M/s Agro Plast, Tiptur V. ITO, Tiptur

ITA 198/BANG/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5249 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-05-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 22-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANOJ D PUKALE
• Keywords: Depreciation

Judgement Text

ITA.198 & 199/B/2010 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALORE BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT AND SHRI. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A NO.198 & 199/BANG/2010 (ASSESSMENT YEARS : 2000-01 & 2001-02) M/S. AGRO PLAST, S. K. P. T. ROAD, TIPTUR .. APPELLANT V. INCOME-TAX OFFICER, WARD - 1, TIPTUR .. RESPONDENT APPELLANT BY : SHRI. MANOJ D. PUKALE, ADVOCATE RESPONDENT BY : SHRI. D. R. JANARDHAN, ADDL. COMMI SSIONER OF INCOME-TAX O R D E R PER DR. O. K. NARAYANAN, VICE PRESIDENT : THESE TWO APPEALS ARE DIRECTED AGAINST THE COMMON O RDER OF THE COMMISSIONER OF INCOME-TAX(A)-II AT BANGALORE, DATE D 27.11.2009 AND ARISE OUT OF THE ASSESSMENTS COMPLETED U/S.143( 3) R.W.S.147 OF THE IT ACT, 1961. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURE AND SALE OF DRIP-IRRIGATION SYSTEMS. THE MANUFACTURING UNIT OF THE ASSESSEE WAS ESTABLISHED IN A NOTIFIED BACKWARD DISTRICT IN THE STATE OF KARNATAKA. ITA.198 & 199/B/2010 PAGE - 2 AS THE UNIT SET UP BY THE ASSESSEE HAS SATISFIED AL L THE PRESCRIBED CONDITIONS, THE GOVERNMENT OF KARNATAKA HAS DISBURS ED INVESTMENT SUBSIDY TO THE ASSESSEE. THE ASSESSEE TREATED THE INVESTMENT SUBSIDY RECEIVED FROM THE GOVERNMENT OF KARNATAKA AS CAPITA L RECEIPT NOT CALLING FOR ANY TAX TREATMENT. BUT THE ASSESSING O FFICER HELD THAT THE SUBSIDIES WERE RELEASED BY THE STATE GOVERNMENT AGA INST SPECIFIC INVESTMENTS MADE BY THE ASSESSEE AND, THEREFORE, TH E COST OF THE ASSETS MUST BE REDUCED BY THE AMOUNTS OF SUBSIDY RECEIVED AND ACCORDINGLY, THE ASSESSEE WOULD BE ENTITLED FOR DEPRECIATION ON SUCH REDUCED COST OF ASSETS ACQUIRED FOR THE PURPOSE OF THE NEW INVESTME NT UNIT. ACCORDINGLY, THE ASSESSING OFFICER REDUCED THE COST OF ASSETS BY THE AMOUNT OF CAPITAL SUBSIDIES RECEIVED BY THE ASSESSE E AND GRANTED DEPRECIATION ALLOWANCE ON THE REDUCED COST. THIS P OSITION WAS CONFIRMED IN FIRST APPEALS AND, THEREFORE, THE SECO ND APPEALS BEFORE THE TRIBUNAL. 3. WE CONSIDERED THE MATTER IN DETAIL. A SIMILAR I SSUE WAS CONSIDERED BY ITAT, PANAJI BENCH IN THE CASE OF M/S .JAYASHREE CONSTRUCTION CO., V. ACIT IN ITA NO.214/PNJ/07, DAT ED 22.12.2008, FOR THE ASSESSMENT YEAR2003-04. THE SAID INDUSTRIA L UNIT ALSO SITUATED IN THE STATE OF KARNATAKA AND RECEIVED INDUSTRIAL S UBSIDY FROM THE STATE GOVERNMENT JUST LIKE IN THE CASE OF THE ASSES SEE BEFORE US. THE ITA.198 & 199/B/2010 PAGE - 3 TERMS AND CONDITIONS OF THE SUBSIDIES DISBURSED BY THE STATE GOVERNMENT IN THE CASE OF M/S. JAYASHREE CONSTRUCTI ON CO., WERE EXACTLY THE SAME BASED ON WHICH, SUBSIDIES HAVE BEE N DISBURSED TO THE ASSESSEE BEFORE US. 4. THE TRIBUNAL IN THE SAID CASE RELYING ON THE JUD GEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER O F INCOME-TAX V. P. J. CHEMICALS (230 ITR 830, HELD THAT THE SUBSIDI ES WERE NOT RELEASED BY THE GOVERNMENT OF KARNATAKA TO MEET ANY PORTION OF THE ACTUAL COST OF ANY ASSET, BUT ON THE OTHER HAND, TH E SUBSIDIES WERE DISBURSED AS AN INCENTIVE TO THE ENTREPRENEURS, TO SET UP INDUSTRIES IN NOTIFIED BACKWARD AREAS. THE TRIBUNAL ACCORDINGLY HELD THAT THE SUBSIDIES NEED NOT BE REDUCED FROM COST OF ASSETS F OR THE PURPOSE OF COMPUTING THE QUANTUM OF DEPRECIATION ALLOWANCE. 5. WE FIND THAT THE SAID ORDER OF THE TRIBUNAL IS E QUALLY APPLICABLE TO THE PRESENT CASE AS WELL. THE ASSESSEE HAS PLAC ED A COPY OF THE SUBSIDY SANCTION ORDER DATED 5.2.1998 BEFORE US AT THE TIME OF HEARING. EVEN THOUGH THE ELIGIBLE AMOUNT OF SUBSIDY AT 25% I S COMPUTED ON THE BASIS OF THE TOTAL INVESTMENTS MADE BY THE ASSESSEE , THE SUBSIDY WAS REALLY MEANT FOR ENCOURAGING ENTREPRENEURS IN ESTAB LISHING INDUSTRIAL UNITS IN NOTIFIED BACKWARD AREAS OF THE STATE. IT IS ONLY FOR THE PURPOSE ITA.198 & 199/B/2010 PAGE - 4 OF COMPUTING THE ELIGIBLE AMOUNT OF INDUSTRIAL SUBS IDY THAT THE TOTAL INVESTMENTS MADE BY THE ASSESSEE ARE TAKEN INTO CON SIDERATION. THIS IS ONLY A MODE OF COMPUTATION. THIS IS NOT THE PURPOS E. THE REAL PURPOSE OF THE SUBSIDY IS IN THE NATURE OF INCENTI VE TO ESTABLISH THE INDUSTRIES. AS ALREADY STATED, THEREFORE, IN THE L IGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF P. J. CHEM ICALS (210 ITR 830), WE FIND THAT THE CLAIM OF THE ASSESSEE IS LEG ITIMATE AND THERE IS NO NEED TO DEDUCT THE SUBSIDY AMOUNT FROM THE COST OF THE ASSETS ACQUIRED BY THE ASSESSEE. ACCORDINGLY, THE ASSESSE E IS ENTITLED FOR DEPRECIATION ALLOWANCE ON THE GROSS AMOUNT OF THE C OST OF ACQUISITION OF ASSETS. THE ASSESSING AUTHORITY IS, THEREFORE, DIRECTED TO RECOMPUTE DEPRECIATION ALLOWANCE IN FAVOUR OF THE ASSESSEE. 5. IN RESULT, THESE TWO APPEALS FILED BY THE ASSESS EE ARE ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 31ST DAY OF MAY, 20 10 AT BANGALORE. SD/- SD/- (P. MADHAVI DEVI) (DR. O. K. NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, NEW DELHI 7. GF, ITAT, BANGALORE