNIT PERCENTAGE CEILING IN TERMS OF GROSS VALUE OF FIXED CAPITAL ASSETS OF THE APPROVED PROJECT REMISSION OF SALES TAX DUE FOR PAYMENT BY THE UNIT PERCENTAGE CEILING IN TERMS OF THE GROSS VALUE OF FIXED CAPITAL ASSETS OF THE APPROVED PROJECT NIL NIL ---- 11 YEARS 110% 9 YEARS 100% 15 YEARS 175% 13 YEARS 150% RELEVANT CLAUSE 10.1.7 SPECIFIES ABOUT PERCENTAGE C EILING AND MAXIMUM LIMIT, WHICH READS AS UNDER: 10.1.7. NOTWITHSTANDING THE PERCENTAGE CEILING SP ECIFIED AT CLAUSE 1, 2, 3, 4 & 5 OF SUB-PARAGRAPH 10.1, THE MAXIMUM LIMIT OF DEFERMENT OF SALES TAX OR REMISSION OF SALES TAX DUE FOR PAYMENT BY A UNIT UNDER THE PROVISIONS CONTAINED ABOVE, IS RS.75.00 CRORE. WHENEVER THE AGGREGATE AMOUNT OF SALES TAX DUE FOR PAYMENT FOR WHICH DEFERMENT/REMISSION HAS BEEN ALLOWED, EXCEEDS THE P ERCENTAGE CEILING OF RS.75.00 CRORE, WHICHEVER IS LESS, THE DEFERMENT OR REMISSION WILL BE DISCONTINUED EVEN BEFORE THE SPECIFIED PERIOD. THE ASSESSEE HAS ALSO DREW OUR ATTENTION TO THE REL EVANT EXCERPTS FROM THE BUDGET STATEMENT OF FINANCE MINISTER OF GOVT. OF WEST BENGAL DATED 19.0 3.1999 MADE AT THE TIME OF PRESENTATION OF BUDGET. THE FINANCE MINISTER MADE SPECIFIC STATEME NT AS REGARDS TO RESURGENCE OF POSITIVE CLIMATE FOR INDUSTRIALIZATION AND THE RELEVANT EXTR ACTS IS AS UNDER: 2.11 IN THIS POSITIVE CLIMATE OF INDUSTRIAL RE SURGENCE, WE THEREFORE DESIRE ALL THE COMMON INDUSTRIALISTS AND THE COMMON BUSINESSMEN TO COME FORWARD FOR SETTING UP OF INDUSTRIES, PARTICULARLY THE SMALL-SCALE INDUSTRIES IN THE DISTRICTS. IN ORDER TO ENCOURAGE THIS PARTICIPATION, I SHALL LATER PROPOSE SPECIFIC INCENTIVES AND FACILITIES. 3.11 HONOURABLE MEMBERS, I HAVE ALREADY MENTIONED THE SPECIFIC REASONS FOR POSSIBILITY OF INDUSTRIAL RESURGENCE IN THE STATE, INCLUDING ALL THE DISTRICTS. IN ORDER TO EXPEDITE REALISATION OF THIS POSSIBILITY, THE STATE GOVERNMENT HAS DECIDED TO INTRODUCE A NEW INCENTIVE SCHEME FOR INDUSTRIES WITH EFFECT FRO M APRIL 1, 1999. THE ASSESSEE HAS ALSO ENCLOSED COPY OF SCHEDULE OF FIXED ASSETS AS ON 31.03.2007 AND COPY OF LETTER DATED 06.03.2006 FILED BEFORE THE AO REGARDI NG CLAIM OF DEPRECIATION, AS AND WHEN SUBSIDY RECEIVED FROM WEST BENGAL GOVERNMENT IS CLA IMED AS CAPITAL RECEIPT. 5 ITA NO. 1398/K/2011 RASOI LTD. , AY 2007-08 6. FROM THE ABOVE FACTS AND CIRCUMSTANCES, ADMITTED FACTS ARE THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE COMPANY RECEIVED INCENTIVE S UBSIDY FROM GOVT. OF WEST BENGAL UNDER WEST BENGAL INCENTIVE SCHEME, 1999 (WBIS) AS ENCOU RAGEMENT FOR SETTING UP OF INDUSTRIAL PROJECT. IT IS ALSO A FACT THAT MAXIMUM LIMIT OF T HE SUBSIDY WAS RESTRICTED WITH REFERENCE TO THE VALUE OF FIXED CAPITAL INVESTMENTS IN LAND, BUILDIN G, PLANT AND MACHINERY BUT NO PART OF THE SUBSIDY WAS SPECIFICALLY INTENDED TO SUBSIDIZE THE COST OF ANY FIXED ASSET, THEREFORE, IT CANNOT BE SAID THAT THE SUBSIDY WAS TO MEET A PORTION OF COST OF THE ASSET. ACCORDING TO US, THE ASSESSEE HAS RIGHTLY NOT REDUCED THE AMOUNT OF SUBSIDY RECEI VED FROM THE ACTUAL COST/WDV OF THE FIXED ASSETS WHILE CLAIMING DEPRECIATION. IT IS ALSO A FA CT THAT REVENUE DURING SCRUTINY ASSESSMENTS OF THE ASSESSEE FOR AY 2003-04 AND 2004-05, THE ABOVE STATED SUBSIDY WAS CONSIDERED AS CAPITAL RECEIPT ACCEPTING THE CONTENTION OF THE ASSESSEE. FOR THE SAKE OF CONSISTENCY ALSO THE AO SHOULD NOT HAVE CHANGED THE STAND NOW. EVEN HONBL E SUPREME COURT IN THE CASE OF CIT VS. P.J. CHEMICALS LTD. (1994) 210 ITR 830 (SC) HAS CON SIDERED THIS ISSUE AND HELD THAT WHERE GOVERNMENT SUBSIDY IS INTENDED AS AN INCENTIVE TO E NCOURAGE ENTREPRENEURS TO MOVE TO BACKWARD AREAS AND ESTABLISH INDUSTRIES, THE SPECIF IED PERCENTAGE OF THE FIXED CAPITAL COST, WHICH IS THE BASIS FOR DETERMINING THE SUBSIDY, BEI NG ONLY A MEASURE ADOPTED UNDER THE SCHEME TO QUANTIFY THE FINANCIAL AID, IS NOT A PAYMENT, DI RECTLY OR INDIRECTLY, TO MEET ANY PORTION OF THE ACTUAL COST. THEREFORE, THE SAID AMOUNT OF SUBSIDY CANNOT BE DEDUCTED FROM THE ACTUAL COST UNDER SEC. 43(1) FOR THE PURPOSE ALLOWING DEPRECIAT ION. IT IS FURTHER HELD THAT IF GOVERNMENT SUBSIDY IS AN INCENTIVE NOT FOR THE SPECIFIC PURPOS E OF MEETING A PORTION OF THE COST OF THE ASSETS, THOUGH QUANTIFIED AS A PERCENTAGE OF SUCH C OST, IT DOES NOT PARTAKE THE CHARACTER OF PAYMENT INTENDED EITHER DIRECTLY OR INDIRECTLY TO M EET THE ACTUAL COST. BY IMPLICATION, THE ABOVE JUDGMENT ALSO PROVIDES THAT IF THE SUBSIDY IS INTENDED FOR MEETING A PORTION OF THE COST OF THE ASSETS, THEN SUCH SUBSIDY SHOULD BE DEDUCTED FR OM THE ACTUAL COST, FOR THE PURPOSE OF COMPUTING DEPRECIATION. AS PER HONBLE SUPREME COUR T, LAW IS THAT IF THE SUBSIDY IS ASSET- SPECIFIC, SUCH SUBSIDY GOES TO REDUCE THE ACTUAL CO ST. IF THE SUBSIDY IS TO ENCOURAGE SETTING UP OF THE INDUSTRY, IT DOES NOT GO TO REDUCE THE ACTUAL C OST, EVEN THOUGH THE AMOUNT OF SUBSIDY WAS QUANTIFIED ON THE BASIS OF THE PERCENTAGE OF THE TO TAL INVESTMENT MADE BY THE ASSESSEE. 7. THE LAW IS ALREADY SETTLED ON THE SUBJECT. NOW, THE ONLY WAVERING IS WITH REFERENCE TO EXPLANATION 10 PROVIDED UNDER SEC.43(1). THE SAID E XPLANATION PROVIDES THAT WHERE A PORTION OF THE COST OF AN ASSET ACQUIRED BY THE ASSESSEE HA S BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR ANY AUT HORITY ESTABLISHED UNDER ANY LAW OR BY ANY OTHER PERSON, IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT (BY WHATEVER NAME 6 ITA NO. 1398/K/2011 RASOI LTD. , AY 2007-08 CALLED), THEN, SO MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE. IT IS FURTHER, PROVIDED THEREUNDER, THAT WHERE SUCH SUBSIDY OR GRANT OR REIMBURSEMENT O F SUCH NATURE THAT IT CANNOT BE DIRECTLY RELATABLE TO THE ASSET ACQUIRED, SO MUCH OF THE AMO UNT WHICH BEARS TO THE TOTAL SUBSIDY OR REIMBURSEMENT OR GRANT THE SAME PROPORTION AS SUCH ASSET BEARS TO ALL THE ASSETS IN RESPECT OF OR WITH REFERENCE TO WHICH THE SUBSIDY OR GRANT OR REI MBURSEMENT IS SO RECEIVED, SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASS ESSEE. IN ORDER TO INVOKE EXPLANATION 10, IT IS NECESSARY TO SHOW THAT THE SUBSIDY WAS DIRECTLY OR INDIRECTLY USED FOR ACQUIRING AN ASSET. THIS IS AGAIN A QUESTION OF FACT. THE RELATABLE SUBSIDY TO SUCH ASSET CAN BE REDUCED FROM THE COST ONLY IF IT IS FOUND THAT THE COST FOR ACQUIRING THAT ASSET WAS DIRECTLY OR INDIRECTLY MET OUT OF THE SUBSIDY. LIKEWISE IN THE PROVISO, IT IS NECESSARY TO SHOW TH AT THE SUBSIDY HAS BEEN DIRECTLY OR INDIRECTLY USED TO ACQUIRE AN ASSET BUT IT IS NOT POSSIBLE TO EXACTLY QUANTIFY THE AMOUNT DIRECTLY OR INDIRECTLY USED FOR ACQUIRING THE ASSET. HERE ALSO, A FINDING OF FACT IS NECESSARY THAT AN ASSET WAS ACQUIRED BY DIRECTLY OR INDIRECTLY USING THE SUBSID Y. THE ABOVE EXPLANATION AND THE PROVISO THERETO DO NOT DILUTE THE FINDING OF THE HONBLE SU PREME COURT IN THE CASE OF P. J. CHEMICALS LTD. THAT ASSET-WISE SUBSIDY ALONE CAN BE REDUCED F ROM THE ACTUAL COST. THE ABOVE EXPLANATION AND THE PROVISO THEREIN ATTEMPT TO EXPLAIN THE LAW. THEY ARE NOT BRINGING ANY NEW LAW DIFFERENT FROM THE LAW CONSIDERED BY THE HONBLE SUPREME COUR T IN THE ABOVE CASES. 8. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND LEGAL POSITION EXPLAINED BY HONBLE SUPREME COURT IN THE CASE OF P. J. CHEMI CALS LTD. SUPRA, WE ARE OF THE VIEW THAT CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF DEPRECIATIO N OF ASSESSEE. WE UPHOLD THE SAME. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 9. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AS R EGARDS TO ORDER OF CIT(A) RESTRICTING THE DISALLOWANCE OF EXPENSES AT 1% OF EXEMPTED INCOME BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLO WING GROUND NO.2: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, L D. CIT(A) ERRED IN LAW IN RESTRICTING THE DISALLOWANCE U/S. 14A AT 1% OF THE EXEMPTED INC OME SINCE THE DECISION OF THE LD. CIT(A) IS WITHOUT ANY BASIS AND IN CONTRAVENTION TO THE JUDGMENTS OF GODREJ BOYCEE MFT. CO. LTD. VS. DCIT (2010) 328 ITR 81 (BOM) WHICH LD. CIT(A) HIGHLIGHTED IN HIS ORDER. 10. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE DERI VED DIVIDEND INCOME AT RS.27,16,737/- AND LONG TERM CAPITAL GAIN AT RS.81,03,426/- AND CLAIME D THE SAME AS EXEMPT U/S. 10(34) AND 10(38) OF THE ACT RESPECTIVELY. THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS INVOKED SECTION 14A OF THE ACT READ WITH RULE 8D OF THE I. T. RULES, 1962 AND MADE DISALLOWANCE A SUM OF RS.11,30,790/-. AGGRIEVED, ASSESSEE PREFERRED A PPEAL BEFORE CIT(A), WHO RESTRICTED THE 7 ITA NO. 1398/K/2011 RASOI LTD. , AY 2007-08 DISALLOWANCE AT 1% OF THE EXEMPTED INCOME AND DIREC TED THE AO ACCORDINGLY. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 11. WE HAVE HEARD RIVAL CONTENTION AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE RELEVANT ASSESSMENT YEAR INVOLVED IS 2007-08 AND HONBLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. V S. DCIT [2010] 328 ITR 81 (BOM.), WHEREIN IT IS HELD THAT RULE 8D OF THE RULES AS INS ERTED BY THE I. T (FIFTH AMENDMENT) RULES, 2008 W.E.F. 24.3.2008 IS PROSPECTIVE AND NOT RETROS PECTIVE. THE CIT(A) RESTRICTED THE DISALLOWANCE AT 1% OF THE EXEMPTED INCOME U/S. 14A OF THE ACT. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) AND HENCE, THE SAME IS CONFIRMED. THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 12. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 13. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2ND APRIL, 2014 ,- #./ 0 JD.(SR.P.S.) 1 *2 3 2%4- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT DCIT, CIRCLE-4, KOLKATA 2 *+() / RESPONDENT M/S. RASOI LTD., 20, SIR R. N. MUKHER JEE ROAD, KOLKATA-700 001. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 2:; *# / DR, KOLKATA BENCHES, KOLKATA +2 */ TRUE COPY, #