Hukumchand Bansilal Kalantri, Latur V. Deputy Commissioner of Income-tax ,

ITA 1922/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8443 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Keywords: Capital asset; Depreciation; Opportunity of being heard; Principle of natural justice
• Section: 143(3); 10

Judgement Text

INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1922/PN/2013 (ASSESSMENT YEAR : 2009-10) HUKUMCHAND BANSILAL KALANTRI, KALANTRI FOOD PRODUCTS, 22D, MARKET YARD, LATUR-413 512 .. APPELLANT PAN NO.ABAPK9456F VS. DCIT, CIRCLE-3, NANDED .. RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI DEPARTMENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 30-10-2014 DATE OF PRONOUNCEMENT : 31-10-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 02-09-2013 OF THE CIT(A), AURANGABAD RE LATING TO ASSESSMENT YEAR 2009-10. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF MANUFACTURING OF DAL AND ALLIED PRODUCTS. HE FILED HIS RETURN OF INCOME ON 30-09-2009 DECLARING TOTAL INCOME OF RS.20,56,760/-. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT THE ASSESSEE HAS RECEIVED SUBSIDY OF RS.18,75,000/- FRO M STATE GOVERNMENT UNDER SPECIAL CAPITAL INCENTIVE- PSI2001 . HE FURTHER NOTICED THAT THE ASSESSEE HAS NOT REDUCED T HE AMOUNT OF THE SAID SUBSIDY FROM THE COST OF THE FIXED ASSE TS AS PER EXPLANATION 10 TO SECTION 43 OF THE ACT. ON BEING QUESTIONED 2 BY THE ASSESSING OFFICER IT WAS SUBMITTED THAT THE SAID SUBSIDY RECEIVED IS AN INCENTIVE FOR ESTABLISHING AN INDUST RY IN BACKWARD AREA AND NOT FOR MEETING ANY PART OF THE A SSET, THOUGH THE SUBSIDY HAS BEEN QUANTIFIED ON THE VALUE OF INV ESTMENT TO BE MADE IN THE FIXED ASSETS AND HENCE THE SUBSIDY C ANNOT BE REDUCED FROM THE COST OF THE ASSETS. HOWEVER, THE AO WAS NOT SATISFIED WITH THE ABOVE EXPLANATION OF THE ASSESSE E AND WORKED OUT THE DISALLOWANCE OF DEPRECIATION OF RS.2 ,44,071/-. 3. BEFORE CIT(A) IT WAS SUBMITTED THAT THE PROVISIO N OF EXPLANATION-10 TO SECTION 43(1) OF THE ACT IS NOT A PPLICABLE AS THE SUBSIDY RECEIVED IS AN INCENTIVE FOR ESTABLISHI NG AN INDUSTRY IN BACKWARD AREA AND NOT FOR MEETING COST OF ANY PA RT OF THE ASSET, THOUGH THE SUBSIDY HAS BEEN QUANTIFIED ON TH E VALUE OF INVESTMENT TO BE MADE IN THE FIXED ASSETS AND HENCE THE SUBSIDY CANNOT BE REDUCED FROM THE COST OF THE ASSE TS. IN SUPPORT OF THE ABOVE CONTENTION THE ASSESSEE RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS. P.J. CHEMICALS LTD. (1994) 210 ITR 830. THE ASSESSEE ALS O RELIED ON THE DECISION OF THE VISAKHAPATNAM BENCH OF THE TRIB UNAL IN THE CASE OF SASISRI EXTRACTIONS LTD. VS. ACIT (2008) 30 7 ITR 127. 4. HOWEVER, THE LD.CIT(A) WAS ALSO NOT SATISFIED WI TH THE EXPLANATION GIVEN BY THE ASSESSEE. HE OBSERVED THA T EXPLANATION 10 TO SECTION 43(1) WAS INTRODUCED W.E. F. A.Y. 2009-10 AND THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF PJ CHEMICALS LTD., (SUPRA) WAS DELIVERED MU CH PRIOR TO THE INTRODUCTION OF EXPLANATION 10 TO SECTION 43(1) IN THE STATUTE. HE NOTED THAT THE ASSESSEE HAS RECEIVED S UBSIDY FROM THE STATE GOVERNMENT UNDER CAPITAL INCENTIVE SCHEME ON THE BASIS OF COST OF CAPITAL ASSETS ACQUIRED BY THE ASS ESSEE. 3 THEREFORE, THE SUBSIDY IS CERTAINLY RELATABLE TO TH E COST OF ASSETS AND CERTAINLY REDUCED THE COST OF ASSETS INC URRED BY THE ASSESSEE. THEREFORE, IN VIEW OF THE PROVISIONS OF EXPLANATION 10 TO SECTION 43, THE ASSESSEE SHOULD HAVE DEDUCTED THE PROPORTIONATE SUBSIDY FROM THE COST OF ASSETS FOR A RRIVING AT ALLOWABLE DEPRECIATION. RELYING ON VARIOUS DECISIO NS INCLUDING THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN T HE CASE OF ALFA LAVAL INDIA LTD., VS. DCIT REPORTED IN 117 TTJ 902 AND IN THE CASE OF RUCHA ENGINEERING VIDE ITA NO.667/PN/20 06 AND ITA NO.1338/PN/2007 ORDER DATED 19-01-2011 AND THE DECISIONS OF THE HONBLE PUNJAB & HARYANA HIGH COUR T IN THE CASE OF CIT VS. JANATA STEEL TUBES PVT. LTD., REPOR TED IN 179 ITR 536 AND CIT VS. JINDAL BROTHERS RICE MILLS REPO RTED IN 179 ITR 470 HE UPHELD THE ACTION OF THE ASSESSING OFFIC ER. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE LEARNED CIT(A), AURANGABAD HAS ERRED IN CONFIRMING THE ORDER UNDER SECTION 143(3) PASSED BY THE ASSESSING OFFICER IN WHICH HE REDUCED THE ALLOWANCE OF DEPRECIATION CLAIMED BY THE APPELLANT BY RS 2,44,07 8/ - BY REDUCING FROM THE OPENING WDVS OF VARIOUS ASSETS TH E AMOUNT OF GOVERNMENT SUBSIDY OF RS18,75,000/- WHICH WAS RECEIVED BY THE APPELLANT IN THE PREVIOUS YEAR RELA TING TO A Y 2009-10 FOR ARRIVING AT THE WDVS FOR COMPUTATION OF DEPRECIATION. (2) THE LEARNED CIT(A) HAS NOT APPRECIATED THAT SUP REME COURT DECISION IN THE CASE OF THE P J CHEMICALS LTD 210 ITR 830 IS APPLICABLE IN THE APPELLANT'S CASE AND THE S UBSIDY RECEIVED WAS NOT LIABLE TO BE DEDUCTED WHILE ARRIVI NG AT THE WDVS OF THE DEPRECIABLE ASSETS CONSIDERING THE NATU RE OF THE SAME AND ALSO HE HAS NOT APPRECIATED THE FACT T HAT THE NATURE OF THE SUBSIDY IN QUESTION IS NOT OF THAT CONTEMPLATED BY THE SECTION 43(1) AND THE EXPLANATI ON 10 TO THAT SECTION WAS NOT APPLICABLE IN CASE OF THE A PPELLANT CONSIDERING THE NATURE OF THE SUBSIDY. (3) ANY OTHER GROUND/S THAT MAY BE TAKEN UP ON OR B EFORE THE HEARING OF THIS APPEAL. 4 6. AFTER HEARING BOTH THE SIDES WE FIND AN IDENTICA L ISSUE HAD COME UP BEFORE THE TRIBUNAL IN THE CASE OF KAVI TA AGRO INDUSTRIES VIDE ITA NO.1999/PN/2013 ORDER DATED 31- 01-2014 FOR A.Y.2008-09. WE FIND THE TRIBUNAL RESTORED THE ISSUE TO THE FILE OF THE LD.CIT(A) BY OBSERVING AS UNDER : 3. WE HAVE HEARD THE PARTIES. THE LD. COUNSEL PLA CED HIS HEAVY RELIANCE ON THE CBDT CIRCULAR NO. 772 DATED 2 3-12- 1998, (1999) 235 ITR (ST) 35 IN SUPPORT OF HIS ARGU MENT THAT SO FAR AS EXPLANATION 10 WHICH HAS BEEN INSERTED BY FINANCE (NO. 2) ACT, 1998 W.E.F. 01-04-1999, IS NOT APPLICA BLE TO THE CASES WHERE THE SUBSIDY IS GIVEN NOT FOR ACQUIRING THE SPECIFIC ASSETS BUT AS AN INCENTIVE FOR SETTING UP INDUSTRIE S IN BACKWARD AREAS. THE LD. COUNSEL PLACED HIS HEAVY R ELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF P.J. CHEMICALS LTD. (SUPRA) AS WELL AS THE FOLLOWIN G DECISIONS: I. MUNJAL AUTO INDUSTRIES LTD. VS. DY. CIT, CIRCLE- 4(1), 33 TAXMANN.COM 172 (GUJ). II. SASISRI EXTRACTIONS LTD. VS. ASSTT. CIT 122 ITD 428 (VIZAG) 4. PER CONTRA THE LD. DR SUPPORTED THE ORDERS OF TH E AUTHORITIES BELOW. THE ISSUE BEFORE US IS IN RESPE CT OF THE TREATMENT OF THE SUBSIDY RECEIVED BY THE ASSESSEE F ROM THE GOVERNMENT. THE DECISION OF THE P.J. CHEMICAL LTD. (SUPRA) IS PRIOR TO THE AMENDMENT TO SEC. 43(1) MORE PARTICULA RLY INSERTION OF EXPLANATION 10 BELOW SEC. 43(1). IN F ACT, THE SAID EXPLANATION WAS INSERTED TO NULLIFY THE RATIO TO SO ME EXTEND LAID DOWN IN THE CASE OF P.J. CHEMICALS LTD. (SUPRA ). 5. IN THE CASE OF SASISRI EXTRACTIONS LTD. (SUPRA) IS CONCERNED, THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS.20,00,000/- AS INVESTMENT SUBSIDY UNDER A SCHEME FLOATED BY ANDHRA PRADESH STATE GOVERNMENT KNOWN AS TARGET 2000. IT WAS CONTENDED THAT THE SUBSIDY WAS GIVEN TO THE UNIT BECAUSE OF THE FACT THAT IT HAS ESTABLISHED AN ELIGIBLE INDUSTRIAL UNIT IN THE NOTIFIED AREA AND THUS THE R ECEIPT WAS CAPITAL IN NATURE AND NOT TAXABLE. IT WAS ALSO CON TENDED BY THE ASSESSEE THAT THE SUBSIDY WAS NOT GIVEN TO ACQU IRE ANY ASSET EITHER DIRECTLY OR INDIRECTLY HENCE, THE AMOU NT OF SUBSIDY SHOULD NOT BE REDUCED FROM THE COST OF ANY ASSET. THE TRIBUNAL EXAMINED THE G.O. ISSUED BY THE ANDHRA PRADESH STATE GOVERNMENT AND HELD THAT THE SAID SUBSIDY WAS NOT GIVEN FOR ACQUIRING ANY SPECIFIC ASSET. IN THE PRE SENT CASE, WE FIND THAT BOTH THE AUTHORITIES BELOW HAVE NOT AT ALL EXAMINED THE SCHEME UNDER WHICH THE ASSESSEE HAS RE CEIVED THE SUBSIDY. AS PER THE FACTS ON RECORD IT IS SEEN THAT THE ASSESSEE RECEIVED SUBSIDY FROM THE STATE GOVERNMENT IN THE PREVIOUS YEAR RELATING TO THE A.Y. 2006-07. IN THI S CASE ALSO IT IS CONTENDED BY THE ASSESSEE THAT THE SUBSIDY IS GRANTED TO THE PROMOTERS AS A CONTRIBUTION AND IS GRANTED IN L IEU OF INDUSTRIES IN THE BACKWARD AREA AND SAME IS NOT REC EIVED TO MEET, DIRECTLY OR INDIRECTLY, THE COST OF ANY ASSET AND 5 THEREFORE THE AMOUNT OF SUBSIDY IS NOT TO BE DEDUCT ED WHILE ARRIVING AT WDVS TO THE ASSETS. BEFORE US ALSO THE ASSESSEE HAS NOT FILED THE RELEVANT SCHEME OR ANY OTHER DOCU MENTS TO ESTABLISH THE NATURE OF THE SUBSIDY. THE NATURE OF SUBSIDY CAN BE DECIDE ONLY AFTER EXAMINING THE RESPECTIVE S CHEME UNDER WHICH THE ASSESSEE HAS BEEN GRANTED SUBSIDY. WE, THEREFORE, CONSIDER IT FIT TO RESTORE THIS ISSUE BA CK TO THE FILE OF THE CIT(A) FOR FRESH CONSIDERATION AND ADJUDICATION . THE CIT(A) IS DIRECTED TO REEXAMINE THE SCHEME UNDER WH ICH THE ASSESSEE HAS BEEN GRANTED THE SUBSIDY WHETHER THE S AME IS GRANTED FOR MEETING THE COST OF ASSETS AND ACCORDIN GLY DECIDE THE ISSUE. NEEDLESS TO SAY THE CIT(A) IS DIRECTED TO GIVE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AS PER P RINCIPLES OF NATURAL JUSTICE. 6.1 RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL, WE RESTORE THE ISSUE TO THE FILE OF THE CIT(A) WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DIRECTI ON OF THE TRIBUNAL CITED (SUPRA) AND IN ACCORDANCE WITH LAW A FTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSE SSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 31-10-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 31 ST OCTOBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A), AURANGABAD 4. CIT, AURANGABAD 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, ITAT, PUNE BENCHES, PUNE