M/s Indo German Tool Room, Indore V. The DCIT, 1(1), Indore

ITA 367/IND/2010

• Counselvise Citation: 36722714 RSA 2010
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 07-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KESHAV SAXENA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Depreciation
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAAAI0272M I.T.A.NO. 367/IND/2010 A.Y. : 2007-08 INDO GERMAN TOOL ROOM, DY. CIT, 302-A, SECTOR-E, SANWER ROAD, VS 1(1), INDORE. INDORE APPELLANT RESPONDENT APPELLANT BY : SHRI S. S. DESHPANDE, C. A. RESPONDENT BY : SHRI KESHAV SAXENA, CIT DR O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 03.03.2010 FOR THE ASSESSMENT YEAR 2007-08. 2. FOLLOWING THREE GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE :- 1. THE LD. CIT(A) HAS ERRED IN DISALLOWING THE DEPRECIATION ON THE FIXED ASSETS ON THE GROUND THAT THE COST OF THE ASSETS WAS MET OUT BY THE GRANT IN -: 2: - 2 AID AND AS SUCH THE PROVISIONS OF SECTION 43(1), EXPLANATION 10 ARE APPLICABLE. 2. THE LD. CIT(A) HAS ERRED IN NOT ALLOWING THE DEPRECIATION ON THE ASSETS AS CLAIMED. 3. THE LD. CIT(A) HAS ERRED IN REJECTING THE CLAIM OF THE ASSESSEE THAT THE PROVISIONS OF SECTION 11 TO 13 OF THE INCOME-TAX ACT, 1961, WERE APPLICABLE AND THE INCOME IS EXEMPT, SINCE THE OBJECTS OF THE SOCIETY ARE CHARITABLE. 3. AT THE OUT-SET, IT WAS SUBMITTED BY THE LD. AUTHORI ZED REPRESENTATIVE THAT THE GROUNDS TAKEN IN THIS YEAR ARE EXACTLY SIMILAR TO THE GROUNDS TAKEN IN I.T.A.NOS. 593, 125 & 594/IND/2009, WHICH WAS DECIDED BY THE TRIBUNAL VID E ORDER DATED 26 TH APRIL, 2011. COPY OF THE ORDER OF TRIBUNAL WAS ALS O HANDED OVER TO THE LD. SENIOR D.R. HE ALSO FAIRLY A GREED THAT THE ISSUE RAISED IN THE ASSESSMENT YEAR 2007-08 HAV E ALREADY BEEN DECIDED BY THE TRIBUNAL IN THIS ORDER FOR THE ASSESSMENT YEARS 2001-02, 2005-06 & 2006-07. 4. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL AND FOUND THAT EXACTLY SIMILAR GROUNDS WER E TAKEN BY -: 3: - 3 THE ASSESSEE IN THE ASSESSMENT YEARS 2001-02, 2005- 06 & 2006-07 AND FOLLOWING WAS CONCLUSION OF THE TRIBUNA L:- 9. 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 ELABORATELY 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 DIRECTLY O R INDIRECTLY TO MEET ANY PORTION OF THE ACTUAL COST. THE EXPRESSION ACTUAL COST IN SECTION 43(1) OF THE IN COME- TAX ACT, 1961, IS TO BE INTERPRETED LIBERALLY. ACCORDINGLY, SUCH SUBSIDY DOES NOT PAR-TAKE ALL THE -: 4: - 4 INCIDENTS WHICH ATTRACTS THE CONDITION FOR ITS DEDUCTIBILITY FROM ACTUAL COST. IT WAS, THEREFORE , 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. RESPECTFULLY FOLLOWING THE PROPOSITION OF LAW AS LAID DOWN BY THE HON'BLE SUPREME COURT AND THEREAFTER BY VARIOUS COURTS, AS NARRATED ABOVE, WE DO NOT FIND ANY MERIT IN THE ACT ION 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 AUTHORITIES AND DECIDE T HE ISSUE IN FAVOUR OF THE ASSESSEE. 10. AS WE HAVE ALREADY DECIDED THE ASSESSEES GROUND WITH REGARD TO CLAIM OF DEPRECIATION IN ITS FAVOUR, THE GROUND NO.3 RAISED WITH REGARD TO REGISTRATION U/S 12A/12AA HAS BECOME ACADEMIC. WE, THEREFORE, DO NOT THINK IT APPROPRIATE TO DEAL WITH THE SAME. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ALL T HE YEARS ARE ALLOWED IN TERMS INDICATED HEREINABOVE. 5. EXACTLY SIMILAR GROUNDS HAVE BEEN TAKEN DURING THE YEAR UNDER CONSIDERATION. RESPECTFULLY FOLLOWING TH E ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE ALLOW THE A PPEAL OF THE -: 5: - 5 ASSESSEE IN TERMS INDICATED IN THE ORDER DATED 26 TH APRIL, 2011. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS INDICATED HEREINABOVE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST MAY, 2011. CPU* 315