PURI OIL MILLS LTD., NEW DELHI V. DCIT, CIRCLE- 20(1), NEW DELHI

ITA 1681/DEL/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2204 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 08-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 147; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F” DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.1681 /DEL/2018 Assessment Year 2014-15 Puri Oil Mills Ltd., 302-Jyoti Shikhar, Janak Puri, New Delhi. v. The Asst. Commissioner of Income Tax, New Delhi. TAN/PAN: AAACP3653M (Appellant) (Respondent) Appellant by: Shri S.K. Vatta, CA Respondent by: Shri Toufel Tahir, Sr.D.R. Date of hearing: 21 07 2022 Date of pronouncement: 28 07 2022 O R D E R PER PRADIP KUMAR KEDIA, A.M.: The captioned appeal has been filed at the instance of the Assessee against the order of the Co mmissioner of Inco me Tax (Appeals)-VII , Ne w Delhi [ ‘CI T(A) ’ in short], dated 0 5.01.2018 arising from the assessment order dated 26.12.2016 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2014-15. 2. As per its grounds of appeal, the assessee has challenged the disallowance of depreciation a mounting to Rs.72,90,000/-. 3. When the matter was called for hearing, the ld. counsel submitted that the assessee is engaged in the business of manufacturing of mustard oil, cattle feed, etc. In the course of I.T.A. No.1681/Del/2018 2 assessment procee dings, the Assessing Officer noticed that the assessee was granted subsidy of Rs.4,86,00,000/- claimed to be a capital subsidy and thus capitalized in the balance sheet b y crediting the ‘Ca pital Reserve’ in the earlier financial year relevant to Assess ment Yea rs 2012-13 and 2013-14. The Assessing Officer took a view that such subsidy is required to be reduced fro m cost of Plant & Machinery and consequently the assessee is entitled to depreciation on adjusted actual cost/WDV and thus Assessee has wrongly clai med enhanced depreciation without adjustment of subsidy to the actual costs of assets. Thus, Assessing Officer adjusted the subsidy fro m the cost of the ‘plant and ma chiner y’ to the extent of Rs.4,86,00,000/- in the Assessment Year 2014-15 in question and thereby reduced depreciation allowance thereon @15% which worked out to Rs.72,90,000/-. The assessed inco me was thus enhanced to this extent. 3.1 In this factual backdrop, the ld. counsel submitted that the Revenue Authorities were not justified in making artificial disallowance of depreciation on ‘plant and machinery’ attributable to capital subsidy clai med. It was also quipped that subsidy was not received in this ye ar but were actually r eceived in earlier assessment yea rs. The ld. counsel for the assessee contended that the capital subsidy pertained to hydro power project and was not in the nature of co mpensation for acquisition of capital assets as misconstrued by the lower authorities. The capital subsidy wa s for purpose of setting up the power project duly sanctioned and allowed by Ministry of New and Renewal Energ y, Gove rn ment of India under the I.T.A. No.1681/Del/2018 3 declared policy of encouraging setting up of said power projects in different States for over all development and growth and has no direct nexus with the plant and machiner y. The purpose and object of granting the capital subsidy thereto was to encourage setting up of new SHP in various states under the sche me . The quantum of subsidy was deter mina ble with reference to Mega Watt capacity of the project per se and not to comp ensate the cost in respect of any individual asset. It was contended that as per the settled law, where the govern ment subsidy is not an incentive for a specific purpose for me eting the cost of the assets, it neither partake the character of payment on revenue account nor subsidy c an be characterized to me et the cost of asset and is thus a capital receipt neither chargeable to tax nor deductible from the cost of acquisition of any particular asset acquired for project. It was pointed out that the amended provisions in Finance Act, 2015 on taxability of subsidy in Section 2(24)(xviii) relied upon by Assessing Officer is applicable prospectively fro m 01.04 .2016, i.e., Assessment Year 2016-17 and thus are not relevant or applicable to impugned Assess ment Year 2014-15 in question. 3.2 On being inquired by the Bench, t he ld. counsel pointed out that assessme nts of Assessment Years 2012-13 and 2013-14 duly made under Section 143(3) earlier have been reopened under Section 147 for making suitable adjustments in the cost of assets and to give effect to the receipts of subsidy. Consequently certain additions have been made b y the Assessing Officer flowing from rec eipt of subsidy in Assess ment Year s 2012-13 and 2013-14 in question. It was f urther pointed out that the I.T.A. No.1681/Del/2018 4 appeal against the re-assess ment or der of the Assessing Officer is pending before the First Appellate Authority and h as not been adjudicated so far. 4. In the light of these assertions made on behalf of the assessee, it is noted that the assessee has received certain subsidy for setting up hydro power units as notified by Ministry of Renewal Ener gy. The financial support by wa y of capital subsidy has been received in the earlier Assessment Years 2012- 13 and 2013-14. The issue attributable to receipt of subsidy and its effect on quantum of depreciation eligible to assessee as deter mined by t he Assessing Officer in the re-assessment proceedings is pending for adjudication at the appellate level. We are concerned with the Assess ment Years 2014-15 in question therefore, in our view the right course available in the matter would be to adopt the findings to be rendered by the appellate authorities in the Assessment Years 2012-13 and 2013- 14 which has given genesis to the present dispute. Thus, without expressing any o pinion on merits of nature of subsidy and its ultimate effect or deter mination of quantum of depreciation, we re mit the issue back to the file of the CIT(A) for det er mination afresh in accordance with law and having regard to the deter mination of the point in question made in Assess ment Years 2012-13 and 2013-14. Hence, the CIT(A) shall apply the findings rendered in these assessment yea rs mutatis mutandis and adopt such view taken by the CIT( A) in Assessment Years 2012-13 and 2013-14 and apply t he sa me to the subsequent Assess ment Year 2014-15 in question. I.T.A. No.1681/Del/2018 5 5. The order of the CIT( A) is set aside accordingly and restored back to the file of the CI T(A) in ter ms of directions noted above. 6. In the result the appeal of the assessee is allowed for statistical purposes. Order was pronounced in the open Court on 28/07/2022. Sd/- Sd/- [KUL BHARAT] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: /07/2022 Prabhat