DCIT CORPORATE CIRCLE 2, MADURAI V. TAMILNADU FOOD GRAINS MARKETING YARD, MADURAI

ITA 1437/CHNY/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6212 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 08-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RET
• Keywords: Capital asset; Depreciation; Set aside
• Section: 10; 119

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . , BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NOS.1435, 1436 & 1437/CHNY/2019 / ASSESSMENT YEARS :2013-14, 2014-15 & 2015-16 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, MADURAI. VS. M/S. TAMILNADU FOOD GRAINS MARKETING YARD, MADURAI-ALANGANALLUR ROAD, SIKKANDAR CHAVADI, MADURAI 625 018. [PAN : AABCT1101F] ( /APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI SRIDHAR DORA, JCIT / RESPONDENT BY : SHRI G. GOPALAN, RET. JCIT / DATE OF HEARING : 27.08.2019 /DATE OF PRONOUNCEMENT : 11.10.2019 / O R D E R PER BENCH: THESE THREE APPEALS FILED BY THE REVENUE RELATING TO SAME ASSESSEE ARE DIRECTED AGAINST SEPARATE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1, MADURAI ALL DATED 20.02.2019 RELEVANT TO THE ASSESSMENT YEARS 2013-14, 2014-15 AND 2015-16. THE ONLY COMMON EFFECTIVE GROUND RAISED ALL THE APPEALS OF THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF DEPRECIATION ON GRANT-IN-AID CONTRIBUTED BY THE GOVERNMENT. I.T.A. NOS.1435-1437/CHNY/19 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD RECEIVED CAPITAL SUBSIDY FROM THE CENTRAL GOVERNMENT OF .29,07,09,000/- AND CLAIMED DEPRECIATION ON THE SUBSIDY PORTION INCLUDED IN THE COST OF ASSETS. WHEN THE ASSESSEE WAS ASKED TO EXPLAIN, IT WAS THE SUBMISSION THAT THE ASSESSEE IS A NON-PROFIT COMPANY INCORPORATED UNDER SECTION 25 OF THE COMPANYS ACT. IT WAS FURTHER SUBMISSION THAT THE ASSESSEE ACTS AS A SPECIAL PURPOSE VEHICLE (SPV) UNDER THE CENTRAL MINISTRY OF COMMERCE AND INDUSTRY. IT WAS FURTHER SUBMISSION THAT THE GRANT WAS CAPITAL IN NATURE, IT WAS NOT TOWARDS ANY SPECIFIC FIXED ASSET OF THE ASSESSE AND HENCE, THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON THE ENTIRE VALUE OF ASSETS AND RELIED ON THE DECISION IN THE CASE OF CIT V. PJ CHEMICALS LTD. 210 ITR 830 (SC). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER OBSERVED FROM THE APPROVAL ORDER DATED 07.22.2004 OF THE GOVERNMENT OF INDIA THAT 75% OF THE COST OF THE PROJECT OF .39.96 CRORES, BEING .29.97 CRORES HAS BEEN GRANTED AS GRANT FROM GOVERNMENT AND THE BALANCE COST IS TO BE BORNE BY THE CONTRIBUTION BY USERS, LENDING AGENCIES/STATE GOVERNMENT. IT WAS FURTHER OBSERVED THAT THE GRANT OF .29.097 CRORES IS NOT AN INCENTIVE OR ANY OTHER THING BUT ONLY A SUBSIDY TO MEET THE ASSETS COST. THEREFORE, THE SUBSIDY AMOUNT OF .29,07,09,000/- RECEIVED FROM THE GOVERNMENT OF INDIA WAS APPORTIONED AGAINST THE OPENING WDV OF THE ASSETS AND ELIGIBLE DEPRECIATION WAS CALCULATED AND THE BALANCE WAS BROUGHT TO TAX IN ALL THE ASSESSMENT YEARS UNDER APPEAL. I.T.A. NOS.1435-1437/CHNY/19 3 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE FACTS OF THE CASE AND BY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011-12, THE LD. CIT(A) DELETED THE DISALLOWANCE OF DEPRECIATION ON SUBSIDY. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL FOR ALL THE ASSESSMENT YEARS. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011- 12 VIDE ORDER IN I.T.A. NO. 635/CHNY/2016 DATED 31.05.2016 AND PRAYED FOR FOLLOWING THE SAME. WE HAVE PERUSED THE ORDER, WHEREIN, THE COORDINATE BENCHES OF THE TRIBUNAL HAS OBSERVED AND HELD AS UNDER: 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND JUDICIAL DECISION CITED. THE LD.A.R HAS EMPHASIZED THAT THE CAPITAL INCENTIVE GRANT-IN-AID WAS FOR THE PURPOSE OF ESTABLISHING AND MAINTAINING QUALITY INFRASTRUCTURE FACILITY THROUGH PPP MODE AND NOT TO OFFSET ANY PORTION OF THE ACTUAL COST OF ANY SPECIFIC CAPITAL ASSET, DIRECTLY OR INDIRECTLY AND THUS IT FALLS OUTSIDE THE KEN OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT. FURTHER, LD.A.R SUBMITTED THAT THE ASSESSEE WAS SELECTED UNDER THE INDUSTRIAL INFRASTRUCTURE UPGRADATION SCHEME TO PROVIDE COMMON FACILITY CENTRE FOR THE FUNCTIONAL CEREALS, PULSES & STAPLES (CPS) INDUSTRY CLUSTER, TO BE AVAILED BY THE MEMBERS OF THE NON-PROFIT APPELLANT ORGANIZATION, AND DREW OUR ATTENTION TO PAGE -17 OF THE PAPER BOOK AND PRAYED THAT THE GRANT RECEIVED FROM THE CENTRAL GOVERNMENT SHOULD NOT BE REDUCED FROM THE COST OF THE ASSET AND I.T.A. NOS.1435-1437/CHNY/19 4 DEPRECIATION SHOULD BE ALLOWED. LD. A.R ALSO REFERRED TO THE VARIOUS CLAUSES & TERMS CONDITIONS, MONITORING, COST ESTIMATES, ROLE OF STATE GOVERNMENT, ADMINISTRATIVE EXPENSES AND ASSETS ACQUIRED OUT OF GOVERNMENT ASSISTANCE AND THE ASSETS/ PROPERTIES OF THE GOVERNMENT ISSUED BY DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION VIDE APPROVAL ORDER DATED 20.10.2004 MENTIONED AT PGE-29 OF THE PAPER BOOK AND THE GOVERNMENT SHALL APPOINT AN INDEPENDENT AUDITOR TO MONITOR AGENCY. THE GRANT WAS RELEASED ON 5TH DECEMBER, 2011 WITH CERTAIN REQUISITE NECESSITIES TO BE COMPLIED BY THE ASSESSEE. LD.A.R FURTHER EXPLAINED THE OBJECTS, AIMS AND REFERRED TO THE MEMORANDUM OF ARTICLES OF THE ORGANIZATION AND SUPPORTED HIS ARGUMENTS WITH VARIOUS DECISIONS OF THE TRIBUNAL INCLUDING THE DECISION IN THE CASE OF SAISRI EXTRACTIONS LTD. VS. ACIT REPORTED IN (2008) 119 TTJ (VISAKHA) 976 WHERE THE SIMILAR ISSUE WAS ADJUDICATED IN CONTRAST WITH THE DECISION OF APEX COURT IN THE CASE OF P.J.CHEMICALS LTD.,(SUPRA) AND THE TRIBUNAL OBSERVED AS FOLLOWS:- 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN OUR CONSIDERED OPINION, EVEN AFTER INSERTION OF EXPLN. 10 TO S. 43(1) OF THE ACT, THE BASIC PRINCIPLE UNDERLYING IN THE DECISION OF THE APEX COURT IN THE CASE OF P.J. CHEMICALS LTD. (SUPRA) STILL HOLDS THE FIELD. THEIR LORDSHIPS ANALYZED THE EXPRESSION 'MET DIRECTLY OR INDIRECTLY' TO COME TO THE CONCLUSION THAT ONLY IN A CASE WHERE A SUBSIDY OR OTHER GRANT WAS GIVEN TO OFFSET THE COST OF AN ASSET, SUCH PAYMENT/GRANT WOULD FALL WITHIN THE EXPRESSION '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. 12. 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 INDUSTRIES IN ANDHRA PRADESH AND FOR THE PURPOSE OF DETERMINING THE AMOUNT OF SUBSIDY TO BE GIVEN, 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 OF SUBSIDY CANNOT BE CONSIDERED AS A PAYMENT DIRECTLY OR INDIRECTLY TO MEET ANY PORTION OF THE ACTUAL COST AND THUS IT FALLS OUTSIDE THE KEN OF EXPLN. 10 TO S. 43(1) OF THE ACT. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT FOR THE PURPOSE OF COMPUTING DEPRECIATION ALLOWABLE TO THE I.T.A. NOS.1435-1437/CHNY/19 5 ASSESSEE, THE SUBSIDY AMOUNT CANNOT BE REDUCED FROM THE COST OF THE CAPITAL ASSET. THE AO IS DIRECTED ACCORDINGLY. THE PRESENT CASE OF THE ASSESSEE IS SIMILAR TO THE ABOVE DECISION OF THE TRIBUNAL CITED SUPRA WHERE THE PROVISIONS ARE DISCUSSED ELABORATELY AND THE SUBSIDIARY AMOUNT SHALL NOT BE DEDUCTED FROM THE COST OF THE ASSET. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND ALLOW THE GROUNDS OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. THE LD. DR COULD NOT CONTROVERT THE ABOVE DECISION OF THE TRIBUNAL. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL, WE CONFIRM THE ORDER PASSED BY THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF DEPRECIATION ON SUBSIDY CLAIMED BY THE ASSESSEE. THUS, THE GROUND RAISED BY THE REVENUE STANDS DISMISSED FOR ALL THE ASSESSMENT YEARS UNDER APPEAL. 7. IN THE RESULT, ALL THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 11 TH OCTOBER, 2019 AT CHENNAI. SD/ - SD/ - (INTURI RAMA RAO) ACCOUNTANT MEMBER (DUVVURU RL REDDY) JUDICIAL MEMBER CHENNAI, DATED, THE 11.10.2019 VM/- /COPY TO: 1. / APPELLANT, 2. / RESPONDENT, 3. ( ) /CIT(A), 4. /CIT, 5. /DR & 6. /GF.