DCIT CORPORATE CIRCLE-2, Madurai V. Tamilnadu Foodgrains Marketing Yard, Madurai

ITA 1446/CHNY/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4697 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 09-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S RAMAKRISHNAN IRS
• Keywords: Depreciation; Set aside
• Section: 143(3); 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH : CHENNAI , . , [BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] !' ./I.T.A. NOS.1445, 1446 & 1447/CHNY/2019. #$% &$ / ASSESSMENT YEARS :2013-14, 2014-15 & 2015-16 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -2, MADURAI. VS. M/S. TAMILNADU FOOD GRAINS MARKETING YARD, ALAGNGANALLUR ROAD, SIKKAANDAR, CHAVADI, MADURAI. [PAN AABCT 1101F] ( / APPELLANT) ( /RESPONDENT) !' '( ) * / APPELLANT BY : SHRI. S. RAMAKRISHNAN, IRS, CIT +,'( ) * /RESPONDENT BY : NONE # - ) . /DATE OF HEARING : 18-02-2020 /0&% ) . /DATE OF PRONOUNCEMENT : 24-02-2020 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE REVENUE DIRECTED AGAINST DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, MADURAI (CIT(A) FOR SHORT) DATED 20.02.2019 FOR THE ASSESSMENT YEARS (AY) 2013-14, 2014-15 AND 2015-2016. ITA NOS.1445-47 /2019 :- 2 -: 2. SINCE, THE IDENTICAL FACTS AND ISSUES ARE INVOLVED IN THESE APPEALS, WE PROCEED TO DISPOSE OF THE SAME VIDE THI S COMMON ORDER. 3. FIRST WE TAKE UP REVENUE APPEAL IN ITA NO.1445/CHNY /2019 FOR ASSESSMENT YEAR 2013-14 FOR ADJUDICATION. 4. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL: 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFI CER TO DELETE THE DISALLOWANCE OF DEPRECIATION ON GRANT-IN -AID CONTRIBUTED BY THE GOVERNMENT 3. THE CIT(A) ERRED IN HOLDING THAT GRANTS-IN-AID R ECEIVED TOWARDS ACQUISITION OF ASSET SHOULD BE DEDUCTED FRO M THE COST OF THE ASSETS WHILE COMPUTING DEPRECIATION U/S .32 R.W.EXPL.10 TO SEC.43(1). 4. THE CIT(A) ERRED IN HOLDING THAT INCENTIVE IN TH E FORM OF GRANTS-IN-AID CANNOT BE CONSIDERED AS PAYMENT DIREC TLY OR INDIRECTLY TO MEET PORTION OF ACTUAL COST OF ASSET WHEREAS CI. D OF LETTER NO.5/28/6/2004-DBA 1/07.11.2004 ISSUED BY MINISTRY OF COMMERCE & INDUSTRY SPECIFICALLY PROVIDE FOR IT. 5. THE CIT(A) OUGHT NOT TO HAVE FOLLOWED THE DECISI ON OF APEX COURT IN THE CASE OF P.J.CHEMICALS (210 ITR 83 0) AS THE SAID DECISION OF HONBLE SUPREME COURT PERTAINS TO AY.1983-84 WHEREAS EXPI. 10 TO SEC 43(1) WAS INTROD UCED W.E.F 01.04.1999 AND HENCE THE DECISION HAS NO RELE VANCE ON THE LAW APPLICABLE FOR THE IMPUGNED A.Y. 6. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADD UCED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE CIT(A) MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER R ESTORED. ITA NOS.1445-47 /2019 :- 3 -: 5. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT-ASSESSEE NAMELY M/S. TAMILNADU FOOD GRAINS MARKETING YARD, IS REGISTERED UNDER THE PROVISIONS OF SECTION 25 OF THE ACT. IT IS FORMED AS SPECIAL PURPOSE VEHICLE (SP V) FOR THE PURPOSE OF IMPLEMENTING INDUSTRIAL INFRASTRUCTURE UPGRADATION SCHEME OF THE DEPARTMENTAL OF INDUSTRIAL POLICY & PROMOTION (DI PP) UNDER MINISTRY OF COMMERCE & INDUSTRY, GOVERNMENT OF INDIA TO ENC HANCE INTERNATIONAL COMPETITIVENESS OF THE DOMESTIC INDU STRY VIZ CEREALS, PULSES AND STAPLES (CPC) CLUSTER AT MADURAI BY PROV IDING QUALITY INFRASTRUCTURE THROUGH PUBLIC PRIVATE PARTNERSHIP APPROACH. THE TOTAL OUTLAY OF THE PROJECT IS G39.96 CRORES OUT OF WHICH THE GRANT-IN-AID OF THE DIPP IS G29.97 CRORES AND THE BALANCE G9.99 CRO RES WAS TERM LOAN FROM NATIONALIZED BANK AND CONTRIBUTION BY STAKEHO LDERS. THE SCHEME CONSISTED OF CREATING COMMON FACILITY CENTRES AND INDUSTRIAL INFRASTRUCTURE VIZ. SCIENTIFIC STORAGE IN AMBIENT A ND LOW TEMPERATURE ATMOSPHERE, CLEANING, GRADING AND SORTING OF GRAINS , PACKING, RESEARCH AND DEVELOPMENT LABORATORY FOR ANALYSIS OF FOOD PRODUCTS, WEIGHBRIDGE, INTERNAL APPROACH ROADS AND AUCTION C ENTRE TO CATER TO THE NEEDS OF FARMERS, AGROFOOD PROCESSORS AND AGROF OOD PRODUCTS EXPORTERS. THE GRANT FROM THE MINISTRY OF COMMERCE WAS RECEIVED IN ADVANCE. THE RETURN OF INCOME FOR THE ASSESSMENT Y EAR 2013-14 WAS FILED ON 20.09.2013 DISCLOSING LOSS OF G1,79,63,873 /-. AGAINST THE SAID ITA NOS.1445-47 /2019 :- 4 -: RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY T HE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2, MAD URAI (HEREINAFTER CALLED AO) VIDE ORDER DATED 31.03.2016 PASSED U/ S. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS.1,87,22,687/-. WHILE DOING SO, THE AO HAS NOT ALLOWED DEPRECIATION ON THE GRANT IN AID RECEIVED FROM GO VERNMENT OF INDIA BY HOLDING THAT PROVISIONS OF EXPLANATION 10 TO SEC .43(1) OF THE ACT ARE SQUARELY APPLICABLE. SIMILARLY, THE ASSESSING OFFICER ALSO BROUGHT TO TAX THE INTEREST EARNED ON BANK DEPOSITS MADE OU T OF THE GRANT RECEIVED PENDING FOR UTILIZATION OF G7,43,872/- UN DER THE HEAD INCOME FROM OTHER SOURCES. 6. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 20.02.2019 PLACING RELIANCE ON THE CO-ORDINATE BENCH DECISION IN ASSESSEES OW N CASE IN ITA NO.635/MDS/2016, DATED 31.05.2016 FOR ASSESSMENT YE AR 2011-2012 HELD THAT PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT ARE NOT APPLICABLE SINCE GRANT IN AID WAS NOT MEANT TO MEET DIRECTLY OR INDIRECTLY TO THE COST OF THE FIXED ASSETS OF THE A SSESSEE COMPANY. ACCORDINGLY, THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON GRANT RECEIVED FROM GOVERNMENT OF INDIA. HOWEVER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSESSIN G OFFICER (AO) TO BRING TO TAX INTEREST EARNED ON FIXED DEPOSITS PLA CED OUT OF GRANT ITA NOS.1445-47 /2019 :- 5 -: RECEIVED PENDING FOR UTILIZATION. THUS, THE LD. CIT (A) PARTLY ALLOWED THE APPEAL. 7. BEING AGGRIEVED BY THE DECISION OF THE LD. CIT(A), THE DEPARTMENT IS IN APPEAL BEFORE US CHALLENGING THE DECISION OF LD. CIT(A) IN ALLOWING DEPRECIATION EVEN IN RESPECT O F GRANT IN AID RECEIVED FROM GOVERNMENT OF INDIA. THE LD. CIT (D EPARTMENTAL REPRESENTATIVE) VEHEMENTLY SUBMITTED THAT GRANT IN AID FROM GOVERNMENT OF INDIA WAS RECEIVED ONLY WITH SUBJE CT OF MEETING THE COST OF PROJECT AND THE PROVISIONS OF EXPLANATION 1 0 AND THE PROVISO THERETO ARE SQUARELY APPLICABLE TO THE FACTS OF TH E PRESENT CASE. 8. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE DUE SERVICE OF NOTICE OF HEARING. 9. WE HEARD THE LD. CIT (DEPARTMENTAL REPRESENTATIVE) AND PERUSED THE MATERIAL ON RECORD. FROM THE STATEMEN T OF FACTS FILED BEFORE THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2014 -2015, IT IS VERY CLEAR THAT GRANT IN AID IS RECEIVED FROM GOVERNMENT OF INDIA ONLY WITH OBJECT OF MEETING COST OF PROJECT. THEREFORE, IT I S NOT AN INCENTIVE OR SUBSIDY PROVIDED WITH INTENTION OF PROMOTING OR ENCOURAGING SETTING UP OF NEW INDUSTRIES. THE PROVISION OF EXPLANATION 10 TO SECTION 43(1) ITA NOS.1445-47 /2019 :- 6 -: OF THE ACT WAS INSERTED W.E.F. ASSESSMENT YEAR 1999 -2000 ARE SQUARELY APPLICABLE TO THE FACTS OF THE CASE, WHICH READS A S UNDE R. 43(1) 'ACTUAL COST' MEANS THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE, REDUCED BY THAT PORTION OF THE COST T HEREOF, IF ANY, AS HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY: PROVIDED THAT WHERE THE ACTUAL COST OF AN ASSET, BE ING A MOTOR CAR WHICH IS ACQUIRED BY THE ASSESSEE AFTER T HE 31ST DAY OF MARCH, 1967, BUT BEFORE THE FIRST DAY OF MAR CH, 1975, AND IS USED OTHERWISE THAN IN A BUSINESS OF RUNNING IT ON HIRE FOR TOURISTS, EXCEEDS TWENTY-FIVE THOUSAND RUPEES, THE EXCESS OF THE ACTUAL COST OVER SUCH AMOUNT SHALL BE IGNORE D, AND THE ACTUAL COST THEREOF SHALL BE TAKEN TO BE TWENTY-FIV E THOUSAND RUPEES. EXPLANATION 1......... EXPLANATION 2......... EXPLANATION 10. WHERE A PORTION OF THE COST OF AN ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY L AW OR BY ANY OTHER PERSON, IN THE FORM OF A SUBSIDY OR GRANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED), THEN, S O MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN THE ACTUA L COST OF THE ASSET TO THE ASSESSEE : PROVIDED THAT WHERE SUCH SUBSIDY OR GRANT OR REIMBURSEMENT IS OF SUCH NATURE THAT IT CANNOT BE D IRECTLY RELATABLE TO THE ASSET ACQUIRED, SO MUCH OF THE AMO UNT WHICH BEARS TO THE TOTAL SUBSIDY OR REIMBURSEMENT O R GRANT THE SAME PROPORTION AS SUCH ASSET BEARS TO AL L THE ASSETS IN RESPECT OF OR WITH REFERENCE TO WHICH THE SUBSIDY OR GRANT OR REIMBURSEMENT IS SO RECEIVED, SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASS ESSEE. ITA NOS.1445-47 /2019 :- 7 -: THE PRINCIPLES ENUMERATED IN THE DECISION OF HON'B LE SUPREME COURT IN THE CASE OF CIT VS. P.J. CHEMICALS LTD, 210 ITR 830 ARE NOT APPLICABLE TO THE FACTS OF THE CASE AFTER INSERTION OF EXPLANATION 10 TO SECTION 43(1)OF THE ACT. THEREFORE THE LD. CIT(A) H AD SERIOUSLY FELL IN ERROR IN ALLOWING DEPRECIATION ON THE GRANT IN AID RECEIVED FROM GOVERNMENT OF INDIA WITHOUT EXAMINING THE TRUE NAT URE OF GRANT IN AID. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ORDER OF THE ASSESSING OFFICER. THE APPEAL FI LED BY THE REVENUE STANDS ALLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN I TA NO.1445/CHNY/2019 FOR ASSESSMENT YEAR 2013-2014 STA NDS ALLOWED. I.T.A. NOS.1446 & 1447/CHNY/2019 FOR ASSESSMENT YE ARS 2014-2015 AND 2015-2016. 11. SINCE, THE FACTS IN THE PRESENT APPEALS ARE IDENTI CAL TO THE FACTS IN ITA NO.1445/CHNY/2019, FOR ASSESSMENT YEAR 2013-14 FOR THE REASONS MENTIONED THEREIN, WE ALLOW THE APPEALS F ILED BY THE REVENUE ON THE ABOVE LINES INDICATED IN APPEAL IT A NO.1445/CHNY/2019 SUPRA. HENCE, THE ABOVE CAPTIONED APPEALS FILED BY THE REVENUE STAND ALLOWED. 12. TO SUMMARIZE THE RESULTS, THE APPEALS FILED BY THE REVENUE IN ITA NOS.1445, 1446 & 1447/CHNY/2019 FOR ASSESSME NT YEARS 2013-14, 2014-15 AND 2015-2016 STAND ALLOWED. ITA NOS.1445-47 /2019 :- 8 -: ORDER PRONOUNCED ON 24TH DAY OF FEBRUARY, 2020 , AT CHENNAI. SD/- SD/- ( . ) (DUVVURU RL REDDY) ! '# /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER 1 #- / CHENNAI 2# / DATED:24TH FEBRUARY, 2020. KV 3 ) +.4 5' !6 5&. / COPY TO: 1 . !' '( / APPELLANT 3. 7. (!' ) / CIT(A) 5. 5 :; +.#< / DR 2. +,'( / RESPONDENT 4. 7. / CIT 6. ;$ =- / GF