DCIT CIRCLE - 1, THANE, THANE V. KONKAN IRRIGATION DEVELOPMENT CORPORATION, THANE

ITA 2276/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1747 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 28-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Assessee Lawyers: SUDHIR DABIR
• Keywords: Capital asset; Depreciation; Bonafide belief
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI PAWAN SING, JM I.T.A. NO S .2276 & 4891 /MUM/2016 ( ASSESSMENT YEAR S : 2008 - 09 & 2011 - 12 ) DCIT, CIRCLE - 1, ASHAR I. T. PARK, 6 TH FLOOR, B WING, ROOM NO. 22, ROAD NO. 16Z, WAGLE INDUSTRIAL ESTATE, THANE (W) - 400 604 VS. KONKAN IRRIGATION DEVELOPMENT CORPORATION SINCHAN BHAWAN, KOPRI COLONY, THANE (E) - 400 603 PAN/GIR NO. AACCK 2358 L ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI S. PADMAJA RESPONDENT BY : SHRI SUDHIR DABIR DATE OF HEARING : 29.08.2018 DATE OF PRONOUNCEMENT : 07.09 .2018 O R D E R PER S HAMIM YAHYA, A. M.: TH ESE ARE APPEALS BY THE REVENUE DIRECTED AGAINST THE RESPECTIVE O RDER S OF THE LEAR N ED COMMISSIONER OF INCOME TAX (APPEALS) - 1, T HANE (LD.CIT(A) FOR SHORT) DATED 15.01.2016 PERTAIN ING TO THE A SSESSMENT YEAR S (A.Y.) 2008 - 09 AND 2010 - 11, WHEREIN THE LD. CIT(A) HAD DELETED THE PENALTY LEVIED U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT' FOR SHORT) AMOUNTING TO RS.23,03,31,738 / - AND RS.51,01,52,093/ - FOR THE RESPECTIVE YEARS FOR ASSESSEES EXCESS CLAIM OF DEPRECIATION. 2. SINCE THE FACTS ARE IDENTICAL, WE ARE REFERRING TO FACTS AND FIGURES FROM A.Y. 2008 - 09. 3. BRIEF FACTS OF THE CASE ARE AS THAT THE ASSESSEE COMPANY IS A CO RPORATION ESTABLISHED TO PERFORM SOVEREIGN FUNCTIONS OF THE STATE GOVERNMENT THROUGH PROMOTION 2 KONKAN IRRIGATION DEVELOPMENT CORPORATION AND OPERATION OF SOME IRRIGATION PROJECTS IN KONKAN REGION, COMMAND AREA DEVELOPMENT AND SCHEMES FOR GENERATION OF HYDRO ELECTRIC ENERGY TO HARNESS THE WATER OF RIVERS ALLOCATED TO THE STATE OF MAHARASHTRA UNDER THE WATER DISPUTES TRIBUNAL AWARD AND OTHER ALLIED AND INCIDENTAL ACT IVITIES INCLUDING FLOOD CONTROL. 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER (A.O. FOR SHORT) NOTICED THAT THE ASSESSEE COMPANY HAS RECEIVED GRANTS FROM GOVT OF MAHARASHTRA TOWARDS RAISING OF CAPITAL ASSETS IN FORM OF DAMS, CANALS ETC. IT WAS FURTHER NOTICED THAT ON THE SAID CAPITAL ASSETS, THE ASSESSEE HAS CLAIMED DEPRECIATION. THOUGH THE COMPANY HAS ALSO USED ITS OWN FUND IN THE FORM OF ISSUE OF BONDS, INTEREST INCOME ETC, HOWEVER CONSIDERING THE FACT THAT MOST OF THE FUNDS HAVE BEEN RECEIVED BY THE COMPANY FROM GOVT OF MAHARASHTRA, THE A.O. OPINED THAT THE PROVISIONS OF SECTION 43(1) OF THE I .T. ACT BECOMES APPLI CABLE TO THE CASE OF THE ASSESSEE AS FAR AS COMPUTATION OF DEPRECIATION IS CONCERNED WHICH READS AS UNDER: FOR CALCULATING ACTUAL COST FOR DETERMINING DEPRECIATION MEANS THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE REDUCED BY THAT PORTION OF COST THEREOF IF ANY AS HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY. 5. IN TERMS OF THE ABOVE PROVISION OF LAW, THE A.O. PRO POSED TO DISALLOW PROPORTIONATE DEPRECIATION. IN RESPONSE THE ASSESSEE COMPANY HAS SUBMITTED DETAILS OF FUNDS RAISED B Y THE ASSESSEE BY WAY OF ISSUE OF BONDS, INTEREST INCOME, SECURITY DEPOSITS HAS BEEN GIVEN ALONG WITH DETAILS OF FUNDS GRANTED BY THE GOVT OF MAHARASHTRA. THE ASSESSEE ARGUED TH AT PROVISIONS OF THE SECTION 43( 1) IS NOT APPLICABLE TO THE ASSESSEE'S CASE. IT HAS BEEN CLAIMED THAT THE FUNDS RECEIVED FROM THE GOVT ARE NOT IN THE FORM OF GRANT OR SUBSIDY OR REIMBURSEMENT BUT THE SAME WERE CAPITAL CONTRIBUTION RECEIVED FROM 3 KONKAN IRRIGATION DEVELOPMENT CORPORATION THE GOVT OF MAHARASHTRA IN VIEW OF THE PROVISIONS OF SECTION 31 OF THE KONKAN IRRIGATION D EVELOPMENT CORPORATION ACT WHICH SAYS AS UNDER: 'CONTRIBUTION OF GOVERNMENT TO CORPORATION FUND : THE STATE GOT SHALL BY APPROPRIATION DULY MADE IN THIS BEHALF, FROM TIME TO TIME PROVIDE AN AGGREGATE SUM OF NOT LESS THAN RS.173 CRORES TO THE CORPORATION FU NDS AS ITS SHARE OF THE CAPITAL REQUIRED BY THE CORPORATION FOR THE PERFORMANCE OF THE FUNCTIONS OF THE CORPORATION UNDER THIS ORDINANCE AND SUCH CONTRIBUTION SHALL BE PAID IN SUITABLE INSTALLMENTS SPREAD OVER A PERIOD OF FIVE YEARS FROM THE DATE OF ESTABL ISHMENT OF THE CORPORATION.' 6. IN SUPPORT OF THE ABOVE CONTENTION, THE AR HAS SUBMITTED COPIES OF THE COVERING LETTERS RECEIVED FROM THE GOVT OF MAHARASHTRA WHICH S TATED THAT IT IS A CAPITAL CONTRIBUTION (ANSHDAAN) TOWARDS THE C ORPORATION FUND. THE LD. C OUNSEL OF THE ASSESSEE HAS ALSO RELIED UPON FOLLOWING JUDICIAL PRONOUNCEMENTS CLAIMING THAT PROVISIONS OF SECTION 43(1) IS NOT APPLICABLE TO THE ASSESSEE'S CASE . 188 ITR 22(MAD) 188 ITR 11 (BOM) 215 ITR 834 (MAD) 234 ITR 53 (MAD) , 210 ITR 830(SC) : . ITA N0.5/NAG/2002 - ITAT MUMBAI BENCH 'A') ITA NO.101 &102/NAG/2006 - ITAT NAGPUR BENCH ) ITA N0.222 & 223/NAG/2007 - ITAT NAGPUR BENCH) 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD. COUNSEL OF THE ASSESSEE HA D ALSO CLAIMED THAT DURING THE YEAR PROJECT S COSTING RS. 956.42 CRORES HAVE BEEN HANDED OVER BY GOVT MAHARASHTRA FOR FURTHER DEVELOPMENT TO THE ASSESSEE BUT THE SAME HAVE NOT BEEN CONSIDERED FOR CHARGING OF DEPRECIATION DURING THE YEAR FOR WANT OF LETTER COMMUNICATING DATE OF HANDING/TAKING OVER OF SAID PROJECTS WHICH WERE EARLIER CARRIED OUT BY GOVT OF MAHARASHTRA. ACCORDINGLY, IT HAS BEEN SUBMITTED THAT THE PROVISIONS OF 4 KONKAN IRRIGATION DEVELOPMENT CORPORATION SECTIN 43(1) IS NOT APPLICABLE TO THE ASSESSEE'S CASE AND IT HAS BEEN REQUESTED THAT THE CLAIM OF DEPRECIATION MAY BE ALLOWED IN TOTO. 8. HOWEVER, THE A.O. WAS NOT SATISFIED. HE REFERRED TO THE PROVISION OF SECTION 43(1) AND EXPLANATION 10 AS UNDER: SECTION 43(1): 'A CTUAL COST' MEANS THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE REDUCED BY THAT PORTION OF THE COST THER E OF, IF ANY, AS HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY' EXPLANATION (10) TO SECTION 43(1): ' WHER E A PORTION OF THE COST OF AN A SSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR STATE GOVERNMEN T OR ANY AUTHORITY ESTABLISHED UNDER ANY LAW OR BY ANY OTHER P ERSON IN THE FORM OF A SUBSIDY OR G RANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED), THEN SO MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMENT SHALL NOT BE INCLUDED IN T HE ACTUAL COST OF THE ASSET TO THE ASSESSEE: 9. REFERRING TO THE ABOVE, THE A.O. OBSERVED THAT IT IS VERY CLEAR THAT ANY AMOUNT BY WHATEVER NAME CALLED IF RECEIVED BY THE CENTRAL GOVERNMENT OR STATE GOVERNMENT HAS TO BE REDUCED FROM THE ACTUAL COST OF THE ASSET. ACCORDINGLY, HE PROCEEDED TO DISALLOW THE DEPRECIATION . 10. UPON THIS, THE PEN ALTY PROCEEDINGS WERE INITIATED. IN TH E PENALTY ORDER, THE A.O. NOTED THE ASSESSEES CLAIM THAT THE PROVISION OF SECTION 43(1) WERE NOT APPLICABLE. IT WAS CLAIMED THAT THE FUNDS RECEIVED FROM THE GOVERNMENT OF MAHARASHTRA WERE NOT IN THE FORM OF ISSUE OF BONDS, INTEREST INCOME, ETC. BUT THE SAME WERE CAPITAL RECEIVED FROM GOVT. OF MAHARASHTRA. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE SUBMITTED THAT THE COPIES OF THE C OVERING LETTERS RECEIVED FROM GOVT . OF MAHARASHTRA WHICH STATE D THAT THESE WERE CAPITAL CONTRIBUTION. HOWEVER, THE A.O. IN PENALTY PROCEEDINGS NOTED THAT THESE 5 KONKAN IRRIGATION DEVELOPMENT CORPORATION SUBMISSIONS HAVE NOT BEEN ACCEPTED BY THE A.O. IN THE ASSESSMENT PROCEEDINGS . FURTHERMORE , THE A .O. NOTED THAT THE LD. CIT(A) HAS UPHELD THE ACTION OF THE A.O. REGARDING THE APPLICATION OF SECTION 43(1) READ WITH EXPLANATION 10 , THOUGH THE LD. CIT(A) HAD GRANTED SOME RELIEF. THE A.O. NEGATED THE ASSESSEES RELIANCE UPON THE DECISION OF THE HONBLE AP EX COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P.) LTD. [2010] 322 ITR 158 (SC) . THE A.O. PROCEEDED TO LEVY PENALTY U/S. 271(1)(C) OF THE ACT. 11. UPON THE ASSESSEES APPEAL, THE LD. CIT(A) ELABORATELY DEALT WITH THE ISSUE. THE LD. CIT(A) NOTED THAT THE ASSESSEE DOES NOT CLAIM DEPRECATION IN THE BOOKS OF ACCOUNTS AND COMPUTES DEPRECIATION ONLY FOR THE PURPOSE OF INCOME TAX. IN THIS REGARD, HE REFERRED TO THE AUDIT REPORT WHICH IS AS UNDER: THE DETAILS OF DEPRECATION ALLOWABLE AS PER INCOME TAX ACT, 196 1 IS AS PER ANNEXURE A ATTACHED. THE DEPRECIATION CHARGEABLE ON FIXED ASSETS IS NOT CHARGED IN BOOKS AND ASSETS STANDS OVERSTATED TO THAT EXTENT. SIMILALRY, THE DEFICIT STANDS UNDERSTATED TO THAT EXTENT. 12. THE ASSESSEE HAD BEEN CLAIMING DEPRECIATIO N AS PER THE ACT IN THE COMPUTATIONS. THE LD. CIT(A) NEGATED THE ASSESSEES CONTENTION THAT THE ASSESSEE SHOULD BE GRANTED THE BENEFIT OF HONBLE APEX COURT DECISION IN THE CASE OF P. J. CHEMICALS LTD. 210 ITR 830 (SC). IN THIS RESPECT, THE LD. CIT(A) REFE RRED TO EXPLANATION 10 TO SECTION 43(1) OF THE ACT . HE CONCLUDED IN THIS REGARD AS UNDER: 16. FROM A PERUSAL OF EXPLANATION 10 TO SECTION 43(1) OF THE I.T. ACT AS REPRODUCED ABOVE, THERE REMAINS NO DOUBT AT ALL THAT WHEN AN ASSESSEE RECEIVES ANY FUNDS FRO M AMONGST OTHERS THE STATE GOVERNMENT IN THE FORM OF SUBSIDY OR GRANT OR REIMBURSEMENT BY WHATEVER NAME CALLED THEN THE SAME HAS TO BE REDUCED FROM THE COST OF THE ASSETS TO ARRIVE AT THE ACTUAL COST OF THE ASSETS. AS THIS EXPLANATION WAS BROUGHT ON THE ST ATUTE AFTER THE JUDGMENT OF THE HON'BLE SC, THE APPELLANT COULD NOT HAVE RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF P.J. CHEMICALS LTD. 6 KONKAN IRRIGATION DEVELOPMENT CORPORATION 13. HOWEVER, THE LD. CIT(A) FOUND THAT THE SECOND EXPLANATION OF THE ASSESSEE REGARDING THE BONA FIDE AND INADVERTENT ERROR IN NOT GIVING EFFECT TO THE PROVISIONS OF SECTION 43(1) R.W EXPLANATION 10 OF THE ACT HAS BEEN FOUND TO HAVE A LOT OF MERIT. HE PROCEEDED TO HOLD THAT SINCE IT WAS A CAPITAL CONTRIBUTION OF GOVT. OF MAHARASHTRA, THE ASSESSEES BE LIEF THAT EXPLANATION 10 OF SECTION 43(1) IS NOT ATTRACTED WAS BONAFIDE. IN THIS REGARD, THE LD. CIT(A) PLACED RELIANCE UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P.) LTD. (SUPRA) AND ACCORDINGLY HE PROCEEDED TO DELE TE THE LEVY OF PENALTY. THE CONCLUDING PORTION OF THE LD. CIT(A) IN THIS REGARD CAN BE GAINFULLY REFERRED AS UNDER: 17. THE APPELLANT'S SECOND EXPLANATION HOWEVER REGARDING BONAFIDE AND INADVERTENT ERROR IN NOT GIVING EFFECT TO THE PROVISIONS OF SECTION 4 3(1) R.W. EXPLANATION 10 OF THE I.T. ACT HAS BEEN FOUND TO HAVE A LOT OF MERIT. INITIALLY THE APPELLANT HAD CLAIMED BEFORE THE AO AND THE CIT(A) THAT PROVISIONS OF SECTION 43(1) WERE NOT APPLICABLE IN ITS CASE BECAUSE THE FUNDS RECEIVED FROM THE GOVERNMENT OF MAHARASHTRA WERE NOT IN THE NATURE OF GRANT, SUBSIDY OR REIMBURSEMENT BUT WERE IN THE NATURE OF CAPITAL CONTRIBUTION TO THE CORPORATION I.E. CAPITAL CONTRIBUTION WAS MADE BY THE MAHARASHTRA GOVERNMENT TO THE APPELLANT CORPORATION AND THE MAHARASHTRA GO VERNMENT CONTINUED TO BE THE OWNER OF THE ASSETS THROUGH THE APPELLANT WHICH WAS FULLY OWNED BY THE MAHARASHTRA GOVERNMENT. THUS ACCORDING TO THE APPELLANT IT WAS NOT A CASE WHERE THE MAHARASHTRA GOVERNMENT HAD MADE A GRANT OR REIMBURSEMENT ETC TO SOME THI RD PARTY. AFTER THE ORDER OF THE CIT(A) - II DATED 3,09.2013 WHEREIN HE HELD THAT PROVISIONS OF SECTION 43(1) R.W. EXPLANATION 10 OF THE I.T. ACT WERE APPLICABLE IN THE APPELLANT'S CASE, THE APPELLANT ACCEPTED THIS LEGAL POSITION AND ACCORDING CLAIMED DEPREC IATION IN THE SUBSEQUENT ASSESSMENT YEARS AFTER GIVING EFFECT TO THESE PROVISIONS. MOREOVER, BONAFIDE OF THE APPELLANT CANNOT BE DOUBTED. AS ALREADY STATED ABOVE THE APPELLANT IS A GOVERNMENT OF MAHARASHTRA UNDERTAKING AND WAS ESTABLISHED IN TERMS OF KONKA N IRRIGATION DEVELOPMENT CORPORATION ACT, 1998. THE APPELLANT CORPORATION WAS INCORPORATED FOR PROMOTION AND OPERATION OF IRRIGATION PROJECTS IN KONKAN REGION, THE FUNCTIONS WHICH WERE EARLIER BEING PERFORMED BY IRRIGATION DEPARTMENT OF GOVERNMENT OF MAHAR ASHTRA. THE APPELLANT IS ALLOTTED EXPENDITURE - WISE GRANTS FOR PROJECTS FOR MEETING DAY - DO - DAY EXPENDITURES OF THE CORPORATION ON ADMINISTRATIVE EXPENSES. THE APPELLANT CORPORATION DOES NOT CARRY OUT ANY ACTIVITY WHICH WOULD FETCH IT ANY REVENUE EXCEPT FOR A SMALL AMOUNT RECEIVED ON ACCOUNT OF WATER REVENUE WHICH ALSO IS 7 KONKAN IRRIGATION DEVELOPMENT CORPORATION REMITTED TO THE GOVERNMENT. AS THE APPELLANT DOES NOT HAVE ANY PROFIT MAKING MOTIVE, THEREFORE, THE APPELLANT CANNOT HAVE ANY DELIBERATE OR WILLFUL DESIGN TO CLAIM EXCESS DEPRECIATION BECAUS E THE SAME IS NOT GOING TO HAVE ANY EFFECT ON THE APPELLANT'S LIABILITY TO TAX. THIS OBSERVATION IS SUPPORTED BY THE FACT THAT THE APPELLANT HAD UNABSORBED BROUGHT FORWARD DEPRECIATION AMOUNTING TO RS. 360.51 CRORES UPTO ASSESSMENT YEAR 2007 - 08 AND THE DEP RECIATION CLAIMED DURING THE YEAR WAS RS. 109.36 CRORES, OUT OF WHICH RS. 39.97 CRORES WAS DISALLOWED BY THE AO AFTER APPLYING THE PROVISIONS OF SECTION 43(1) READ WITH EXPLANATION 10 OF THE I.T. ACT. THEREFORE, IT CANNOT BE SAID THAT THE APPELLANT HAD OVE R STATED THE DEPRECIATION WITH ANY MOTIVE TO LOWER ITS LIABILITY FOR TAX. MOREOVER, ON PERUSAL OF THE AUDIT REPORT SCHEDULE - I OF THE LIABILITIES FORMING PART OF THE BALANCE - SHEET IT IS SEEN THAT THE APPELLANT HAD DULY DISCLOSED GOVERNMENT CONTRIBUTION FOR WORKS. THE DEPRECIATION CHART AS PER INCOME - TAX RULES WAS FILED AS PER ANNEXURE - A TO THE AUDIT REPORT. THEREFORE, AS FAR AS THE PARTICULARS OF INCOME ARE CONCERNED, IT IS SEEN THAT NEITHER ANY INACCURATE PARTICULARS OF INCOME WERE FILED NOR ANY PARTICULARS OF INCOME WERE CONCEALED. THE APPELLANT HAD MADE A CLAIM OF DEPRECIATION WHICH CLAIM WAS NOT ACCEPTABLE BEING NOT IN ACCORDANCE WITH LAW AND THE CLAIM WAS ALLOWED AT A REDUCED AMOUNT AFTER CORRECT APPLICATION OF LAW. IN THIS REGARD IT IS SEEN THAT THE HON 'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS, 322 ITR 158 (SC) HAS HELD AS UNDER MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION , ATTRACT THE PENALTY UNDER SECTION 271(L)(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(L)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. THEREFORE, KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED ABOVE AND THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF RELIANCE PETROPORDUCTS (SUPRA), IT IS HELD TH AT PENALTY U/S. 271(L)(C) OF THE I.T. ACT WAS NOT LEVIABLE IN THE APPELLANT'S CASE AS THE APPELLANT HAS NEITHER FURNISHED ANY INACCURATE PARTICULARS OF INCOME NOR HAS THE APPELLANT CONCEALED ANY FACTS MATERIAL FOR THE COMPUTATION OF ITS INCOME. THE PENALTY LEVIED IN THE APPELLANT'S CASE U/S. 271(L)(C) OF THE I.T. ACT AMOUNTING TO RS.23,03,31,738/ - IS THEREFORE, DIRECTED TO BE DELETED. 14. AGAINST THIS ORDER, THE REVENUE IS IN APPEAL BEFORE US. 15. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. LD. DEPARTMENTAL REPRESENTATIVE (LD. DR') RELIED UPON THE ORDERS OF THE A.O. SHE FURTHER CLAIMED THAT IN 8 KONKAN IRRIGATION DEVELOPMENT CORPORATION ABSENCE OF NECESSARY DETAILS , IT CANNOT BE ESTABLISHED THAT THE CONTRIBUTION BY THE GOVERNMENT WAS CAPITAL CONTRIBUTION. 16. UPON CAREFUL CON SIDERATION, WE NOTE THAT IT IS THE ASSESSEES CLAIM THAT THE GOVERNMENTS CONTRIBUTION WAS CAPITAL CONTRIBUTION AND NOT GRANT SUBSIDY OR REIMBURSEMENT . IN THIS REGARD, IT HAS BEEN NOTED IN THE ORDERS OF THE AUTHORITIES BELOW THAT THE COVERING LETTER OF TH E CONTRIBUTION WERE PRODUCED. IN THE SAID LETTER IT WAS MENTIONED TO BE CAPITAL CONTRIBUTION. NONE OF THE AUTHORITIES BELOW HAS DISPUTED THIS ASPECT. SO THE CLAIM OF THE LD. DR THAT IT CANNOT BE ESTABLISHED THAT THE CONTRIBUTION WAS CAPITAL CONTRIBUTION IS LIABLE TO BE REJECTED. THE OPINION OF THE AUTHORITIES BELOW IS THAT SECTION 43(1) AND EXPLANATION 10 THERETO IS APPLICABLE. THE SAME READS AS UNDER: SECTION 43(1): 'A CTUAL COST' MEANS THE ACTUAL COST OF THE ASSETS TO THE ASSESSEE REDUCED BY THAT PORTION OF THE COST THER E OF, IF ANY, AS HAS BEEN MET DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY' EXPLANATION (10) TO SECTION 43(1): ' WHER E A PORTION OF THE COST OF AN A SSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL G OVERNMENT OR STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY LAW OR BY ANY OTHER P ERSON IN THE FORM OF A SUBSIDY OR G RANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED), THEN SO MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR GRANT OR REIMBURSEMEN T SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE: 17. HENCE, THEY HAVE OPINED THAT THE CAPITAL CONTRIBUTION WOULD ALSO BE ENCOMPASSED IN THE TERM S UBSIDY OR GRANT OR REIMBURSEMENT (BY WH ATEVER NAME CALLED) . HENCE, ASSESSEES PLEA ON MERITS HAS BEEN NEGATED. HOWEVER, THE ASSESSEES BELIEF THAT IN TERMS OF THE ABOVE PR OVISION OF THE ACT IT WAS ENTITLED TO CLAIM DEPRECATION OUT OF PURCHASES FROM CAPITAL CONTRIBUTION FOR GOVERNMENT HAS BEEN FOUND TO BE BONAFIDE BY THE LD. 9 KONKAN IRRIGATION DEVELOPMENT CORPORATION CIT(A). IN T HIS REGARD, THE LD. CIT(A) HAS ALSO REFERRED TO HONBLE APEX COURT DECISION IN THE CASE OF RELIANCE PETROPRODUCTS (P.) LTD. (SUPRA). 18. IN OUR CONSIDERED OPINION, THERE IS NO INFIRMITY ON THE PLANK OF THE LD. CIT(A) UNDER WHICH HE HAS DELETED THIS PENAL TY. IT IS SETTLED LAW THAT THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE DISTINCT. SUSTENANCE OF THE ADDITIONS BY THE LD. CIT(A) AND ASSESSEE S NOT C ONT ESTING THE SAME BEFORE ITAT CANNOT BE SAID TO BE ADVERSELY AFFECTING THE ASSESSEES PLEA THAT P ENALTY U/S. 271(1)(C) IS NOT LEVIABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FURTHER NOTE THAT ALL THE DETAILS OF DEPRECIATION CLAIM WAS DULY MADE AND DISCLOSED IN THE COMP UTATION OF INCOME . SO THERE IS NO QUESTION OF CONCEALMENT OF INCOME OR FURNI SHING OF INACCURATE PARTICULARS OF INCOME. THE AUTHORITIES BELOW HAVE ONLY DENIED THE CLAIM ON MERITS ON THE BASIS THAT TERM SUBSIDY OR GRANT OR REIMBURSEM ENT (BY WHATEVER NAME CALLED) WOULD INCLUDE CAPITAL CONTRIBUTION. HENCE, THE ASSESSEES CLAIM HAS B EEN DENIED. THE ASSESSEES PLEA THAT IT WAS UNDER A BONAFIDE BELIEF THAT ASSET ACQUIRED OUT OF CAPITAL CONTRIBUTION CANNOT BE SAID TO BE IN VIOLATION OF THE ACT IS ABSOLUTELY BONAFIDE. IT WILL BE NOT OUT OF PLACE TO MENTION THAT THE AUTHORITIES BELOW O PINI ON, T HAT THE SAID TERM WOULD INCLUDE CAPITAL CONTRIBUTION ALSO , PRIMA FACIE ITSELF HAS NO BASIS. THE PRINCIPAL OF EJUSDEM GENERIS WOULD ALSO NOT SUPPORT SUCH AN EXTENSION OF THE TERM SUBSIDY OR GRANT OR REIMBURSEMENT (BY WHATEVER NAME CALLED). [ 19. BE AS IT MAY, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE S BELIEF THAT ASSESSEE WAS ENTITLED FOR DEPRECATION OUT OF PURCHASE MADE FROM CAPITAL CONTRIBUTION RECEIVED F ROM GOVERNMENT WAS BONAFIDE. HENCE, NO CASE IS THERE FOR FURNISHING OF 10 KONKAN IRRIGATION DEVELOPMENT CORPORATION INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THE HONBLE APEX COURT S DECISION IN THE CASE OF RELIANCE PETROPRODUCTS (P.) LTD. (SUPRA) SUPPORTS THE CASE OF THE ASSESSEE. HENCE, WE AFFIRM THE ORDER OF THE LD. CIT(A). 20. IN THE RESULT, THE REVENUES A PPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.09.2018 SD/ - SD/ - ( PAWAN SINGH ) (S HAMIM YAHYA) J UDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI ; DATED : 07.09.2018 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI