ACIT, Circle-1, Asansol, Asansol V. M/S. Bhagwati Sponge Pvt. Ltd.,

ITA 1646/KOL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4571 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 30-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 11-08-2014
• Court: TRIBUNAL
• Assessee Lawyers: V N PUROHIT; H N BHARWADAJ ACA
• Keywords: Capital asset; Depreciation; Additional depreciation; Question of law; Capital receipt; Revised return
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.1672/KOL/2014 ASSESSMENT YEAR: 2007-08 BHAGWATI SPONGE PVT. LTD. VS. DEPUTY COMMISSION ER OF INCOME-TAX, (PAN: AACCB3462A) CIRCLE-1, ASANSOL. ( APPELLANT ) ( RESPONDENT ) & I.T.A NO.1646/KOL/2014 ASSESSMENT YEAR: 2007-08 ASSISTANT COMMISSIONER OF INCOME-TAX, VS. BHAGWATI SPONGE PVT. LTD. CIRCLE-1, ASANSOL. (APPELLANT) (RESPONDENT) DATE OF HEARING: 01.06.2016 DATE OF PRONOUNCEMENT: 08.07.2016 FOR THE ASSESSEE: SHRI V.N.PUROHIT, CA & SHRI H.N. BHARWADAJ, ACA FOR THE REVENUE: SHRI ARUN KANTI SINHA, JCIT, SR . DR ORDER PER SHRI M. BALAGANESH, AM: THESE CROSS APPEALS BY ASSESSEE AND REVENUE ARE ARI SING OUT OF ORDER OF CIT(A), ASANSOL VIDE APPEAL NO.198/CIT(A)/ASL/ACIT/CIR-1/AS L/2009-10 DATED 11.06.2014. ASSESSMENT WAS FRAMED BY DCIT, CIR-1, KOLKATA U/S. 143(3) & 115WE(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) FOR AY 2007-08 VIDE HIS ORDER DATED 30.12.2009. SINCE BOTH THE APPEALS ARE ARISING OUT OF SAME ORDER OF CIT(A), WE DISPOSE OF THE SAME BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE LD. CIT(A), ASANSOL HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE DISALLOWANCE OF RS.1,09,73,000/-, MADE BY THE AO ON ACCOUNT OF SUBSIDY RECEIVED FROM GOVERNMENT OF W.B. THROUGH WBIDCL. 2. THAT THE LD. CIT(A), ASANSOL HAS ERRED IN LAW AN D ON FACTS BY ALLOWING THE DISALLOWANCE OF RS.10,38,005/-, MADE BY THE AO ON A CCOUNT OF INTEREST SUBSIDY RECEIVED AS REVENUE RECEIPT. 3. THAT THE LD. CIT(A), ASANSOL HAS ERRED IN LAW AN D ON FACTS BY ALLOWING THE DISALLOWANCE OF RS.11,14,841/-, MADE BY THE AO ON A CCOUNT OF REVENUE RECEIPT. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- (1) FOR THAT THE ID. CIT (A) ERRED IN LAW IN NOT A CCEPTING THE CLAIM OF THE ASSESSEE ABOUT NORMAL DEPRECIATION AT RS. 1,00,41,737/- CALCULATED ON TOTAL AMOUNT OF ACTUAL COST OF 2 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 FIXED ASSET BEFORE DEDUCTING THEREFROM AMOUNT OF RS . 1,09,73,000/- BEING CAPITAL SUBSIDY RECEIVED AND WRONGLY SO DEDUCTED TO ARRIVE AT ALLOW ABLE DEPRECIATION EARLIER AT RS. 8395787/-. (2) FOR THAT THE LD. CIT(A) ERRED IN LAW AS WELL AS IN FACTS IN SUSTAINING THE ACTION OF THE LD. A.O. IN REJECTING THE CLAIM MADE BY THE ASSESSE E THAT THE SUM OF RS. 40,30,061/- RECEIVABLE BY THE ASSESSEE ON ACCOUNT OF SETTING UP A NEW INDUSTRY UNDER THE NOMENCLATURE OF SUBSIDY ON INTEREST ON TERM LOAN - WHICH WAS INADVERTENTLY REDUCED BY THE ASSESSEE FROM THE INTEREST PAID ACCOUNT BE CONS IDERED FOR COMPUTATION OF TOTAL INCOME, BY REDUCING THE TOTAL INCOME COMPUTED TO TH AT EXTENT. (3) FOR THAT THE LD. CIT (A) HAS FURTHER ERRED IN N OT ALLOWING THE ADDITIONAL DEPRECIATION OF RS. 1,50,89,699/- AS CLAIMED BY THE ASSESSEE. 3. THE ISSUE TO BE DECIDED IS AS TO WHETHER, THE C APITAL INVESTMENT SUBSIDY OF RS. 1,09,73,000/- ; INTEREST SUBSIDY OF RS. 10,38,005/- AND ELECTRICITY SUBSIDY OF RS. 11,14,841/- RECEIVED FROM GOVT. OF WEST BENGAL UNDE R INCENTIVE SCHEME 2000 COULD BE BROUGHT TO TAX AS A REVENUE RECEIPT WITH CORRESPOND ING IMPACT ON THE ALLOWANCE OF DEPRECIATION, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE OTHER ISSUE IS AS TO WHETHER THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEP RECIATION ON THE PLANT AND MACHINERY IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE ASSESSEE IS A COMPANY ENGAGED IN THE MANUF ACTURE OF SPONGE IRON AT ITS PLANT AT JAMURIA IN THE DISTRICT OF BURDWAN IN WEST BENGA L. THE ASSESSEE WAS INCORPORATED FOR SETTING UP OF THIS PLANT. IMMEDIATELY AFTER THE INC ORPORATION, THE ASSESSEE COMPANY APPLIED FOR AN ELIGIBILITY CERTIFICATE IN TERMS OF THE ABOVESAID INCENTIVE SCHEME. BY LETTER NO. INC-2000(386)/II/GENCS/3285 DATED 16-12-2004, T HE WEST BENGAL INDUSTRIAL DEVELOPMENT CORPORATION LIMITED (A GOVERNMENT OF WE ST BENGAL UNDERTAKING), BEING THE 'AUTHORISED AGENT' OF THE GOVERNMENT OF WEST BE NGAL IN TERMS OF THE SAID INCENTIVE SCHEME, INFORMED THE COMPANY THAT THE UNIT OF THE A SSESSEE COMPANY FOR THE PROJECT OF SPONGE IRON AT LOCATION IKRAH, P.O. JAMURIA HAT, P. S. JARNURIA HAS BEEN DECLARED ELIGIBLE FOR DIFFERENT INCENTIVES, SUBJECT TO CERTA IN CONDITIONS, AND AN ELIGIBILITY CERTIFICATE NO. INC-2000/EC-29I (B) DATED 16-12-200 4 WAS ISSUED TO THE COMPANY. THE SUBSIDIES ARE NOT ABSOLUTE, BUT ARE RECOVERABLE IN CASE THE ASSESSEE COMPANY FAILS TO ABIDE BY THE CONDITIONS MENTIONED IN CONDITION (III ) OF THE ELIGIBILITY CERTIFICATE. AS PER THE SAID ELIGIBILITY CERTIFICATE, THE COMPANY WAS E LIGIBLE FOR THE SUBSIDIES WHICH WERE TO 3 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 BE COMPUTED ON DIFFERENT CRITERIA. FOR EASY CONSIDE RATION, THE SUBSIDIES WERE GIVEN FOLLOWING NOMENCLATURE: (A) STATE CAPITAL INCENTIVE SUBSIDY (B) INTEREST SUBSIDY (C) WAIVER OF ELECTRICITY DUTY (D) EMPLOYMENT GENERATION SUBSIDY (E) REMISSION OF STAMP DUTY & REGISTRATION FEES STATE CAPITAL INCENTIVE SUBSIDY THE GOVERNMENT OF WEST BENGAL SANCTIONED, IN TERMS OF THE AFORESAID INCENTIVE SCHEME, A CAPITAL SUBSIDY OF RS.1,09,73,000/- ON AC COUNT OF INVESTMENT MADE BY THE ASSESSEE FOR THE ESTABLISHMENT OF ITS SPONGE IRON F ACTORY AT JAMURIA VIDE ITS LETTER NO. INC- 2000(386)/II/GENCS/4597 DATED 19/21-03-2007. T HE ABOVE SUBSIDY OF RS.1,09,73,000/- WAS SANCTIONED IN TERMS OF PARA 8. 1 OF THE SAID INCENTIVE SCHEME, ACCORDING TO WHICH AN ELIGIBLE INDUSTRIAL UNIT LOCA TED IN A GROUP 'B' AREA AND SET UP IN THE STATE ON OR AFTER THE 1ST JANUARY, 2000 WOULD B E ENTITLED TO STATE CAPITAL INVESTMENT SUBSIDY @ 15% OR THE FIXED CAPITAL INVESTMENT SUBJE CT TO A LIMIT OF RS. 150.00 LAKHS. THIS AMOUNT OF SUBSIDY WAS NOT RELATABLE TO ANY SPE CIFIC ASSET. THE SAID AMOUNT OF RS.1,09,73,000/- WAS REDUCED FROM THE COST OF PLANT & MACHINERIES DUE TO INADVERTENCE, AND THE DEPRECIATION IN THE RETURN OF INCOME WAS CL AIMED ACCORDINGLY. THE ASSESSEE MADE A CLAIM BEFORE THE LD. AO FOR SETTING RIGHT TH E MATTER AND REQUESTED HIM TO GRANT DEPRECIATION ON THE FULL VALUE OF COST PRIOR TO DED UCTION OF STATE CAPITAL SUBSIDY. THE LD. AO ADDED THE SAID CAPITAL SUBSIDY TO THE INCOME OF THE ASSESSEE TREATING THE SAME HAVING BEEN RECEIVED ON REVENUE ACCOUNT. HE, HOWEVE R, DID NOT INCREASE THE WDV OF THE FIXED ASSETS BY THE CORRESPONDING AMOUNT. INTEREST AND ELECTRICITY SUBSIDY: THE ASSESSEE, IN TERMS OF THE PROMISES OF THE GOVER NMENT OF WEST BENGAL AS CONTAINED IN THE ELIGIBILITY CERTIFICATE, AT THE TI ME OF FINALIZATION OF THE ACCOUNTS FOR THE YEAR, COMPUTED ON ITS OWN THE AMOUNTS OF THE SUBSID IES OTHER THAN THE STATE CAPITAL INCENTIVE SUBSIDY, THAT MAY BE RECEIVED BY IT BASED ON THE CRITERIA LAID DOWN IN THE SCHEME. THE ASSESSEE ARRIVED AT THE FOLLOWING FIGUR ES OF THE SUBSIDIES: 4 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 SL. NO. ACCOUNT HEAD AMOUNT 1. SUBSIDY ON INTEREST ON TERM LOAN - 1 RS. 40 ,30,061 2. SUBSIDY ON INTEREST ON TERM LOAN - 2 RS. 10 ,38,005 3. SUBSIDY ON ELECTRICITY DUTY RS. 11,14,841 THE ASSESSEE COMPANY, THEREAFTER, INADVERTENTLY CRE DITED THE ABOVE AMOUNT OF THE SUBSIDIES TO THE ACCOUNT HEADS OF INTEREST AND ELEC TRICITY CHARGES IN ITS BOOKS OF ACCOUNT AS PER FOLLOWING DETAILS AND DEBITED THE PROFIT & L OSS ACCOUNT FOR THE YEAR ENDED 31-03- 2007 WITH THE NET FIGURES OF THE EXPENSES AS PER FO LLOWING DETAILS: SL. NO. A/C HEAD INTEREST ON TERM LOAN-1 A/C HEAD INTEREST ON TERM LOAN-2 A/C HEAD ELECTRICITY CHARGES 1. TOTAL AMOUNT OF EXPENDITURE 69,74,269 41,52,021 85,90,773 2. 3. 4. LESS: AMOUNT OF SUBSIDY COMPUTED NET AMOUNT DEBITED TO PROFIT & LOSS ACCOUNT 40,30,061 29,44,208 10,38,005 31,14,016 11,14,841 74,75,932 TOTAL NET EXPENDITURE UNDER THE HEAD INTEREST- RS.54,55,459 AS A RESULT OF SUCH ADJUSTMENT OF SUBSIDIES, THE EX PENDITURE UNDER THE ABOVE HEADS WAS REDUCED. BASED ON THE ABOVE SAID NET FIGURES, THE A CCOUNTS OF THE COMPANY WERE FINALIZED AND A LOSS OF RS. RS. 1,64,02,636/-, WHIC H SHOULD HAVE BEEN HIGHER BY THE SUM OF RS. 61,82,907/- I.E. THE ACTUAL LOSS OF THE COMP ANY WOULD BE RS.2,25,85,543/-. THE RETURN OF INCOME WAS FINALIZED ON THE BASIS OF THE LOSS OF RS.1,64,02,636/-. THIS FACT IS EVIDENT FROM THE BOOKS OF ACCOUNTS AND PROFIT & LOS S ACCOUNT FOR THE YEAR ENDED 31-03- 2007. AS A RESULT OF THE ABOVE ADJUSTMENTS, THE TOT AL LOSS RETURNED BY THE COMPANY GOT REDUCED AND THE RETURN OF INCOME WAS FILED ACCORDIN GLY SHOWING LOWER AMOUNT OF LOSS, WHICH OTHERWISE SHOULD HAVE BEEN FILED AT A HIGHER FIGURE OF LOSS. ADDITIONAL DEPRECIATION: IN THE ORIGINAL RETURN OF INCOME, THE ASSESSEE CLAI MED AN AMOUNT OF RS.2,27,961/- AS THE ADDITIONAL DEPRECIATION ON THE PLANT & MACHINERIES. THIS ADDITIONAL DEPRECIATION WAS CLAIMED ON THE PLANT & MACHINERIES INSTALLED DURING THE YEAR ONLY. IN DOING SO, THE ASSESSEE DID NOT CONSID ER THE PLANT & MACHINERIES INSTALLED IN THE EARLIER YEAR BUT AFTER THE MANDATED DATE OF 31- 03-2005. 5 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 NON RECEIPT OF SUBSIDY ON TERM LOAN II : IT HAS BEEN ALREADY SUBMITTED IN THE PRECEDING PARA S THAT THE ASSESSEE HAS CONSIDERED THE INTEREST SUBSIDY RECEIVABLE FROM THE GOVERNMENT OF WEST BENGAL ON THE AMOUNT OF INTEREST PAID BY THE ASSESSEE BY WAY OF D EDUCTING THE SAME FROM THE TOTAL AMOUNT OF INTEREST PAID BY THE ASSESSEE ON TERM LOA N I AS WELL AS TERM LOAN II. ON THE TERM LOAN II, THE ASSESSEE HAD AT THAT TIME CONSIDE RED AN AMOUNT OF RS. 10,38,005/- AS SUBSIDY. WHEN THE ACTUAL DISBURSEMENT OF SUBSIDY WA S MADE, IT WAS SEEN THAT THE GOVERNMENT OF W.B. HAS NOT ALLOWED THE CLAIM OF SUB SIDY IN RESPECT OF THE TERM LOAN II. IT WAS CLAIMED THAT THE SAID SUBSIDY AMOUNT OF RS. 10,38,005/- WOULD NEVER BE RECEIVED BY THE ASSESSEE AT ANY AT ANY FUTURE DATE. IN OTHER WORDS, THE SAID SUBSIDY OF RS.10,38,005/- HAS NOT ACCRUED TO THE ASSESSEE AT A LL AT ANY POINT OF TIME. REVISED RETURN DURING THE COURSE OF HEARING FOR ASSESSMENT, THE AS SESSEE SUBMITTED A LETTER BEFORE THE LD. AO EXPLAINING THE DIFFERENT QUERIES RAISED BY HIM DURING THE COURSE OF HEARING. IN THE SAID LETTER, THE ASSESSEE ALSO EXPL AINED THE REASONS FOR FILING THE REVISED RETURN. IN THE SAID LETTER, THE ASSESSEE ALSO SUBMI TTED BEFORE THE LD. AO TO SET RIGHT THE MISTAKES THAT OCCURRED AT THE FILING OF THE ORIGINA L RETURN AS WELL AS REVISED RETURN REGARDING THE NON-EXCLUSION OF THE SUBSIDY OF RS. 4 0,30,061/- RECEIVED ON THE BASIS OF INTEREST ON TERM LOAN - I, EXCLUSION OF CAPITAL SUB SIDY OF RS. 1,09,73,000/- FROM THE COST OF PLANT & MACHINERIES FOR THE PURPOSE OF WORK ING OUT OF WDV AND DEPRECIATION. 5. THE LD. AO DID NOT ACCEPT THE CLAIM OF THE ASSES SEE FOR A) ADDITIONAL DEPRECIATION, B) SUBSIDY NOT RECEIVED IN THE SUM OF RS. 10,38,005/- BASED ON INTEREST ON TERM LOAN II AND C) EXCLUSION OF SUBSIDY OF 11,14,8 41/- RECEIVED BEING BASED ON ELECTRICITY CHARGES FROM THE TOTAL INCOME AS MADE I N THE REVISED RETURN. THE LD. AO, FURTHER, DID NOT ACCEPT THE CLAIM OF THE ASSESSEE, A) EXCLUDING THE SUM OF RS. 40,30,061/- BEING SUBSIDY BASED ON INTEREST ON TERM LOAN I FROM TOTAL INCOME BEING CAPITAL IN NATURE AND B) REVERSAL OF THE DEDUCTION OF STATE IN CENTIVE SUBSIDY FROM THE COST OF PLANT & MACHINERIES, AS MADE INADVERTENTLY BY THE ASSESSE E, FOR THE PURPOSE OF DEPRECIATION AS MADE IN THE LETTER FILED DURING THE COURSE OF HE ARING. THE LD. AO, HOWEVER, ADDED THE 6 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 STATE CAPITAL INCENTIVE SUBSIDY OF RS. 1,09,73,000/ - TO THE RETURNED INCOME TREATING THE SAME BEING REVENUE IN NATURE. 6. THE LEARNED CITA APPRECIATED THE INCENTIVE SCHEM E AND ITS PURPOSE AND TREATED THE CAPITAL SUBSIDY RECEIVED IN THE SUM OF RS. 1,09 ,73,000/- AS CAPITAL RECEIPT AND ALLOWED THE GROUND OF THE ASSESSEE IN THAT REGARD. THE LEARNED CITA HOWEVER BY PLACING RELIANCE ON THE DECISION OF THE HONBLE APE X COURT IN THE CASE OF GOETZE INDIA LTD REPORTED IN 284 ITR 323 (SC) DID NOT CONSIDER T HE REVISED RETURN OF INCOME WHEREIN THE DEPRECIATION WAS CLAIMED WITHOUT SUBTRACTING TH E CAPITAL SUBSIDY FROM THE COST OF THE ASSET, AMONG OTHERS. THE LEARNED CITA TREATED THE INTEREST SUBSIDY AND ELECTRICITY SUBSIDY AS A CAPITAL RECEIPT AND ALLOWED THE GROUND S OF THE ASSESSEE. THE LEARNED CITA UPHELD THE VERSION OF THE LEARNED AO WITH REGARD TO CLAIM OF ADDITIONAL DEPRECIATION BY HOLDING THAT EXPLANATION 5 TO SECTION 32(1)(II) OF THE ACT IS APPLICABLE ONLY FOR NORMAL DEPRECIATION AND THE SAME CANNOT BE EXTENDED FOR CL AIM OF ADDITIONAL DEPRECIATION. AGGRIEVED, BOTH ASSESSEE AND REVENUE ARE IN APPEALS BEFORE US ON THE RESPECTIVE GRIEVANCES. 7. THE LEARNED AR ARGUED THAT THE WEST BENGAL INCE NTIVE SCHEME, 2000 AS FORMULATED BY THE GOVERNMENT OF WEST BENGAL FOR THE GROWTH OF INDUSTRIES IN THE STATE OF WEST BENGAL. THIS FACT IS CLEAR IN THE FO REWORD ATTACHED TO THE SCHEME ITSELF. IN THE FOREWORD, THE GOVERNMENT OF WEST BE NGAL STATED THAT AS THERE IS STRONG NEED FOR FISCAL SUPPORT FOR THE PROMOTION OF INDUSTRY IN THE STATE GOVERNMENT DECIDED TO INTRODUCE THE WEST BENGAL INCENTIVE SCH EME, 2000. THEREAFTER, IT WENT ON TO DIVIDE THE ENTIRE STATE INTO 3 (THREE) CATEGO RIES FOR THE PURPOSE OF THE INCENTIVES. DISTRICTS HAVE BEEN GROUPED AS 'A' (CA LCUTTA MUNICIPAL CORPORATION). B (HOWRAH. HOOGHLY, NORTH 24- PARGANAS, SOUTH 24- PARGANAS, BURDWAN, NADIA & MIDNAPORE DISTRICTS) AND 'C' (MURSHIDABAD, BIRBHU M. PURULIA, BANKURA, MALDA, COACH BEHAR, NORTH DINAJPUR, SOUTH DINAJPUR, JALPAI GURI AND DARJEELING DISTRICTS) AND QUANTIFIED THE AMOUNT OF 'FISCAL SUPPORT' PAYAB LE IN EACH OF THE CATEGORIES. IT MEANS THAT THE STATE GOVERNMENT WANTS TO EXTEND THE HELP TO THE INDUSTRIES IN THE CAPITAL FIELD NOT IN OPERATIONAL FIELD. THE AMOUNT PAYABLE BY THE STATE GOVERNMENT IS NOT TO SUBSIDIZE THE OPERATION OF THE UNIT, BUT TO HELP IN RECOVERING THE COST OF THE 7 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 PROJECT. HAD IT NOT BEEN SO, THE WORDING WOULD HAVE BEEN DIFFERENT. THIS IS MORE CLEAR FROM THE FACT THAT THE INCENTIVE ARE PAYABLE FOR A LIMITED PERIOD BUT NOT OVER THE ENTIRE PERIOD OF THE LIFE OF THE INDUSTRY. MORE OVER, THESE SUBSIDIES ARE RECOVERABLE BY THE GOVERNMENT OF WEST BENGAL IN THE CASE OF THE FAILURE OF THE ASSESSEE COMPANY TO COMPLY WITH THE TERMS AND CONDI TIONS ATTACHED WITH THE GRAM OR SUCH SUBSIDIES. UNDER THESE CIRCUMSTANCES, IT WAS ARGUED THAT WHEN THE SUBSIDY IS IN THE FIELD OF CAPITAL SUPPORT, TAXING THE SAME WOULD BE WRONG AND NOT IN ACCORDANCE WITH THE LAW AND THEREFORE, NEEDS TO BE EXCLUDED WHILE COMPU TING THE INCOME UNDER THE INCOME TAX ACT. THE LEARNED AR EFFECTIVELY REITERATED THE SUBMISSIO NS MADE BEFORE THE LOWER AUTHORITIES BY STATING THE RELEVANT PORTIONS OF THE SCHEME BY MAKING SPECIFIC REFERENCES TO THE PAPER BOOK FILED BY HIM. IN RESPONSE TO THI S, THE LEARNED DR SUPPORTED THE ORDERS OF THE LEARNED AO AND SPECIFICALLY ARGUED THAT THE INTEREST AND ELECTRICITY SUBSIDY SHOULD BE TREATED ONLY AS REVENUE RECEIPTS AS IT RE DUCES THE TOTAL EXPENDITURE OF THE ASSESSEE WHICH IN TURN INCREASES THE PROFITABILITY OF THE ASSESSEE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESS EE. WE FIND THAT THE OBJECTS OF THE SCHEME COULD BE UNDERSTOOD FROM THE FOREWORD OF WES T BENGAL INCENTIVE SCHEME, 2000 ISSUED BY THE COMMERCE & INDUSTRIES DEPARTMENT AND COTTAGE & SMALL SCALE INDUSTRIES DEPARTMENT , GOVERNMENT OF WEST BENGAL. FOR THE SA KE OF CONVENIENCE, THE SAME IS REPRODUCED HEREUNDER:- WEST BENGAL INCENTIVE SCHEME 1999 SCHEME HAD AN A TTRACTIVE PROVISION OF SALES TAX RELATED BY WAY OF REMISSION OR DEFERMENT. BUT IN PURSUANCE OF THE NATIONAL POLICY, THE STATE GOVT. HAD TO DISCONTINUE THE SALES TAX RELATE D INCENTIVES FROM 1 ST JANUARY, 2000. HOWEVER, AS THERE IS A STRONG NEED FOR FISCAL SUPPO RT FOR THE PROMOTION OF INDUSTRY IN THE STATE, THE STATE GOVT. DECIDED TO INTRODUCE THE WES T BENGAL INCENTIVE SCHEME, 2000, WITH DIFFERENT AND NEW FEATURES, QUITE ATTRACTIVE FOR IN DUSTRIES IN LARGE, MEDIUM, SMALL SCALE AND TOURISM SECTORS. FOR THE PURPOSE OF THE INCENTIVES, DISTRICTS HAVE BEEN GROUPED AS A (CALCUTTA MUNICIPAL CORPORATION), B (HOWRAH, HOOGHLY, NORTH 24 PARGAN AS, SOUTH 24 PARGANAS, BURDWAN, NADIA & MIDNAPORE DISTRICTS) AND C (MURSHIDABAD, BIRBHUM, PURULIA, BANKURA, MALDA, COOCH BEHAR, NORTH DINAJPUR, SOUTH DINAJPUR, JALPAI GURI AND DARJEELING DISTRICTS. 8 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 8.1. WE HOLD THAT WHERE SUBSIDY WAS GIVEN TO OFFS ET THE COST OF AN ASSET, SUCH PAYMENT WOULD FALL WITHIN THE EXPRESSION MET, WHE REAS 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 ASSET. A CAREFUL PERUSAL OF THE WEST BENGAL INCENTIVE SCHEME 2000 SHOWS THAT THE SCHEME WAS INTENDED TO ACCELERATE INDUSTRIAL DEVELOPMENT OF THE STATE AND THE INCENTI VE WAS GIVEN FOR SETTING UP OF INDUSTRIES IN WEST BENGAL AND FOR THE PURPOSE OF DE TERMINING 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 THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT INCENTIVE IN THE FORM OF SUBSI DY CANNOT BE CONSIDERED AS A PAYMENT DIRECTLY OR INDIRECTLY TO MEET ANY PORTION OF THE A CTUAL COST AND THUS IT FALLS OUTSIDE THE KEN OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT FOR THE PURPOSE OF COMPUTIN G DEPRECIATION ALLOWABLE TO THE ASSESSEE, THE SUBSIDY AMOUNT CANNOT BE REDUCED FROM THE COST OF THE CAPITAL ASSET. 8.2. WE ALSO FIND THAT THE HONBLE APEX COURT IN THE CASE OF CIT VS PONNI SUGA RS & CHEMICALS LTD & ORS REPORTED IN (2008) 306 ITR 392 (SC) HAD HELD AS UNDER:- THE CHARACTER OF THE RECEIPT OF A SUBSIDY IN THE HA NDS OF THE ASSESSEE UNDER A SCHEME HAS TO BE DETERMINED WITH RESPECT TO THE PURPOSE FO R WHICH THE SUBSIDY IS GRANTED. IN OTHER WORDS, ONE HAS TO APPLY THE PURPOSE TEST. THE POINT OF TIME AT WHICH THE SUBSIDY IS PAID IS NOT RELEVANT. THE SOURCE IS IMMATERIAL. IF THE OBJECT OF THE SUBSIDY IS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY THEN T HE RECEIPT IS ON REVENUE ACCOUNT. ON THE OTHER HAND, IF THE OBJECT OF THE ASSISTANCE UND ER THE SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND AN EXIST ING UNIT THEN THE RECEIPT OF THE SUBSIDY WOULD BE ON CAPITAL ACCOUNT. THE ASSESSEE WAS A CO-OPERATIVE SOCIETY RUNNING A S UGAR MILL. DURING THE RELEVANT YEAR IN QUESTION, ON ACCOUNT OF ECONOMIC FACTORS, IT WAS NO T ECONOMICALLY VIABLE TO RUN NEW SUGAR FACTORIES AND, DUE TO HIGH FINANCIAL COSTS, F INANCIAL INSTITUTIONS DID NOT COME FORWARD TO ADVANCE LOANS TO THE ENTREPRENEURS OF NE W SUGAR FACTORIES. THE TEMPO OF ESTABLISHING NEW SUGAR FACTORIES RECEIVED A SERIOUS SETBACK. A COMMITTEE APPOINTED BY THE GOVERNMENT RECOMMENDED THAT FIVE POSSIBLE INCEN TIVES FOR MAKING A SUGAR PLANT ECONOMICALLY VIABLE COULD BE PROVIDED FOR, VIZ., CA PITAL SUBSIDY, LARGER PERCENTAGE OF FREE SALE OF SUGAR, HIGHER LEVY SUGAR PRICE, ALLOWING RE BATE ON EXCISE DUTY AND REMISSION OF PURCHASE TAX. FOLLOWING THAT REPORT, SCHEMES WERE F ORMULATED GIVING THE FOLLOWING BENEFITS : (I) INCENTIVE SUBSIDY AVAILABLE ONLY IN NEW UNITS AND TO SUBSTANTIALLY EXPANDED UNITS ; (II) MINIMUM INVESTMENT FOR NEW UNITS AND E XPANSION OF EXISTING UNITS ; (III) INCREASE IN FREE SUGAR SALE QUOTA. THE BENEFIT OF T HE SCHEMES HAD TO BE UTILISED ONLY FOR REPAYMENT OF LOANS. THE DEPARTMENT AND THE HIGH COU RT HAD HELD THAT THE RECEIPTS FROM THE GOVERNMENT UNDER THE INCENTIVE SCHEMES WERE IN THE NATURE OF REVENUE. ON APPEAL TO THE SUPREME COURT : 9 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 HELD ACCORDINGLY, REVERSING THE DECISION OF THE HIG H COURT, ON THIS POINT, THAT THE MAIN ELIGIBILITY CONDITION IN THE SCHEMES WAS THAT THE I NCENTIVE HAD TO BE UTILIZED FOR REPAYMENT OF LOANS TAKEN BY THE ASSESSEE TO SET UP NEW UNITS OR FOR SUBSTANTIAL EXPANSION OF AN EXISTING UNIT. THE SUBSIDY RECEIVED BY THE ASSESSEE WAS NOT IN THE COURSE OF A TRADE BUT WAS OF A CAPITAL NATURE. 8.3. WE ALSO FIND THAT THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS R ASOI LTD REPORTED IN (2011) 335 ITR 438 (CAL) HAD HELD AS UNDER:- IF THE OBJECT OF A SUBSIDY SCHEME IS TO ENABLE THE ASSESSEE TO RUN THE BUSINESS MORE PROFITABLY THE RECEIPT IS ON REVENUE ACCOUNT. ON TH E OTHER HAND, IF THE OBJECT OF THE ASSISTANCE UNDER THE SUBSIDY SCHEME IS TO ENABLE TH E ASSESSEE TO SET UP A NEW UNIT OR TO EXPAND THE EXISTING UNIT, THE RECEIPT OF THE SUBSID Y IS ON CAPITAL ACCOUNT. IT IS THE QUALITY OF THE PAYMENT THAT IS DECISIVE OF THE CHARACTER OF THE PAYMENT AND NOT THE METHOD OF THE PAYMENT OR ITS MEASURE. HELD, DISMISSING THE APPEAL, THAT THE OBJECT OF THE SUBSIDY WAS THE EXPANSION OF BUSINESS CAPACITIES, MODERNIZATION, AND IMPROVING MARKETING CAPABILITIES AND THUS, THOSE WERE FOR ASSISTANCE ON CAPITAL ACCOUNT. MERELY BECAUSE THE A MOUNT OF SUBSIDY WAS EQUIVALENT TO 90 PER CENT. OF THE SALES TAX PAID BY THE BENEFICIA RY THAT DID NOT IMPLY THAT IT WAS IN THE FORM OF REFUND OF SALES TAX PAID. THE SUBSIDY WAS A CAPITAL RECEIPT. 8.4. IT IS NOT IN DISPUTE THAT THE WEST BENGAL IND SUTRIAL DEVELOPMENT CORPORATION LTD HAD ACKNOWLEDGED THE FACT OF ASSESSEE SETTING UP A NEW UNIT FOR THE PRODUCTION OF SPONGE IRON LOCATED AT VILLAGE-IKRAH, P.O JAMURIA HAT, P.S.-JAMURIA IN THE DISTRICT OF BURDWAN COVERED UNDER ELIGIBILITY CERTIFICATE NO. I NC(2000)/EC-291(B) DATED 16.12.2004 AND ACCORDINGLY HAD SANCTIONED THE STAT E CAPITAL INVESTMENT SUBSIDY UNDER WEST BENGAL INCENTIVE SCHEME 2000 AS PER PARA 8.1 O F THE SCHEME. SIMILARLY INTEREST SUBSIDY AND ELECTRICITY SUBSIDY WERE GRANTED AS PER PARA 9.1 AND PARA 10 OF THE SCHEME RESPECTIVELY. 8.5. WE FIND THAT THE ISSUE WITH REGARD TO TAXABIL ITY OF SUBSIDY IS ALSO ADJUDICATED IN DETAIL BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF D CIT VS M/S STRASSENBURG PHARMACEUTICALS LTD IN ITA NO. 113 1 1133 /KOL/2009 DATED 27.1.2011 WHEREIN IT WAS HELD THAT :- 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL PLACED BEFORE US AND THE DECISION OF THE ITAT AND ALSO THE DECISION OF THE H ONBLE JURISDICTIONAL HIGH COURT CITED SUPRA. WE FIND THAT THE ISSUE IS COVERED BY THE AF ORESAID DECISIONS CITED SUPRA AND THE LD. CIT(A) FOLLOWING THE SAID DECISIONS TREATED THE WBI PA RECEIPT AS A CAPITAL RECEIPT AND DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITI ONS FOR ALL THE THREE ASSESSMENT YEARS UNDER APPEAL. SINCE THE LD. CIT(A) BY FOLLOWING TH E DECISION OF HONBLE JURISDICTIONAL HIGH COURTS ORDER AND ALSO THE DECISION OF THE JUR ISDICTIONAL ITAT, TREATED THE WBIPA RECEIPT AS A CAPITAL RECEIPT AND DIRECTED THE ASSES SING OFFICER TO DELETE THE ADDITIONS FOR ALL 10 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 THE THREE ASSESSMENT YEARS UNDER APPEAL. WE FIND NO INFIRMITY IN HIS ORDER AND THE SAME IS HEREBY UPHELD. FOR THE SAKE OF BREVITY, WE REPRODU CE THE RELEVANT PORTION OF HIS ORDER AS UNDER : 6.3 I HAVE DULY CONSIDERED THE A.OS RELIANCE PLAC ED ON THE JUDICIAL DECISIONS AND REASONS FOR TREATING THE WBIPA AS A REVENUE RECEIPT. THE CO UNTER SUBMISSIONS MADE BY THE APPELLANT HAVE ALSO BEEN CAREFULLY EXAMINED AND CON SIDERED. THE ISSUE THAT IS TO BE DECIDED IS WHETHER THE WBIPA RECEIPT IS A REVENUE O R A CAPITAL RECEIPT. THE A.O PLACED RELIANCE ON THE FOLLOWING CASE LAWS: SAHNEY STEEL & PRESS WORKS LTD. (1997) 228 HR 253 ( SC) CIT VS. CHINDWARA FUELS 245 ITR 9 (CAL) EAST INDIA PHARMACEUTICAL WORKS LTD. VS. DCIT (ITA NO.587 (KOL) 2006 THE APPELLANT PLACED RELIANCE ON THE FOLLOWING CASE LAWS: CIT VS. PONNI SUGARS & CHEMICALS LTD. (SC) ACITVS. RASOI LTD. (ITA NO. 1467 TO 1469 (CAL) 2001 CIT VS. KLARSEHEN P. LTD. (G.A.N. 145106 DT. 12.5.0 8 (CALCUTTA HIGH COURT) KLAR SAHEN P. LTD. VS. ITO (ITA NO. 2069 TO 2071 (K OL) OF 2004) EMCEE PHARMACEUTICALS (P) LTD. VS. DY. CIT (ITA NO. 1941 (KOL)/2004) MENDINE PHARMACEUTICALS (P) LTD. (ITA NO. 2403/KOH/ 2003) THE DEPARTMENT HAS BEEN RELYING ON THE HONBLE SUPR EME COURT DECISION IN THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD.(SUPRA). THE CALCU TTA HIGH COURT IN THE CASE OF CIT VS. CHINDWARA FUELS (SUPRA) HAS FOLLOWED THE APEX COURT DECISION. THIS DECISION HAS ALSO BEEN FOLLOWED BY HONBLE ITAT, KOLKATA IN THE CASE OF EAST INDIA PHARMACEUTICALS WORKS LTD. (SUPRA). THE A.O IN HIS ASSESSMENT ORDER SIMPL Y QUOTED THE CASE LAWS AND HELD THAT WBIPA RECEIPT IS A CAPITAL RECEIPT. THE A.O HAS NOT ANALYSED THE FACTS NOR COMPARED THE FACTS WITH THE FACTS OF THE SUPREME COURT CASE (SAH NEY STEEL & PRESS WORKS LTD.(SUPRA). ON THE OTHER HAND THE HONBLE ITAT, KOLKATA HAS DEA LT THIS ISSUE IN A NUMBER OF CASES AND HELD THAT THE SUBSIDY/ASSISTANCE RECEIVED FROM WEST BENGAL GOVERNMENT IS A CAPITAL RECEIPT. BEFORE I PROCEED TO DISCUSS THE ITAT ORDER S WHICH ARE IN FAVOUR OF THE APPELLANT, I WOULD FIRST PREFER TO EXAMINE THE FACTS OF SAHNEY S TEEL & PRESS WORK LTD. (SUPRA) WHEREIN THE APEX COURT TREATED THE SUBSIDY AS REVENUE IN NATURE. THE APEX COURT DEEPLY EXAMINED THE SALIENT FEATURES OF THE SCHEME FORMULA TED BY THE ANDHRA PRADESH GOVERNMENT. IT NOTICED THE FOLLOWING CONDITIONS TO BE FULFILLED FOR GETTING INCENTIVES: - INCENTIVE IS CONDITIONAL UPON COMMENCEMENT OF PRO DUCTION - INCENTIVE IS LIMITED TO 5 YEARS FROM THE DATE OF COMMENCEMENT OF PRODUCTION - INCENTIVES ARE TO BE GIVEN BY WAY OF REFUND OF SA LES TAX AND ALSO SUBSIDY AS POWER CONSUMED AND OTHER EXEMPTIONS. AFTER ANALYZING THE ABOVE FEATURES, THE APEX COURT AT PAGE 262 OBSERVED AS UNDER: THAT PRECISELY IS THE QUESTION RAISED IN THIS CASE . BY NO STRETCH OF IMAGINATION CAN BE SUBSIDIES WHETHER BY WAY OF REFUND OF SALES TAX OR RELIEF OF ELECTRICITY CHARGES OR WATER CHARGES TO BE TREATED AS AN AID TO SETTING UP OF TH E INDUSTRY OF THE ASSESSEE. . THE SUBSIDIES ARE OPERATIONAL SUBSIDIES AND NOT CAPITAL SUBSIDIES. THE ABOVE FACTS OF THE CASE ARE SIMILAR TO THE CASE OF KESORAM INDUSTRIES & COTTON MILLS LTD. (1991) 191 ITR 518 (CAL) WHEREIN THE SUB SIDY RECEIVED BY WAY OF REFUND OF SALES TAX LEVIED ON RAW MATERIALS, MACHINERY, FINISHED GO ODS ETC. THUS THESE TWO JUDICIAL DECISIONS ARE MAINLY BASED ON TWO FACTORS : FIRST, SUBSIDY FOR CARRYING ON BUSINESS (CONDITIONAL), SECONDLY THE INCENTIVE BY WAY OF REF UND OF SALES TAX ETC. 11 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 THE FACTS OF THE PRESENT CASE ARE DIFFERENT AND ARE VERY SIMILAR TO THE CASE LAWS RELIED ON BY THE APPELLANT ESPECIALLY CASES DECIDED BY ITAT, KOLKATA. IN THE PRESENT CASE THE SUBSIDY CALLED AS ASSISTANCE IS GIVEN EQUIVAL ENT TO 90% OF SALES TAX PAID AND NOT TO EQUATED WITH SALES TAX REFUND AND OTHER EXEMPTIONS PROVIDED AS IN THE CASE OF SAHNEY STEEL & PRESS WORKS LTD. (SUPRA). THE TAT DECISIONS RELIED ON BY THE APPELLANT CLEARLY DISTINGUISHED THIS POINT AND ALSO OTHER CONDITIONS AND HELD THE ASSISTANCE RECEIPT IS A CAPITAL RECEIPT. THE NOTABLE CASE AMONG OTHERS IS T HE CASE OF RASOI LTD.(SUPRA) WHEREIN THE HONBLE JURISDICTIONAL ITAT (KOLKATA) HAS DISCU SSED THE SIMILAR ISSUE THREAD BEAR DISTINGUISHING THE SAHNEY STEEL & PRESS WORKS LTD. CASE AND HELD AS A CAPITAL RECEIPT. THIS DECISION HAS BEEN FOLLOWED IN OTHER CASES DEALT BY KOLKATA ITAT BENCH INCLUDING THE CASE OF KIAR SEHEN P. LTD. (SUPRA) WHICH WAS LATER UPHEL D BY THE KOLKATA HIGH COURT. IT IS VERY MUCH RELEVANT TO REPRODUCE THE RELEVANT EXTRACT FROM THE ITAT ( - R IN THE CASE OF RASOI LTD. VS. DCIT IN ITA NO. 1080/CAL/98 DT. 18.5.01: 7. SO FAR AS THE PRESENT CASE BEFORE US IS CONCERN ED, THE NOTIFICATION NO. 1460 F.Y. DATED 27TH MAY 1994 RECITES THE RESOLUTION OF THE G OVT. OF WEST BENGAL, STARTING AS FOLLOWS: WHEREAS CERTAIN INDUSTRIES IN THE STATE HAVE BEEN PASSING THROUGH AN ACUTE FINANCIAL CRISIS AND IT HAS BEEN CONSIDERED NECESSARY TO EXTE ND FINANCIAL ASSISTANCE TO TIDE OVER SUCH CRISIS FOR PROMOTION OF SUCH INDUSTRIES, IT HAS BEE N DECIDED IN THE PUBLIC INTEREST TO FORMULATE A SCHEME TO ALLOW FINANCIAL ASSISTANCE TO THE MANUFACTURING UNITS IN WEST BENGAL OF SUCH. IT IS CLEAR FROM THE ABOVE PREAMBLE TO THE RESOLUTI ON THAT THE SCHEME FOR ALLOWING ASSISTANCE TO INDUSTRIES IS TO HELP THEM TO TIDE OV ER THE FINANCIAL CRISIS FACED BY THE INDUSTRIES AND FOR PROMOTION OF THE INDUSTRIES THEM SELVES. THE SCHEME OF THE GOVT. OF WEST BENGAL DOES NOT RELATE TO NEW INDUSTRIES ALONE AND RATHER ALLOWS BENEFIT UNDER THE SCHEME TO NEW AS WELL AS EXISTING UNITS PERTAINING TO CERT AIN INDUSTRIES. THE PURPOSE OF THE SCHEME IS DEFINITELY TO REMOTE THE SPECIFIED INDUST RIES AND TO HELP THE UNITS UNDER SUCH INDUSTRIES TO TIDE OVER THE FINANCIAL CRISIS BEING FACED BY THE INDUSTRIES AS SUCH. THERE IS NOTHING IN THE SCHEME WHICH COULD BE CONSIDERED TO HELP THE INDUSTRIES IN CARRYING ON THEIR OPERATIONS ON DAY TO DAY BASIS. WHEN FINANCIAL CRIS IS IS FACED BY SOME BUSINESS, PUMPING OF FRESH CAPITAL IS REQUIRED TO! HELP THE BUSINESS TO TIDE OVER SUCH FINANCIAL CRISIS. THE FINANCIAL HELP, IN THIS REGARD, HAS, THEREFORE, GOT TO BE CONSIDERED AS HAVING AN ENDURING EFFECT OF DRAGGING THE BUSINESS OUT OF THE POOR FIN ANCIAL CONDITIONS BEING FACED BY THE INDUSTRIES. THE SCHEME OF THE GOVT. OF WEST BENGAL DOES NOT AT ALL ENVISAGE GIVING ANY SUBSIDY IN RESPECT OF SPECIFIC ITEMS OF EXPENSES LI KE SALES-TAX, POWER, WATER ETC. HENCE, WE ARE OF THE OPINION THAT THE FACTS OF THE PRESENT CA SE NOT ONLY DIFFER GREATLY FROM THOSE IN THE CASES OF EITHER KESORAM INDUSTRIES & COTTON MILLS L TD. OR SAHNEY STEEL & PRESS WORKS LTD. AS DECIDED EARLIER, BUT THE ASSISTANCE, IN THE INST ANT CASE, BEING UNRELATED TO THE DAY-TO-DAY OPERATIONS OF THE ASSESSEE-COMPANY OR EVEN MEETING OF ANY SPECIFIC ITEMS OF REVENUE EXPENSES, HAS GOT TO BE CONSIDERED AS CAPITAL RECEI PT. THERE IS NO DOUBT ABOUT THE FACT THAT THE UNITS RECEIVING THE ASSISTANCE FROM THE GOVT. O F WEST BENGAL WILL BE REQUIRED TO UNDERGO CERTAIN REGULATORY MEASURES AND FULFILL CER TAIN EXISTENCE TO BE ALLOWABLE TO THE ASSESSEE IN CARRYING FOR THE BUSINESS ITSELF IN A R EGULAR MANNER OR EVEN FOR THE PURPOSE OF AUGMENTING ITS PRO FITS ON THE OTHER HAND, THE SOLE PURPOSE BEHIND THE GRANT OF THE ASSISTANCE SEEMS TO BE TO TIDE OVER THE FINANCIAL CRISES AND PROMOTION OF INDUSTRIES. BOTH THESE ACTIVITIES RELATE TO CAPITAL FIELD AND C ANNOT BE CONSIDERED TO BE LINKED UP WITH THE DAY TO DAY OPERATIONS OF THE ASSESSEE IN ANY MA NNER. HENCE, WE ARE OF TOO VIEW THAT THE INCENTIVE RECEIVED BY THE ASSESSEE, ALTHOUGH DEPEND ENT UPON CERTAIN CONDITIONALITIES, IS ACTUALLY GRATUITOUS IN NATURE AND FORMS CAPITAL REC EIPT IN ITS HANDS. THE INCENTIVE CANNOT AGAIN BE CONSIDERED AS PROVIDED BY THE GOVT. TO THE ASSESSEE TO MEET SOME OF ITS REVENUE EXPENSES. 12 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 THE ABOVE RATIO LAID DOWN IN TERMS OF ASSISTANCE IN THE FORM OF FRESH CAPITOL TO TIDE OVER THE FINANCIAL CRISIS, ENDURING EFFECT, PROMOTIO N OF INDUSTRIES ETC. HAS ALSO BEEN FOLLOWED IN THE CASE OF KLAR SEHEN P. LTD.(SUPRA) FOR TREATI NG THE ASSISTANCE AS A CAPITAL RECEIPT. SUBSEQUENTLY THE KOLKATA HIGH COURT HAS ALSO CONFIR MED THE DECISION IN THE CASE OF KLAR SEHEN P. LTD. AS UNDER: FURTHER WE HAVE PERUSED THE ORDER PASSED BY THE TR IBUNAL. WE HAVE FOUND THAT THE TRIBUNAL HAS EXTENSIVELY DEALT WITH THE MATTER INCL UDING THE FACTS, MATERIALS AND EVIDENCE PLACED BEFORE THE TRIBUNAL OR ADJUDICATION. WE DO N OT FIND ANY REASON TO INTERFERE WITH THE ORDER SO PASSED BY THE LEARNED TRIBUNAL NOR THE ORD ER SO PASSED BY HE LEARNED TRIBUNAL SUFFERS FROM ANY LEGAL INFIRMITY NOR WE FIND ANY SU BSTANTIAL QUESTION OF LAW IS INVOLVED IN THE APPEAL. 6.4 DECISION: THE FACTS OF THE CASE AND THE ISSUE INVOLVED IN TH E PRESENT CASE IS SIMILAR TO FACTS OF THE CASES DECIDED BY THE JURISDICTIONAL KOLKATA TRIBUN AL AND HIGH COURT. I FIND IN THE LATER YEARS (A.Y. 2001-02) IN THE APPELLANTS OWN CASE M Y PREDECESSOR FOLLOWING THE JURISDICTIONAL ITAT DECISIONS [RASOI LTD., MENDINE PHARM. LTD. (SUPRA)} HELD THE WBIPA AS CAPITAL RECEIPT. I AM ALSO OF THE VIEW TH AT THE SOLE PURPOSE BEHIND THE GRANT OF ASSISTANCE IS TO TIDE OVER THE FINANCIAL CRISIS AND PROMOTION OF INDUSTRIES AND THAT BOTH THESE ACTIVITIES ARE RELATED TO CAPITAL FIELD AND CANNOT BE LINKED UP WITH DAY TO DAY OPERATIONS OF THE APPELLANT IN ANY MANNER. RESPECT FULLY FOLLOWING THE JURISDICTIONAL KOLKATA ITAT AND HIGH COURT DECISIONS DISCUSSED EA RLIER I TREAT WBIPA AS A CAPITAL RECEIPT AND DIRECT THE A.O TO DELETE THE ADDITION OF RS.23,12,430/-. THIS GROUND OF APPEAL OF THE REVENUE FOR ALL THE TH REE ASSESSMENT YEARS ARE DISMISSED. WE ALSO FIND THAT THIS DECISION OF THE TRIBUNAL HAS BEEN DULY APPROVED BY THE HONBLE CALCUTTA HIGH COURT IN G.A. NO. 2042 OF 2011 ITAT NO. 201 OF 2011 DATED 21.7.2011 IN THE VERY SAME CASE. 8.6. WITH REGARD TO THE CLAIMS MADE IN THE REVISED RETURN, WE FIND THAT THE LEARNED CITA HAD NOT CONSIDERED THE SAME IN VIEW OF THE FAC T THAT THE REVISED RETURN WAS FILED BY THE ASSESSEE BEYOND THE PRESCRIBED PERIOD U/S 13 9(5) OF THE ACT. THE LEARNED CITA HAD APPLIED THE DECISION OF GOETZE INDIA LTD SUPRA AND ACCORDINGLY REJECTED THE CLAIM OF THE ASSESSEE. BUT WE FIND FROM THE LAST PARAGRAPH OF THE DECISION OF GOETZE INDIA LTD , SUPRA, WHEREIN THE HONBLE APEX COURT OBSERVED THAT REVISED RETURN THOUGH FILED BELATEDLY COULD BE CONSIDERED BY THE APPELLATE AUTH ORITY AND HENCE WE HOLD THAT THE ASSESSEE IS ENTITLED TO MAKE ITS CLAIM BY WAY OF RE VISED RETURN. 8.7. WITH REGARD TO THE ISSUE OF CLAIM OF ADDITION AL DEPRECIATION, WE FIND THAT THE LOWER AUTHORITIES HAD CLEARLY MISUNDERSTOOD THE SCHEME OF THE ACT AND THE PURPOSE OF GIVING THE BENEFIT OF ADDITIONAL DEPRECIATION TO THE ASSES SEE. THE PROVISIONS OF SECTION 32(1) (IIA) ARE REPRODUCED HEREUNDER FOR THE SAKE OF CONV ENIENCE:- 13 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 32. (1) IN RESPECT OF DEPRECIATION OF ( IIA ) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31ST DAY OF MARCH, 2005, BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING 34 [ OR IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTION ] OF POWER, A FURTHER SUM EQUAL TO TWENTY PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE ( II ) : 35 [ PROVIDED THAT WHERE AN ASSESSEE, SETS UP AN UNDERTAKING OR E NTERPRISE FOR MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING, ON OR AFTER THE 1ST DAY OF APRIL, 2015 IN ANY BACKWARD AREA NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF, IN THE STATE OF ANDHRA PRADESH OR IN THE STATE OF BIHAR OR IN THE STATE OF TELANGANA OR IN THE STATE OF WEST BENGAL, AND ACQUIRES AND INSTALLS ANY NEW MACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT) FOR THE PURPOSES OF THE SAID UNDERTAKING OR ENTERPRISE DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 2015 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2020 IN THE SAID BACKWARD AREA, THEN, THE PROVISIONS OF CLAUSE ( IIA )SHALL HAVE EFFECT, AS IF FOR THE WORDS 'TWENTY PER CENT', THE WORDS 'THIRTY-FIVE PER CENT' HAD BEEN SUBSTITUTED : ] PROVIDED 36 [ FURTHER ] THAT NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF ( A ) ANY MACHINERY OR PLANT WHICH, BEFORE ITS INSTALLA TION BY THE ASSESSEE, WAS USED EITHER WITHIN OR OUTSIDE INDIA BY ANY OTHER PERSON; OR ( B ) ANY MACHINERY OR PLANT INSTALLED IN ANY OFFICE PR EMISES OR ANY RESIDENTIAL ACCOMMODATION, INCLUDING ACCOMMODATION IN THE NATUR E OF A GUEST-HOUSE; OR ( C ) ANY OFFICE APPLIANCES OR ROAD TRANSPORT VEHICLES; OR ( D ) ANY MACHINERY OR PLANT, THE WHOLE OF THE ACTUAL C OST OF WHICH IS ALLOWED AS A DEDUCTION (WHETHER BY WAY OF DEPRECIATION OR OTHERW ISE) IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUS INESS OR PROFESSION' OF ANY ONE PREVIOUS YEAR; FROM THE BARE READING OF THE SAME, IT COULD BE UNDE RSTOOD THAT THE ADDITIONAL DEPRECIATION IS NOTHING BUT AN EXTRA DEDUCTION ELIG IBLE TO AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICL E OR THING. THIS IS QUITE EVIDENT FROM THE WORDS A FURTHER SUM EQUAL TO 20% OF ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (I I) (EMPHASIS SUPPLIED). WHILE THIS IS SO, WHEN THERE IS A MANDATE ON THE LEARNED AO TO GRANT DEPRECIATION TO THE ASSESSEE WHETHER OR NOT SUCH CLAIM IS MADE BY THE A SSESSEE IN THE RETURN IN TERMS OF EXPLANATION 5, IT WOULD BE JUST AND FAIR THAT THE S AME MANDATE WOULD GET AUTOMATICALLY EXTENDED TO THE CLAIM OF ADDITIONAL DEPRECIATION AL SO. THE PROVISIONS OF SECTION 32(1)(II) SPEAKS ABOUT BLOCK OF ASSETS. THE ADDIT IONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT ONLY ENABLES FURTHER DEPRECIATION OF 20% OF ACT UAL COST OF PLANT AND MACHINERY UNDER CLAUSE (II). 14 ITA NOS.1672 & 1646/K/2014 BHAGWATI SPONGE PVT. LTD. AY 2007-08 8.8. KEEPING IN VIEW THE OBJECTS OF THE WEST BENGA L INCENTIVE SCHEME 2000 AND VARIOUS JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE , WE HOLD THAT THE CAPITAL SUBSIDY OF RS. 1,09,73,000/- IS TO BE TREATED AS CAPITAL RECEI PT. CONSEQUENTIALLY THE ASSESSEE NEED NOT REDUCE THE SAME FROM THE COST OF THE ASSET FOR THE PURPOSE OF CLAIMING DEPRECIATION. WE HOLD ACCORDINGLY. SIMILARLY, WE HOLD THAT THE INTEREST SUBSIDY OF RS. 10,38,005/- AND ELECTRICITY SUBSIDY OF RS. 11,14,841/- SHOULD A LSO BE TREATED AS CAPITAL RECEIPT. WE DIRECT THE LEARNED AO TO GRANT THE ADDITIONAL DEPRE CIATION ON THE ACTUAL COST OF ASSET BEFORE REDUCING SUBSIDY IN TERMS OF SECTION 32(1)(I IA) OF THE ACT. WE HOLD ACCORDINGLY. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 08.07.20 16 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 8 TH JULY, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT BHAGWATI SPONGE PVT. LTD., P.O. JAMURI A, DIST. BURDWAN (WB), PIN-713336 2 RESPONDENT DCIT, CIRCLE-1, ASANSOL. 3 . THE CIT(A), ASANSOL 4. 5. CIT , ASNASOL DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .