Rohit Exhaust Systems Pvt. Ltd., Aurangabad V. Assistant Commissioner of Income-tax,

ITA 1880/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89083 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 18-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation; Capital receipt
• Section: 143(3); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1880/PN/2013 ASSESSMENT YEAR: 2008-09 ROHIT EXHAUST SYSTEMS PVT. LTD., K 245, MIDC, WALUJ, AURANGABAD. . APPELLANT PAN: AABC7135D VS. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE 1, AURANGABAD. . RESPONDENT APPELLANT BY : SHRI S.N. PURANIK RESPONDENT BY : SHRI ACHAL SHARMA DATE OF HEARING : 09-02-2015 DATE OF PRONOUNCEMENT : 31-03-2015 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A), AURANGABAD DATED 13.09.2013 RELATING TO ASSESSMENT YEAR 2008-09 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE COMMISSIONER (APPEALS) HAS ERRED IN HOLDING THAT CAPITAL INCENTIVE SUBSIDY RECEIVED FOR ESTABLISHING INDUSTR Y IN BACKWARD AREA IS TO BE REDUCED FROM ACTUAL COST OF ASSET APPELLANT PRAYS TO HOLD THAT CAPITAL SUBSIDY, IS N OT TO BE REDUCED FROM ACTUAL COST 2. THE COMMISSIONER (APPEALS) HAS ERRED IN NOT FOLL OWING JURISDICTIONAL PUNE ITAT DECISION IN CASE OF BALAP RASAD AGARWAL REFERRED TO HIM. 3. APPELLANT PRAYS TO ADD, ALTER, AMEND, MODIFY AND / OR WITHDRAWN THE GROUNDS AS AND WHEN NECESSARY. ITA NO.1880/PN/2013 ROHIT EXHAUST SYSTEMS PVT. LTD 2 3. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE WAS ENGAGED IN THE BUSINESS OF MANUFACTURER OF PRESSPARTS & FABRICATED ASSEMBLIES & PAINTING VARIOUS PRESSPARTS AND FABRICATED ITEMS. DURING TH E YEAR UNDER CONSIDERATION, THE ASSESSEE HAD RECEIVED RS.15 LAKHS SPECIAL CAPIT AL INCENTIVE SUBSIDY UNDER THE PACKAGE SCHEME OF INCENTIVE, 1993 WHICH H AS BEEN CLAIMED AS CAPITAL RECEIPT BY THE ASSESSEE. UNDER THE SCHEME, GOVERNMENT OF MAHARASHTRA HAD PROPOSED THAT WHERE THE INDUSTRIES ARE SHIFTED OUTSIDE BOMBAY-THANE-PUNE BELTS, SPECIAL CAPITAL INCENTIVE IN THE FORM OF ADDITIONAL SALES TAX INCENTIVE, INSTEAD OF CASH GRANT WAS OFFE RED. THE ELIGIBLE SSI UNIT WAS ENTITLED TO DRAW THE INCENTIVE AFTER COMPLETION OF ALL INITIAL AND FINAL STEPS AND THE SAME WAS TO BE COMPUTED ON THE BASIS OF FIX ED CAPITAL INVESTMENT ACTUALLY MADE BY THE ELIGIBLE SSI UNIT. THE ASSESS ING OFFICER WAS OF THE VIEW THAT THE SUBSIDIES WERE CAPITAL OR REVENUE IN NATUR E IS TO BE DECIDED FROM THE NATURE OF SUBSIDIES. MERELY BECAUSE SUBSIDIES HAVE BEEN GRANTED FOR ENCOURAGING THE SETTING UP OF INDUSTRIES IN A PARTI CULAR AREA OF THE STATE, DOES NOT ESTABLISH THAT IT IS CAPITAL IN NATURE. FURTHE R, UNDER THE SCHEME, THE UNITS WERE ELIGIBLE TO DRAW THE SPECIAL CAPITAL INCENTIVE AT A CERTAIN PERCENTAGE OF THE FIXED CAPITAL INVESTMENT AFTER THE COMPLETION O F ALL STEPS NECESSARY FOR SETTING UP OF UNIT AND EVEN BEFORE THE COMMENCEMENT OF PRODUCTION ESTABLISHED THAT THE SAID SUBSIDY IS IN THE NATURE OF REVENUE RECEIPT. THE ASSESSING OFFICER PLACED RELIANCE ON VARIOUS DECISI ONS OF THE HONBLE SUPREME COURT AND HONBLE HIGH COURTS. THE SECOND ISSUE CONSIDERED BY THE ASSESSING OFFICER WAS THE APPLICABILITY OF SECTION 41(1) OF THE ACT AND IT WAS HELD THAT SINCE THE ASSESSEE HAD CLAIMED DEPRECIATI ON ON THE ASSETS, THE PROVISIONS OF SECTION 41(1) OF THE ACT WERE APPLICA BLE AND THE SAME WAS ADDED AS INCOME OF THE ASSESSEE. ANOTHER ASPECT CO NSIDERED BY THE ASSESSING OFFICER WAS THE EXPLANATION 10 TO SECTION 43(1) OF THE ACT AND IT WAS HELD THAT THE SAID PROVISIONS OF THE ACT WERE A PPLICABLE AND THE VALUE OF FIXED ASSETS SHOULD BE REDUCED BY THE QUANTUM OF SP ECIAL CAPITAL INCENTIVE ITA NO.1880/PN/2013 ROHIT EXHAUST SYSTEMS PVT. LTD 3 RECEIVED DURING THE YEAR. HOWEVER, SINCE THE SAID AMOUNT WAS TREATED AS INCOME UNDER SECTION 41(1) OF THE ACT ON PROTECTIVE BASIS, THE PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT WERE HEL D TO BE APPLICABLE TO THE FACTS OF THE CASE. 4. THE CIT(A) HELD THAT THE SPECIAL CAPITAL INCENTI VE RECEIVED UNDER PACKAGE INCENTIVE SCHEME OF GOVERNMENT OF MAHARASHT RA FOR ESTABLISHING INDUSTRY IN BACKWARD AREA OF AURANGABAD, AS REVENUE RECEIPT, COULD NOT BE ACCEPTED, IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS. RELIANCE INDUSTRIES LTD. (2011) 339 ITR 632 (BOM). THE FIRST CONTENTION OF THE ASSESSING OFFICER WAS THUS REJECTED BY THE CIT(A). THE SECOND CONTENTION OF THE ASSESSING OFFICER THAT THE SAID INVESTMENT WAS TO BE ADDED AS INCOME UNDER SECTION 41(1) OF THE ACT, AS DEPRECIATION WAS AN ITEM OF EXPENDITURE CLAIMED BY THE ASSESSEE, IN RESPECT OF ASSETS ON WH ICH SUBSIDY HAD BEEN RECEIVED, WAS ALSO REJECTED BY THE CIT(A), IN VIEW OF THE RATIO LAID DOWN BY HONBLE SUPREME COURT IN NECTOR BEVERAGES (P) LTD. VS. DCIT 314 ITR 314 (SC). HOWEVER, THE THIRD CONTENTION OF THE ASSESSI NG OFFICER THAT EXPLANATION 10 TO SECTION 43(1) OF THE ACT WAS APPLICABLE AND T HE CAPITAL INCENTIVE RECEIVED HAD TO BE REDUCED FROM THE COST OF THE ASSETS, WAS APPLIED, IN VIEW OF THE EXPLANATION 10 INSERTED TO SECTION 43(1) OF THE ACT W.E.F. ASSESSMENT YEAR 1999-2000. RELIANCE IN THIS REGARD WAS PLACED ON T HE FOLLOWING DECISIONS:- I) ALFA LAVAL INDIA LTD. VS. DCIT (2008) 117 TTJ 90 2 (PUNE) II) CIT VS. JANAK STEEL TUBES (P) LTD., 179 ITR 536 (P&H) III) CIT VS. JINAL BROS. RICE MILLS, 179 ITR 470 (P &H) 5. THE ASSESSING OFFICER WAS THEREFORE, DIRECTED TO REDUCE THE COST OF ASSETS IN RESPECT OF WHICH THE SUBSIDY HAD BEEN REC EIVED AND ALLOW THE DEPRECIATION ON THE REDUCED COST OF ASSETS. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF C IT(A). ITA NO.1880/PN/2013 ROHIT EXHAUST SYSTEMS PVT. LTD 4 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE AS SESSEE POINTED OUT THAT THE SPECIAL CAPITAL INCENTIVE RECEIVED AS PER THE MAHARASHTRA PACKAGE INCENTIVE SCHEME WAS ESTABLISHING UNITS IN BACKWARD AREAS OF STATE AND NOT FOR ACQUIRING CAPITAL ASSETS AND ONLY MODE OF COMPU TATION OF SUBSIDY WAS CERTAIN PERCENTAGE OF INVESTMENT IN CAPITAL ASSETS SUBJECT TO CEILING LIMIT. THE PLEA OF THE LEARNED AUTHORIZED REPRESENTATIVE FOR T HE ASSESSEE WAS THAT THE SUBSIDY WAS BY WAY OF CAPITAL CONTRIBUTION FOR ESTA BLISHING INDUSTRY IN BACKWARD AREA AND WAS A CAPITAL RECEIPT WHICH WOULD NOT REDUCE THE COST OR WDV OF THE ASSET FOR THE PURPOSE OF DEPRECIATION. RELIANCE IN THIS REGARD WAS PLACED ON THE RATIOS LAID DOWN BY KOLKATA BENCH OF THE TRIBUNAL IN DCIT VS. RASOI LTD. (2014) 46 TAXMANN.COM 214 (KOLKATA TRI B) AND BY VISAKHAPATNAM BENCH OF THE TRIBUNAL IN SASISRI EXTR ACTIONS LTD. VS. ACIT (2008) 119 TTJ (VISAKHA) 976. IT WAS FURTHER POINT ED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE RELIANCES PLACED UPON BY THE CIT(A) WERE MIS-PLACED AS THE DECISION IN ALFA LAVAL INDIA LTD. VS. DCIT (SUPRA) WAS IN RELATION TO SUBSIDY RECEIVED FROM NA TIONAL DAIRY DEVELOPMENT BOARD AND NOT FROM GOVERNMENT OF MAHARASHTRA. FURT HER, THE DECISIONS IN CIT VS. JANAK STEEL TUBES (P) LTD. (SUPRA) AND IN CIT V S. JINAL BROS. RICE MILLS (SUPRA) WERE IN RELATION TO THE SCHEME PRIOR TO INS ERTION OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT AND BOTH THE SCHEMES WERE DIFFERENT. OUR ATTENTION WAS DRAWN TO THE PURPOSE OF SCHEME AND ALSO THE SCO PE OF SCHEME AND METHOD OF GIVING SUBSIDY, WHICH WAS NOT TO BE ADJUS TED AGAINST THE COST OF ASSETS. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT AFTER THE INSERTION OF EXPLANATION 10 TO SECTI ON 43(1) OF THE ACT, THE CAPITAL INCENTIVE SUBSIDY RECEIVED IS TO BE REDUCED FROM TH E COST OF ASSETS. FURTHER, RELIANCE WAS PLACED ON THE ORDER OF CIT(A), IN THIS REGARD. ITA NO.1880/PN/2013 ROHIT EXHAUST SYSTEMS PVT. LTD 5 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD RE CEIVED CAPITAL INCENTIVE SUBSIDY UNDER THE PACKAGE INCENTIVE SCHEME, 1993 OF GOVERNMENT OF MAHARASHTRA FOR ESTABLISHING INDUSTRIES IN THE BACK WARD AREA OF AURANGABAD. THE ASSESSEE HAD CLAIMED THE SAID RECEIPT TO BE CAP ITAL IN NATURE AS THE OBJECT OF THE SUBSIDY WAS TO SET UP UNITS IN BACKWARD AREA S. THE SAID PLEA OF THE ASSESSEE HAS BEEN ACCEPTED BY THE CIT(A), IN TURN, RELYING ON THE RATIO LAID DOWN BY HONBLE BOMBAY HIGH COURT IN CIT VS. RELIAN CE INDUSTRIES LTD. (SUPRA), AGAINST WHICH THE REVENUE IS NOT IN APPEAL , HENCE, THE SAID PROPOSITION IS ACCEPTED IN THE HANDS OF THE ASSESSE E. THE SECOND PROPOSITION RAISED BY THE ASSESSING OFFICER THAT THE SAID SUBSI DY IS TO BE ADDED AS INCOME UNDER SECTION 41(1) OF THE ACT, IN VIEW OF THE RATI O LAID DOWN BY HONBLE BOMBAY HIGH COURT IN NECTOR BEVERAGES (P) LTD. VS. DCIT (2004) 267 ITR 385 (BOM) HAS BEEN REVERSED BY THE CIT(A) SINCE THE HONBLE SUPREME COURT HAS REVERSED THE DECISION OF HONBLE BOMBAY HIGH CO URT IN NECTOR BEVERAGES (P) LTD. VS. DCIT (SUPRA). THE REVENUE IS ALSO NOT IN APPEAL AGAINST THE SAID PROPOSITION AND THE SAME STANDS ACCEPTED. THE THIR D PROPOSITION PROPOSED BY THE ASSESSING OFFICER WAS THAT IN THE ALTERNATE EXP LANATION 10 TO SECTION 43(1) OF THE ACT IS APPLICABLE AND THE VALUE OF CAPITAL I NCENTIVE IS TO BE REDUCED FROM THE COST OF ASSETS IN RESPECT OF WHICH THE SAID SUB SIDY HAD BEEN RECEIVED AND THE CIT(A) HAS APPLIED THE SAME. 10. THE PERUSAL OF THE PACKAGE SCHEME OF INCENTIVE, 1993 PLACED AT PAGES 21 TO 44 REFLECT THAT THE PURPOSE OF THE SCHEME WAS TO ESTABLISH INDUSTRIES IN THE UNDERDEVELOPED AREAS OF THE MAHARASHTRA STATE U NDER WHICH THE GOVERNMENT APPOINTED SICOM LTD. TO ACT AS AN AGENT OF THE GOVERNMENT FOR THE IMPLEMENTATION OF THE SCHEME. UNDER THE 1993 S CHEME, THE PROCEDURES WERE FRAMED AND THE ENTREPRENEUR WAS ENTITLED TO SP ECIAL CAPITAL INCENTIVE OF ITA NO.1880/PN/2013 ROHIT EXHAUST SYSTEMS PVT. LTD 6 VARYING PERCENTAGE OF THE GROSS FIXED CAPITAL INVES TMENT, SUBJECT TO CEILING IN RESPECT OF ELIGIBLE UNIT, PROVIDED WHERE THE ENTREP RENEUR DOES NOT OPT FOR AVAILING SALES TAX INCENTIVE UNDER PART-III OF 1993 SCHEME. UNDER THE SAID SCHEME A GRANT OF RS.15 LAKHS WAS DISBURSED TO THE ASSESSEE. 11. WE FIND THAT SIMILAR ISSUE OF TAXABILITY OF THE CAPITAL INCENTIVE RECEIVED UNDER THE PACKAGE SCHEME INCENTIVE, 1993 AROSE BEFO RE THE TRIBUNAL IN ACIT VS. M/S. ENDRESS + HAUSER FLOWTEC (INDIA) PVT. LTD. , IN ITA NO.1206/PN/2011, M/S. ENDRESS + HAUSER FLOWTEC (INDIA) PVT. LTD., VS . ACIT IN ITA NO.1215/PN/2011 AND CROSS OBJECTION, RELATING TO AS SESSMENT YEAR 2007-08 AND M/S. ENDRESS + HAUSER FLOWTEC (INDIA) PVT. LTD. , VS. ACIT IN ITA NO.295/PN/2013, RELATING TO ASSESSMENT YEAR 2008-09 , ORDER DATED 25.02.2015 AND IN LEAD ORDER I.E. ITA NO.1206/PN/20 11, THE TRIBUNAL CONSIDERED THE RATIO LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF EVEREST INDUSTRIES LTD. VS. ACIT VIDE ITA N O.814/MUM/2007 RELATING TO ASSESSMENT YEAR 2003-04 ORDER DATED 04.12.2009, WHEREIN IT WAS HELD AS UNDER:- 10.4 COMING TO THE MERITS OF THE CASE, THE 'G' BEN CH OF THE TRIBUNAL IN THE CASE OF M/S ZENITH FIBRES LTD (SUPRA) HAD CONSI DERED THE INCENTIVE SCHEME OF THE MAHARASHTRA GOVERNMENT OF 1993 AND CA ME TO A CONCLUSION THAT THIS SCHEME IS IDENTICAL TO THE INC ENTIVE SCHEME OF 1979 CONSIDERED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF CIT VS RELIANCE INDUSTRIES LTD 88 ITD 273 (MUM)(SB) AND CO NCLUDED THAT THE RECEIPT IN QUESTION IS CAPITAL RECEIPT. 12. THE TRIBUNAL AFTER CONSIDERING THE SCHEME OF 19 93 OBSERVED AS UNDER:- 33. THE CONTENTION OF THE LEARNED AUTHORISED REPRE SENTATIVE FOR THE ASSESSEE WAS THAT 1993 SCHEME FORMULATED BY THE GOV ERNMENT OF MAHARASHTRA HAS BEEN CONSIDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN EVEREST INDUSTRIES VS. ACIT (SUPRA), WHEREIN IT HAS BEEN HELD THAT THE INCENTIVE RECEIVED UNDER THE SCHEME WAS CAPITAL RECEIPT. IT HAS ALSO BEEN HELD BY THE MUMBAI BENCH OF THE TRIBUNAL THAT THE SCHEME REFERRED TO IN THE CASE OF RELIANCE INDUSTRIES LTD. , I.E. 1979 SCHEME WAS IDENTICAL TO THE 1993 SCHEME. THE HONBLE BOMBAY H IGH COURT IN THE CASE OF CIT VS. RELIANCE INDUSTRIES LTD., (SUPRA) I N THE APPEAL FILED BY REVENUE AGAINST THE ORDER OF SPECIAL BENCH OF MUMBA I TRIBUNAL REPORTED IN (2004) 88 ITD 273 (SB) (MUM) HAVE HELD THAT THE SUBSIDY RECEIVED UNDER THE 1979 SCHEME FOR SETTING UP NEW U NITS IN BACKWARD AREAS WAS A CAPITAL RECEIPT. APPLYING THE SAME RAT IO TO THE FACTS OF THE ITA NO.1880/PN/2013 ROHIT EXHAUST SYSTEMS PVT. LTD 7 PRESENT CASE, WE ARE IN CONFORMITY WITH THE ORDER O F THE CIT(A) IN HOLDING THAT THE GRANT OF RS.30 LAKHS RECEIVED BY T HE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS A CAPITAL RECEIPT AND NOT TAXABLE IN THE HANDS OF THE ASSESSEE. FURTHER, THERE IS NO ME RIT IN INVOKING OF THE PROVISIONS OF EITHER SECTION 41(1) OR SECTION 43(1) (B) OF THE ACT. THUS, GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS DISM ISSED. 13. THE ISSUE BEFORE US IS RESTRICTED TO THE INVOKI NG OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT, UNDER WHICH IT IS PROVIDE D THAT WHERE PORTION OF COST OF ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTL Y OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR THE STATE GOVERNMENT OR ANY A UTHORITY ESTABLISHED UNDER ANY LAW OR BY ANY OTHER PERSON, IN THE FORM O F SUBSIDY OR GRANT OR REIMBURSEMENT, THEN SO MUCH OF THE COST AS IS RELAT ABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT, SHALL NOT BE INCLUDED IN TH E ACTUAL COST OF THE ASSET TO THE ASSESSEE. IT IS FURTHER PROVIDED THEREUNDER TH AT WHERE SUCH SUBSIDY OR GRANT OR REIMBURSEMENT OF SUCH NATURE CANNOT BE DIR ECTLY RELATABLE TO THE ASSET ACQUIRED, SO MUCH OF THE AMOUNT WHICH 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 ASS ET TO THE ASSESSEE. IN OTHER WORDS, IN ORDER TO INVOKE THE PROVISIONS OF EXPLANA TION 10 TO SECTION 43(1) OF THE ACT, IT IS NECESSARY TO ESTABLISH THAT THE SUBS IDY WAS DIRECTLY OR INDIRECTLY UTILIZED FOR MEETING THE COST OR PORTION OF COST OF ASSET ACQUIRED. WHERE IT IS FOUND THAT THE COST FOR ACQUIRING THE ASSET WAS DIR ECTLY OR INDIRECTLY MET OUT OF THE SUBSIDY, THEN THE VALUE OF SUBSIDY IS TO BE RED UCED FROM THE COST OF THE ASSET TO RE-WORK THE DEPRECIATION ON THE SAID ASSET . UNDER THE PROVISO, IT IS ALSO PROVIDED THAT IT IS NECESSARY TO SHOW THAT THE SUBSIDY HAD BEEN DIRECTLY OR INDIRECTLY USED FOR THE ACQUISITION OF AN ASSET. T HE FACTS OF EACH CASE IN THIS REGARD HAVE TO BE SEEN TO DETERMINE WHETHER THE SUB SIDY HAS BEEN GRANTED TO MEET THE COST OF ASSET DIRECTLY OR INDIRECTLY. SIM ILAR PROPOSITION HAS BEEN LAID DOWN BY THE KOLKATA BENCH OF THE TRIBUNAL IN DCIT V S. RASOI LTD. (SUPRA) AND ALSO BY VISAKHAPATNAM BENCH OF THE TRIBUNAL IN SASI SRI EXTRACTIONS LTD. VS. ACIT (SUPRA). IT HAS BEEN FURTHER LAID DOWN BY THE TRIBUNAL IN SASISRI ITA NO.1880/PN/2013 ROHIT EXHAUST SYSTEMS PVT. LTD 8 EXTRACTIONS LTD. VS. ACIT (SUPRA) THAT EVEN AFTER I NSERTION OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT, THE BASIC PRINCIPLE UNDER LYING THE DECISION OF APEX COURT IN CIT VS. P.J. CHEMICALS LTD. (1994) 210 ITR 830 (SC) STILL HOLDS THE FIELD. THE TRIBUNAL HAS HELD AS UNDER:- 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE RECORD. IN OUR CONSIDERED OPINION, EVEN AFTER INSERTION OF EXPLN. 10 TO S. 43(1) OF THE ACT, THE BASIC PRINCIPLE UNDERLY ING IN THE DECISION OF THE APEX COURT IN THE CASE OF PJ. CHEMICALS LTD. (S UPRA) STILL HOLDS 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 TO OFFSET THE COST OF AN A SSET, SUCH PAYMENT/GRANT WOULD FALL WITHIN THE EXPRESSION 'MET ', WHEREAS THE SUBSIDY RECEIVED MERELY TO ACCELERATE THE INDUSTRIA L DEVELOPMENT OF THE STATE CANNOT BE CONSIDERED AS PAYMENTS MADE SPECIFI CALLY TO MEET A PORTION OF THE COST OF THE ASSETS. 11. A CAREFUL PERUSAL OF 'TARGET 2000' SCHEME SHO WS 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 SUBSID Y TO BE GIVEN, COST OF ELIGIBLE INVESTMENT WAS TAKEN AS THE BASIS, THOU GH IT WAS NOT SPECIFICALLY INTENDED TO SUBSIDISE THE COST OF THE CAPITAL. UNDER THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE INCENTIV E 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 FAL LS OUTSIDE THE KEN OF EXPLN. 10 TO S. 43(1) OF THE ACT. IN THE LIGHT OF T HE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT FOR THE PURPOSE OF COMPUTING D EPRECIATION ALLOWABLE TO THE ASSESSEE, THE SUBSIDY AMOUNT CANNOT BE REDUC ED FROM THE COST OF THE CAPITAL ASSET. THE AO IS DIRECTED ACCORDINGL Y. 14. THE PERUSAL OF THE PACKAGE SCHEME OF INCENTIVE, 1993 REFLECT THAT THE SCHEME WAS FORMULATED TO GIVE INCENTIVE FOR SETTING UP THE INDUSTRIES IN CERTAIN BELTS OF MAHARASHTRA AND FOR THE PURPOSE OF WORKING OUT THE AMOUNT OF SUBSIDY, THOUGH THE COST OF ELIGIBLE INVESTMENT WAS TAKEN AS THE BASE, BUT THE SAID SUBSIDY WAS NOT SPECIFICALLY INTENDED TO MEET THE COST OF ASSETS. IN VIEW THEREOF, IT COULD NOT BE HELD THAT THE INCENTIVE RE CEIVED BY THE ASSESSEE UNDER THE PACKAGE SCHEME OF 1993 IN THE FORM OF SUBSIDY W AS COVERED UNDER PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF TH E ACT AND CONSEQUENTLY, THE SUBSIDY AMOUNT WAS NOT TO BE REDUCED FROM THE COST OF THE ASSETS. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED NOT TO REDUCE THE VALUE OF THE ITA NO.1880/PN/2013 ROHIT EXHAUST SYSTEMS PVT. LTD 9 SUBSIDY FROM THE COST OF ASSETS WHILE ALLOWING DEPR ECIATION ON THE SAID ASSETS OF THE ASSESSEE. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF MARCH, 2015. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 31 ST MARCH, 2015. GCVSR COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A), AURANGABAD; 4) THE CIT, AURANGABAD; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE