THE ACIT-Circle 4(1), Indore V. M/s. Indo German Tool Room, Indore

ITA 288/IND/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5757 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 31-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Keywords: Depreciation
• Section: 143(3); 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER ACIT, CIRCLE 4(1), INDORE. VS. M/S. INDO GERMAN TOOL ROOM 291-B,302-A, SECTOR-E, SANWER ROAD, INDUSTRIAL AREA, INDORE. .. ./ PAN: AAAAI0272M / APPELLANT / RESPONDENT / APPELLANT BY SHRI MOHD. JAVED, SR. DR / RESPONDENT BY NONE. DATE OF HEARING 28.09.2016 DATE OF PRONOUNCEMENT 28.09.2016 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-I, INDORE [HEREINAFTER .. . / I.T.A. NO. 288/IND/2016 %' ' / ASSESSMENT YEAR: 2008-09 I.T.A.NO. 288/IND/2016 A.Y.08-09 M/S. INDO GERMAN TOOL ROOM,INDORE. PAGE 2 OF 5 REFERRED TO AS THE CIT(A)] DATED 21.12.2015 AND PER TAINS TO ASSESSMENT YEAR 2008-09 AS AGAINST APPEAL DECIDED I N ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT DATE D 18.11.2010 OF ITO WARD 1(2) INDORE [HEREINAFTER REF ERRED TO AS THE AO]. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDO GERMAN TOOL ROOM, INDORE, IS A GOVERNMENT OF INDIA SOCIETY REGISTERED UNDER THE SO CIETIES REGISTRATION ACT FOR UNDERTAKING PROMOTIONAL ACTIVI TIES FOR DEVELOPMENT OF MICRO, SMALL & MEDIUM INDUSTRIES. IT IS MANAGED BY A GOVERNING COUNCIL, CHAIRED BY ADDITION AL SECRETARY & DEVELOPMENT COMMISSIONER (MSME), MINIST RY OF MSME, GOVERNMENT OF INDIA. THE ASSESSEE SOCIETY HAS FILED HIS RETURN OF INCOME ON 18.11.2010 SHOWING LOSS AT RS. 1,03,84,912/-. DURING THE ASSESSMENT, THE AO NOTICE D THAT THE ASSESSEE WAS GETTING GRANT FROM GOVERNMENT IN T HE FORM OF SUBSIDY. DURING THE YEAR, THE ASSESSEE HAS RECEIVED RS. 3 CRORES FROM GOVERNMENT OF INDIA. THE AO INVOKING EXPLANATION 10 OF SECTION 43 OF THE ACT AND DEDUCTE D THE COST I.T.A.NO. 288/IND/2016 A.Y.08-09 M/S. INDO GERMAN TOOL ROOM,INDORE. PAGE 3 OF 5 OF PLANT AND MACHINERY BY RS. 3 CRORES, WHILE CALCU LATING THE DEPRECIATON ON PLANT AND MACHINERY. THIS RESULTED I N REDUCTION IN ALLOWABLE DEPRECIATION BY RS. 45,00,000 /-. THE AO, THEREFORE, DISALLOWED DEPRECIATION OF RS. 45,00 ,00,000/-. THE ASSESSEE NOT SATISFIED WITH THE DISALLOWANCE FIL ED AN APPEAL BEFORE THE CIT(A). 3. THE LD. CIT(A) OBSERVED THAT I.T.A.T., INDORE BENCH IN ASSESSEES OWN CASE IN I.T.A.NO. 593, 125 & 594/IND/ 2009 DATED 26.04.2011 FOR ASSESSMENT YEARS 2001-02, 2005 -06 & 2006-07 HAVE OBSERVED AS UNDER :- WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND DELIBERATED ON THE CASE LAWS CITED BY THE LD. AUTHORIZED REPRESENTATIVE IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. IN THE INSTANT CASE, THE ASSESS EE BEING A SOCIETY SET UP BY THE GOVERNMENT OF INDIA, FOR CARRYING ON ACTIVITY OF PROVIDING TECHNICAL AND CONSULTANCY SERVICES FOR SMALL SCALE UNIT. IT GOT GOVERNMENT GRANT TOWARDS CAPITAL FUNDS. BY UTILIZIN G THESE FUNDS AND ITS OWN CAPITAL, IT ACQUIRED PLANT AND MACHINERY AND BUILDING. WHILE ALLOWING ASSESSEES CLAIM FOR DEPRECIATION ON SUCH PLANT AND MACHINERY AND BUILDING, THE AO REDUCED THE ACTUAL COST BY THE AMOUNT OF GRANT AFTER APPLYING EXPLANATION 10 TO SECTION 43. HON'BLE SUPREME COURT IN THE CASE OF P.J. CHEMICALS (SUPRA) HAS ELABORATE LY DEALT WITH SUCH A SITUATION AND OBSERVED THAT WHERE GOVERNMENT SUBSIDY IS INTENDED AS AN INCENTIVE TO ENCOURAGE ENTREPRENEURS, THE SAME IS NOT A PAYMENT I.T.A.NO. 288/IND/2016 A.Y.08-09 M/S. INDO GERMAN TOOL ROOM,INDORE. PAGE 4 OF 5 DIRECTLY OR INDIRECTLY TO MEET ANY PORTION OF THE A CTUAL COST. THE EXPRESSION ACTUAL COST IN SECTION 43(1) OF THE INCOME-TAX ACT, 1961, IS TO BE INTERPRETED LIBERALLY. ACCORDINGLY, SUCH SUBSIDY DOES NOT PAR- TAKE ALL THE INCIDENTS WHICH ATTRACTS THE CONDITION FOR ITS DEDUCTIBILITY FROM ACTUAL COST. IT WAS, THERE FORE, HELD THAT AMOUNT OF SUBSIDY IS NOT LIABLE TO BE DEDUCTED FROM THE ACTUAL COST U/S 43(1) FOR THE PURPOSE OF CALCULATION OF DEPRECIATION. RESPECTFULL Y FOLLOWING THE PROPOSITION OF LAW AS LAID DOWN BY TH E HON'BLE SUPREME COURT AND THEREAFTER BY VARIOUS COURTS, AS NARRATED ABOVE, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES FOR REDUCING THE AMOUNT OF GOVERNMENT GRANT FROM THE ACTUAL COST OF PLANT AND MACHINERY AND BUILDING FOR THE PURPOSE OF ALLOWING ASSESSEES CLAIM FOR DEPRECIATION. ACCORDINGLY, WE REVERSE THE ORDER OF LOWER AUTHORIT IES AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 4. LD. SR. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AO. 5. WE HAVE CONSIDERED THE FACTS AND MATERIALS AVAILABL E ON RECORD. WE FIND THAT THE ISSUE UNDER CONSIDERAT ION IS COVERED BY THIS BENCH ORDER IN I.T.A.NOS. I.T.A.NO. 593, 125 & 594/IND/2009 DATED 26.04.2011 FOR ASSESSMENT YEARS 2001- 02, 2005-06 & 2006-07. THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL AND NOTHING NEW FACT HA VE BEEN BROUGHT ON RECORD. THEREFORE, RESPECTFULLY FOLLOWING THE I.T.A.NO. 288/IND/2016 A.Y.08-09 M/S. INDO GERMAN TOOL ROOM,INDORE. PAGE 5 OF 5 DECISION OF THE I.T.A.T. INDORE BENCH, WE FIND THAT THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION FOLLOWI NG THE DECISION OF I.T.A.T. ACCORDINGLY, THE AFORESAID GRO UND OF APPEAL IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 28 TH SEPTEMBER, 2016. SD/- (..) (D.T.GARASIA) JUDICIAL MEMBER SD/- (..) (O.P.MEENA) ACCOUNTANT MEMBER * / DATED : 28 TH SEPTEMBER, 2016. CPU*