M/s. Suraj Cotex, Jalna V. Income-tax Officer,

ITA 662/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2822 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 07-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHEERAJ KUMAR JAIN
• Keywords: Capital asset; Depreciation; Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO. 66 2 /PN/201 4 / ASSESSMENT YEAR : 20 0 9 - 1 0 M/S. SURAJ COTEX, GAT NO.110, SILLOD ROAD, TQ. BHOKARDAN, DIST. JALNA. . / APPELLANT PAN: A BIFS4320G VS. THE INCOME TAX OFFICER , WARD - 1(3) , JALNA . / RESPONDENT / APPELLANT BY : SHRI S.N. PURANIK / RESPONDENT BY : SHRI DHEERAJ KUMAR JAIN / / DATE OF HEARING : 12 . 0 1 .201 6 / DATE OF PRONOUNCEMENT: 10 . 0 2 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) , AURANGABAD , DATED 3 1 . 0 1 .20 1 4 RELATING TO ASSESSMENT YEAR 20 0 9 - 1 0 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1 . HONORABLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING DISALLOWANCE OF DEPRECIATION OF RS.2,91,807/ - BY REDUCING WRITTEN DOWN VALUE OF ASSETS BY SUBSIDY RECEIVED RS.25 LAKHS. ITA NO. 66 2 /PN/20 1 4 SURAJ COTEX 2 APPELLANT PRAYS TO CANCEL THE DISALLOWANCE AS SUBSIDY RECEIVED IS FOR ESTABLISHING UNIT IN BACKWARD AREA AND CREATING EMPLOYMENT HAS NO NEXUS WITH INVESTMENT/COST OF ASSETS. 2. APPELLANT PRAYS FOR JUST AND EQUITABLE RELIEF . 3 . THE ONLY ISSUE IN THE PRE SENT APPEAL IS IN RESPECT OF TREATMENT OF SUBSIDY RECEIVED BY THE ASSESSEE. 4. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF COTTON GINNING AND PRESSING . FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHE D RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 7,57,390/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD RECEIVED SUBSIDY OF RS.25 LAKHS FROM STATE GOVERNMENT UNDER SPECIAL CAPITAL INCENTIVE (PSI - 2001) S CHEME. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD NOT REDUCED THE AMOUNT OF THE SAID SUBSIDY FROM THE COST OF FIXED ASSETS AS PER EXPLANATION 10 TO SECTION 43 OF THE ACT. IN REPLY, THE ASSESSEE EXPLAINED THAT THE SAID SUBSIDY WAS RECEIVED AS THE ACT. IN REPLY, THE ASSESSEE EXPLAINED THAT THE SAID SUBSIDY WAS RECEIVED AS AN IN CENTIVE FOR ESTABLISHING AN INDUSTRY IN THE BACKWARD AREA AND THE SAME WAS NOT FOR MEETING ANY PART OF THE COST OF THE ASSETS, ALTHOUGH THE QUANTIFICATION OF THE SUBSIDY WAS ON THE VALUE OF INVESTMENT TO BE MADE IN THE FIXED ASSETS. THUS, THE VALUE OF THE SAID SUBSIDY WAS CLAIMED TO BE A CAPITAL RECEIPT, WHICH WAS NOT TO BE REDUCED FROM THE COST OF ASSETS. THE EXPLANATION OF ASSESSEE WAS REJECTED BY THE ASSESSING OFFICER AND THE SUBSIDY OF RS.25 LAKHS WAS ATTRIBUTED TO THE BUILDING AND PLANT & MACHINERY A T RS.8,54,000/ - AND RS.16,46,000/ - AND THE DEPRECIATION ON THE ASSETS WAS RE - WORKED BY THE ASSESSING OFFICER. CONSEQUENTLY, THE DEPRECIATION OF RS. 17,5 9 ,441/ - WAS ALLOWED TO THE ASSESSEE AS AGAINST CLAIM OF RS. 20,51,548/ - AND THE EXCESS DEPRECIATION OF RS .2,91,807/ - WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO. 66 2 /PN/20 1 4 SURAJ COTEX 3 5. THE CIT(A) NOTED THAT THE PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT WERE INTRODUCED FROM ASSESSMENT YEAR 1999 - 2000 AND THE RELIANCE PLACED UPON BY THE LEARNED AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN CIT VS. P.J. CHEMICALS LTD. (1994) 210 ITR 830 (SC) WAS PRIOR TO THE INTRODUCTION OF THE SAID EXPLANATION IN STATUTE . THE CIT(A) FURTHER NOTED THAT THE SUBSIDY WAS RELATABLE TO THE COST OF ASSETS AND HAD TO BE REDUCED FROM THE COST OF SAID ASSETS. RELIANCE IN THIS REGARD WAS PLACED UPON THE RATIO LAID DOWN BY (I) PUNE BENCH OF TRIBUNAL IN ALFA LAVAL INDIA LTD. VS. DCIT (2008) 117 TTJ 902 (PUNE) , (II) THE HONBLE PUNJAB & HARYAN A HIGH COURT IN CIT VS. JANAK STEEL TUBES (P) LTD. 179 ITR 536 (P&H) AND (III) CIT VS. JINDAL BROS. RICE MILLS 179 ITR 470 (P&H) . THE CIT(A) THUS, UPHELD THE ORDER OF ASSESSING OFFICER. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) . 7. THE LE ARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT THE SUBSIDY RECEIVED BY THE ASSESSEE WAS A CAPITAL SUBSIDY SINCE THE SAME WAS RECEIVED AGAINST ESTABLISHMENT OF AN INDUSTRY IN THE BACKWARD AREA. OUR ATTENTION WAS DRAWN TO THE CAPITAL SUBSIDY SCHEME FLOATED BY THE GOVERNMENT OF MAHARASHTRA UNDER GOVERNMENT RESOLUTION OF PACKAGE SCHEME OF INCENTIVE, 2001 , DATED 31.03.2001 . OUR ATTENTION WAS ALSO DRAWN TO THE VARIOUS CLAUSES OF THE SAID SCHEME AND IT WAS POINTED OUT THAT THE CAPITAL INCENTIVES WERE PROVIDED FOR ESTABLISHING SSI UNITS IN THE STATE OF MAHARASHTRA, UNDER WHICH THE QUANTIFICATION OF THE SUBSIDY WAS THE PERCENTAGE OF FIXED CAPITAL I.E. THE INVESTMENT MADE. HOWEVER, DEPENDING ON THE AREA, THERE WAS A CEILING FIXED FOR THE AWARD OF SU BSIDY. SINCE THE ASSESSEE HAD ESTABLISHED THE UNIT I N THE AREA WHICH WAS GROUPED D+, THE ASSESSEE WAS ENTITLED TO SUBSIDY OF RS.25 ITA NO. 66 2 /PN/20 1 4 SURAJ COTEX 4 LAKHS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE SAID SCHEME WAS SIMILAR TO ANOTH ER SCHEME FLOATED BY THE GOVERNMENT OF MAHARASHTRA I.E. PACKAGE SCHEME OF INCENTIVE, 1993. OUR ATTENTION WAS DRAWN TO THE SIMILARITIES BETWEEN TWO SCHEMES AND IT WAS ALSO POINTED OUT BY HIM THAT THE SAID SCHEME WAS ALSO FLOATED FOR THE ESTABLISHMENT OF SS I UNITS AND THE SUBSIDY WAS QUANTIFIED ON THE BASIS OF PERCENTAGE OF FIXED CAPITAL WITH CEILING PROVIDED FOR EACH OF THE AREAS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE EARLIER SCHEME OF INCENTIVE HAS BEEN CONSID ERED BY PUNE BENCH OF TRIBUNAL IN ROHIT EXHAUST SYSTEMS PVT. LTD. VS. ACIT IN ITA NO.1880/PN/2013 , RELATING TO ASSESSMENT YEAR 2008 - 09 , ORDER DATED 31.03.2015 , WHEREIN ON IDENTICAL FACTS, THE SUBSIDY RECEIVED BY THE SAID ASSESSEE WAS HELD TO BE CAPITAL REC EIPT. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE TREATMENT O F SUBSIDY RECEIVED BY THE ASSESSEE FOR ESTABLISHING A UNIT IN THE STATE OF MAHARASHTRA. THE ASSESSEE WAS CARRYING ON THE BUSINESS OF COTTON GINNING AND PRESSING AND HAD SET UP A SMALL SCALE INDUSTRY IN THE STATE OF MAHARASHTRA IN JALNA DISTRICT, WHICH WAS A BACKWARD AREA. THE GOVERNMENT OF MAHARASHTRA HAD FLOATED AN INCENTIVE SCHEME NAMED AS PACKAGE SCHEME OF INCENTIVES, 2001 ON 31.03.2001 . AS PER PREAMBLE OF THE SAID SCHEME, THE INTENTION W AS TO ENCOURAGE DISPERSAL OF INDUSTRIES TO THE LESS DEVELOPED AREAS OF THE STATE, UNDER WHICH THE GOVERNMENT WAS GIVING PACKAGE OF INCENTIVES TO NEW / EXTENSION UNITS SET UP IN THE DEVELOPING REGION OF THE STATE SINCE 1964, UNDER A ITA NO. 66 2 /PN/20 1 4 SURAJ COTEX 5 SCHEME POPULARLY KNOWN AS PACKAGE SCHEME OF INCENTIVES. IN THE PREAMBLE ITSELF VIDE C LAUSE (2), IT WAS RECOGNIZED THAT THE AFORESAID PACKAGE SCHEME OF INCENTIVE S INTRODUCED IN 1964, WAS AMENDED FROM TIME TO TIME AND THE LAST AMENDED SCHEME, COMMONLY KNOWN AS THE 1993 SCHEME WAS OPERATIVE FROM THE 1 ST OCTOBER, 1993 TO 31 ST MARCH, 2001. IN FURTHERANCE, THE GOVERNMENT RECOGNIZED THE NEED TO ADDRESS THE EMERGING CHALLENGES IN THE PHASE OF SECOND GENERATION ECONOMIC REFORMS AND THE NEED FOR ENCOURAGING HI - TECH AND SUNRISE INDUSTRIES IN THE INFORMATION TECHNOLOGY AND OTHER FIELDS. THE GOVERNME NT THUS, DECIDED TO REVISE 1993 SCHEME AND BRING INTO FORCE A NEW SCHEME PACKAGE SCHEME OF INCENTIVES, 2001 FOR INTENSIFYING AND ACCELERATING THE PROCESS OF DIS PE RSAL OF INDUSTRIES TO THE LESS DEVELOPED REGIONS AND PROMOTING HI - TECH INDUSTRIES IN DEVELOPED AREA OF THE STATE COUPLED WITH THE OBJECT OF GENERATING MASS EMPLOYMENT OPPORTUNITIES. THE ASSESSEE UNDER THE SAID SCHEME CLAIMS TO HAVE ESTABLISHED A SMALL SCALE INDUSTRY AND ON FULFILLMENT OF THE CONDITIONS OF THE SAID SCHEME, HAD RECEIVED SUBSIDY OF R S. 25 LAKHS. THE PERUSAL OF THE SCHEME ITSELF REFLECTS THAT WHERE A NEW SSI UNIT OR OTHER NEW UNITS SPECIFIED IN THE SCHEME, WHOSE INVESTMENT WAS WITHIN THE CEILING PRESCRIBED FOR SSI UNIT IS SET UP ON OR AFTER 01.04.2001 WOULD BE ENTITLED TO SPECIAL CAPIT AL INCENTIVE AT DIFFERENT RATES SPECIFIED YEAR - WISE. THE ASSESSEE FALLS WITHIN THE AREA D+, WHEREIN THE QUANTUM AS PERCENTAGE OF FIXED CAPITAL INVESTMENT WAS NOTIFIED TO BE 35 AGAINST WHICH, THE CEILING ON THE SUBSIDY WAS RS.25 LAKHS. THE ASSESSEE FALLS WITHIN THE SAID CATEGORY AND HAD RECEIVED SUM OF RS.25 LAKHS THEREUNDER. 10. THE ISSUE ARISING BEFORE US IS THE ASSESSABILITY OF THE SAID INCENTIVE RECEIVED BY THE ASSESSEE, WHICH IS CLAIMED TO BE A CAPITAL SUBSIDY IN THE HANDS OF THE ASSESSEE. HOWEVER , THE CASE OF THE REVENUE BEFORE US IS THAT SINCE THE ITA NO. 66 2 /PN/20 1 4 SURAJ COTEX 6 BASIS FOR QUANTIFICATION OF THE SAID SUBSIDY IS THE PERCENTAGE OF INVESTMENT IN FIXED ASSETS, HENCE, THE SAID SUBSIDY AMOUNT IS TO BE ADJUSTED AGAINST THE COST OF ASSETS AND THE DEPRECIATION IS TO BE AL LOWED ON THE RE - WORKED COST OF ASSETS. ANOTHER ASPECT TO BE NOTED IS THA T THE PACKAGE SCHEME OF INCENTIVE S , 2001 IS IN FURTHERANCE TO PACKAGE SCHEME OF 1993, THE ASSESSEE HAS PLACED THE COPIES OF FIRST PACKAGE SCHEME OF 1993 AT PAGES 21 TO 42 OF THE PAPER BOOK AND THE PACKAGE SCHEME OF INCENTIVES, 2001 AT PAGES 1 TO 20 OF THE PAPER BOOK. THE PERUSAL OF TWO SCHEMES REFLECTS THAT THE CONDITIONS FOR GRANT OF SUBSIDY ARE SIMILAR AND THE INTENTION OF THE SCHEME IS TO PROVIDE A PLATFORM FOR ESTABLISHING UNITS I N UNDER - DEVELOPED AREAS AND TO PROVIDE EMPLOYMENT WITHIN THE STATE OF MAHARASHTRA. 11. THE PUNE BENCH OF TRIBUNAL IN ROHIT EXHAUST SYSTEMS PVT. LTD. VS. ACIT (SUPRA) HAD AN OCCASION TO CONSIDER THE PACKAGE SCHEME OF 1993 ISSUED BY THE GOVERNMENT OF MAHA RASHTRA FOR ESTABLISHING THE INDUSTRIES IN THE BY THE GOVERNMENT OF MAHA RASHTRA FOR ESTABLISHING THE INDUSTRIES IN THE BACKWARD AREA OF AURANGABAD. THE TRIBUNAL HAD OBSERVED AS UNDER: - 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD RECEIVED CAPITAL INCENTI VE SUBSIDY UNDER THE PACKAGE INCENTIVE SCHEME, 1993 OF GOVERNMENT OF MAHARASHTRA FOR ESTABLISHING INDUSTRIES IN THE BACKWARD AREA OF AURANGABAD. THE ASSESSEE HAD CLAIMED THE SAID RECEIPT TO BE CAPITAL IN NATURE AS THE OBJECT OF THE SUBSIDY WAS TO SET UP U NITS IN BACKWARD AREAS. THE SAID PLEA OF THE ASSESSEE HAS BEEN ACCEPTED BY THE CIT(A), IN TURN, RELYING ON THE RATIO LAID DOWN BY HONBLE BOMBAY HIGH COURT IN CIT VS. RELIANCE INDUSTRIES LTD. (SUPRA), AGAINST WHICH THE REVENUE IS NOT IN APPEAL, HENCE, THE SAID PROPOSITION IS ACCEPTED IN THE HANDS OF THE ASSESSEE. THE SECOND PROPOSITION RAISED BY THE ASSESSING OFFICER THAT THE SAID SUBSIDY IS TO BE ADDED AS INCOME UNDER SECTION 41(1) OF THE ACT, IN VIEW OF THE RATIO LAID DOWN BY HONBLE BOMBAY HIGH COURT I N NECTOR BEVERAGES (P) LTD. VS. DCIT (2004) 267 ITR 385 (BOM) HAS BEEN REVERSED BY THE CIT(A) SINCE THE HONBLE SUPREME COURT HAS REVERSED THE DECISION OF HONBLE BOMBAY HIGH COURT IN NECTOR BEVERAGES (P) LTD. VS. DCIT (SUPRA). THE REVENUE IS ALSO NOT IN APPEAL AGAINST THE SAID PROPOSITION AND THE SAME STANDS ACCEPTED. THE THIRD PROPOSITION PROPOSED BY THE ASSESSING OFFICER WAS THAT IN THE ALTERNATE EXPLANATION 10 TO SECTION 43(1) OF THE ACT IS APPLICABLE AND THE VALUE OF CAPITAL INCENTIVE IS TO BE REDUCE D FROM THE COST OF ASSETS IN RESPECT OF WHICH THE SAID SUBSIDY HAD BEEN RECEIVED AND THE CIT(A) HAS APPLIED THE SAME. ITA NO. 66 2 /PN/20 1 4 SURAJ COTEX 7 10. THE PERUSAL OF THE PACKAGE SCHEME OF INCENTIVE, 1993 PLACED AT PAGES 21 TO 44 REFLECT THAT THE PURPOSE OF THE SCHEME WAS TO ESTABLISH INDUSTRIES IN THE UNDERDEVELOPED AREAS OF THE MAHARASHTRA STATE UNDER WHICH THE GOVERNMENT APPOINTED SICOM LTD. TO ACT AS AN AGENT OF THE GOVERNMENT FOR THE IMPLEMENTATION OF THE SCHEME. UNDER THE 1993 SCHEME, THE PROCEDURES WERE FRAMED AND THE ENTREPREN EUR WAS ENTITLED TO SPECIAL CAPITAL INCENTIVE OF VARYING PERCENTAGE OF THE GROSS FIXED CAPITAL INVESTMENT, SUBJECT TO CEILING IN RESPECT OF ELIGIBLE UNIT, PROVIDED WHERE THE ENTREPRENEUR DOES NOT OPT FOR AVAILING SALES TAX INCENTIVE UNDER PART - III OF 1993 SCHEME. UNDER THE SAID SCHEME A GRANT OF RS.15 LAKHS WAS DISBURSED TO THE ASSESSEE. 11. WE FIND THAT SIMILAR ISSUE OF TAXABILITY OF THE CAPITAL INCENTIVE RECEIVED UNDER THE PACKAGE SCHEME INCENTIVE, 1993 AROSE BEFORE THE TRIBUNAL IN ACIT VS. M/S. ENDRESS + HAUSER FLOWTEC (INDIA) PVT. LTD., IN ITA NO.1206/PN/2011, M/S. ENDRESS + HAUSER FLOWTEC (INDIA) PVT. LTD., VS. ACIT IN ITA NO.1215/PN/2011 AND CROSS OBJECTION, RELATING TO ASSESSMENT YEAR 2007 - 08 AND M/S. ENDRESS + HAUSER FLOWTEC (INDIA) PVT. LTD., VS. ACIT IN ITA NO.295/PN/2013, RELATING TO ASSESSMENT YEAR 2008 - 09, ORDER DATED 25.02.2015 AND IN LEAD ORDER I.E. ITA NO. 1206/PN/2011, THE TRIBUNAL CONSIDERED THE RATIO LAID DOWN BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF EVEREST INDUSTRIES LTD. VS. A CIT VIDE ITA NO.814/MUM/2007 RELATING TO ASSESSMENT YEAR 2003 - 04 ORDER DATED 04.12.2009 , WHEREIN IT WAS HELD AS UNDER: - 10.4 COMING TO THE MERITS OF THE CASE, THE 'G' BENCH OF THE TRIBUNAL IN THE CASE OF M/S ZENITH FIBRES LTD (SUPRA) HAD CONSIDERED THE IN CENTIVE SCHEME OF THE MAHARASHTRA GOVERNMENT OF 1993 AND CAME TO A CONCLUSION THAT THIS SCHEME IS IDENTICAL TO THE INCENTIVE SCHEME OF 1979 CONSIDERED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF CIT VS RELIANCE INDUSTRIES LTD 88 ITD 273 (MUM)(SB) A ND CONCLUDED THAT THE RECEIPT IN QUESTION IS CAPITAL RECEIPT. 12. THE TRIBUNAL AFTER CONSIDERING THE SCHEME OF 1993 OBSERVED AS UNDER: - 33. THE CONTENTION OF THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE WAS THAT 1993 SCHEME FORMULATED BY THE GOVERNMENT OF MAHARASHTRA HAS BEEN CONSIDERED BY THE MUMBAI BENCH OF THE TRIBUNAL IN EVEREST INDUSTRIES VS. ACIT (SUPRA), WHEREIN IT HAS BEEN HELD THAT THE INCENTIVE RECEIVED UNDER THE SCHEME WAS CAPITAL RECEIPT. IT HAS ALSO BEEN HELD BY THE MUMBAI BENCH OF THE TRIBUNAL THAT THE SCHEME REFERRED TO IN THE CASE OF RELIANCE INDUSTRIES LTD., I.E. 1979 SCHEME WAS IDENTICAL TO THE 1993 SCHEME. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE INDUSTRIES LTD., (SUPRA) IN THE APPEAL FILED BY REVENUE A GAINST THE ORDER OF SPECIAL BENCH OF MUMBAI TRIBUNAL REPORTED IN (2004) 88 ITD 273 (SB) (MUM) HAVE HELD THAT THE SUBSIDY RECEIVED UNDER THE 1979 SCHEME FOR SETTING UP NEW UNITS IN BACKWARD AREAS WAS A CAPITAL RECEIPT. APPLYING THE SAME RATIO TO THE FACTS OF THE PRESENT CASE, WE ARE IN CONFORMITY WITH THE ORDER OF THE CIT(A) IN HOLDING THAT THE GRANT OF RS.30 LAKHS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS A CAPITAL RECEIPT AND NOT TAXABLE IN THE HANDS OF THE ASSESSEE. FURTHER, THERE IS NO MERIT IN INVOKING OF THE PROVISIONS OF EITHER SECTION 41(1) OR SECTION 43(1)(B) OF THE ACT. THUS, GROUND OF APPEAL NO.3 RAISED BY THE REVENUE IS DISMISSED. 13. THE ISSUE BEFORE US IS RESTRICTED TO THE INVOKING OF EXPLANATION 10 TO SECTION 43(1) O F THE ACT, UNDER WHICH IT IS PROVIDED THAT WHERE PORTION OF COST OF ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MET DIRECTLY OR INDIRECTLY BY THE CENTRAL GOVERNMENT OR THE STATE GOVERNMENT OR ANY AUTHORITY ESTABLISHED UNDER ANY LAW OR BY ANY OTHER PERSON, IN T HE FORM OF SUBSIDY OR GRANT OR REIMBURSEMENT, THEN SO MUCH OF THE COST AS IS RELATABLE TO SUCH SUBSIDY OR ITA NO. 66 2 /PN/20 1 4 SURAJ COTEX 8 GRANT OR REIMBURSEMENT, SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE. IT IS FURTHER PROVIDED THEREUNDER THAT WHERE SUCH SUBS IDY OR GRANT OR REIMBURSEMENT OF SUCH NATURE CANNOT BE DIRECTLY RELATABLE TO THE ASSET ACQUIRED, SO MUCH OF THE AMOUNT WHICH BEARS TO ALL THE ASSETS IN RESPECT OF OR WITH REFERENCE TO WHICH THE SUBSIDY OR GRANT OR REIMBURSEMENT IS SO RECEIVED, SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET TO THE ASSESSEE. IN OTHER WORDS, IN ORDER TO INVOKE THE PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT, IT IS NECESSARY TO ESTABLISH THAT THE SUBSIDY WAS DIRECTLY OR INDIRECTLY UTILIZED FOR MEETING THE C OST OR PORTION OF COST OF ASSET ACQUIRED. WHERE IT IS FOUND THAT THE COST FOR ACQUIRING THE ASSET WAS DIRECTLY OR INDIRECTLY MET OUT OF THE SUBSIDY, THEN THE VALUE OF SUBSIDY IS TO BE REDUCED FROM THE COST OF THE ASSET TO RE - WORK THE DEPRECIATION ON THE S AID ASSET. UNDER THE PROVISO, IT IS ALSO PROVIDED THAT IT IS NECESSARY TO SHOW THAT THE SUBSIDY HAD BEEN DIRECTLY OR INDIRECTLY USED FOR THE ACQUISITION OF AN ASSET. THE FACTS OF EACH CASE IN THIS REGARD HAVE TO BE SEEN TO DETERMINE WHETHER THE SUBSIDY H AS BEEN GRANTED TO MEET THE COST OF ASSET DIRECTLY OR INDIRECTLY. SIMILAR PROPOSITION HAS BEEN LAID DOWN BY THE KOLKATA BENCH OF THE TRIBUNAL IN DCIT VS. RASOI LTD. (SUPRA) AND ALSO BY VISAKHAPATNAM BENCH OF THE TRIBUNAL IN SASISRI EXTRACTIONS LTD. VS. AC IT (SUPRA). IT HAS BEEN FURTHER LAID DOWN BY THE TRIBUNAL IN SASISRI EXTRACTIONS LTD. VS. ACIT (SUPRA) THAT EVEN AFTER INSERTION OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT, THE BASIC PRINCIPLE UNDERLYING THE DECISION OF APEX COURT IN CIT VS. P.J. CHEMI CALS LTD. (1994) 210 ITR 830 (SC) STILL HOLDS THE FIELD. THE TRIBUNAL HAS HELD AS UNDER: - 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. IN OUR CONSIDERED OPINION, EVEN AFTER INSERTION OF EXPLN. 10 TO S. 43(1) OF THE AC T, THE BASIC PRINCIPLE UNDERLYING IN THE DECISION OF THE APEX COURT IN THE CASE OF PJ. CHEMICALS LTD. (SUPRA) STILL HOLDS THE FIELD. THEIR LORDSHIPS ANALYSED THE EXPRESSION 'MET DIRECTLY OR INDIRECTLY TO COME TO THE CONCLUSION THAT ONLY IN A CASE WHERE A SUBSIDY OR OTHER GRANT WAS GIVEN TO OFFSET THE COST OF AN ASSET, SUCH PAYMENT/GRANT GRANT WAS GIVEN TO OFFSET THE COST OF AN ASSET, SUCH PAYMENT/GRANT WOULD FALL WITHIN THE EXPRESSION 'MET', WHEREAS THE SUBSIDY RECEIVED MERELY TO ACCELERATE THE INDUSTRIAL DEVELOPMENT OF THE STATE CANNOT BE CONSIDERED AS PAYMENTS MADE SPEC IFICALLY TO MEET A PORTION OF THE COST OF THE ASSETS. 11. A CAREFUL PERUSAL OF 'TARGET 2000' SCHEME SHOWS THAT THE SCHEME WAS INTENDED TO ACCELERATE INDUSTRIAL DEVELOPMENT OF THE STATE AND THE INCENTIVE WAS GIVEN FOR SETTING UP OF INDUSTRIES IN ANDHRA PRADESH AND FOR THE PURPOSE OF DETERMINING THE AMOUNT OF SUBSIDY TO BE GIVEN, COST OF ELIGIBLE INVESTMENT WAS TAKEN AS THE BASIS, THOUGH IT WAS NOT SPECIFICALLY INTENDED TO SUBSIDISE THE COST OF THE CAPITAL. UNDER THE CIRCUMSTANCES, WE ARE OF THE VIEW THA T THE INCENTIVE IN THE FORM OF SUBSIDY CANNOT BE CONSIDERED AS A PAYMENT DIRECTLY OR INDIRECTLY TO MEET ANY PORTION OF THE ACTUAL COST AND THUS IT FALLS OUTSIDE THE KEN OF EXPLN. 10 TO S. 43(1) OF THE ACT. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE OF TH E VIEW THAT FOR THE PURPOSE OF COMPUTING DEPRECIATION ALLOWABLE TO THE ASSESSEE, THE SUBSIDY AMOUNT CANNOT BE REDUCED FROM THE COST OF THE CAPITAL ASSET. THE AO IS DIRECTED ACCORDINGLY. 14. THE PERUSAL OF THE PACKAGE SCHEME OF INCENTIVE, 1993 REFLECT THA T THE SCHEME WAS FORMULATED TO GIVE INCENTIVE FOR SETTING UP THE INDUSTRIES IN CERTAIN BELTS OF MAHARASHTRA AND FOR THE PURPOSE OF WORKING OUT THE AMOUNT OF SUBSIDY, THOUGH THE COST OF ELIGIBLE INVESTMENT WAS TAKEN AS THE BASE, BUT THE SAID SUBSIDY WAS NOT SPECIFICALLY INTENDED TO MEET THE COST OF ASSETS. IN VIEW THEREOF, IT COULD NOT BE HELD THAT THE INCENTIVE RECEIVED BY THE ASSESSEE UNDER THE PACKAGE SCHEME OF 1993 IN THE FORM OF SUBSIDY WAS COVERED UNDER ITA NO. 66 2 /PN/20 1 4 SURAJ COTEX 9 PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT AND CONSEQUENTLY, THE SUBSIDY AMOUNT WAS NOT TO BE REDUCED FROM THE COST OF THE ASSETS. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED NOT TO REDUCE THE VALUE OF THE SUBSIDY FROM THE COST OF ASSETS WHILE ALLOWING DEPRECIATION ON THE SAID ASSETS O F THE ASSESSEE. 1 2 . THE COMPARISON OF THE PACKAGE SCHEME OF INCENTIVES, 1993 AND PACKAGE SCHEME OF INCENTIVES, 2001 AS REFERRED TO BY US IN THE PARAS HEREINABOVE REFLECTS THAT TWO SCHEMES ARE SIMILARLY OFFERED FOR ESTABLISHING SSI UNITS IN UNDER - DEVELOPE D AREAS. UNDER THE FIRST SCHEME, IN THE CASE OF ROHIT EXHAUST SYSTEMS PVT. LTD. VS. ACIT (SUPRA) , THE ASSESSEE THEREIN HAD ESTABLISHED A UNIT IN THE DISTRICT OF AURANGABAD. HOWEVER, THE ASSESSEE BEFORE US HAS ESTABLISHED A UNIT IN THE DISTRICT OF JALNA. THE CLAIM OF THE ASSESSEE BEFORE US HAS BEEN THAT THOUGH THE QUANTIFICATION OF THE CLAIM IS LINKED TO THE COST OF FIXED ASSETS , HOWEVER, THE PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT ARE NOT TO BE INVOKED SINCE THE INCENTIVE HAS BEEN GIVEN TO THE ASSESSEE FOR ESTABLISHING A UNIT AND NOT FOR MEETING THE COST OF FIXED ASSETS. IN VIEW OF THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN ROHIT EXHAUST SYSTEMS PVT. LTD. VS. ACIT (SUPRA), WE HOLD THAT THERE IS NO MERIT IN THE ORDERS PASSED BY THE AUTHORITIES BELOW. THE ASSESSEE HAD RECEIVED THE SUBSIDY FOR SETTING UP A UNIT IN THE SPECIFIED AREA AND SUCH SUBSIDY RECEIVED BY THE ASSESSEE IS A CAPITAL RECEIPT IN THE HANDS OF ASSESSEE, COST OF WHICH IS NOT TO BE REDUCED FROM THE WRITTEN DOWN VALU E OF FIXED ASSETS. FURTHER, THE CIT(A) HAD PLACED RELIANCE ON SERIES OF DECISIONS, WHICH WERE ALSO RELIED UPON BY THE CIT(A) WHILE DECIDING THE APPEAL IN THE CASE OF ROHIT EXHAUST SYSTEMS PVT. LTD. VS. ACIT (SUPRA). THE TRIBUNAL HAS CONSIDERED THE SAID R ELIANCE AND HAD DECIDED THE ISSUE HOLDING THAT THE INCENTIVE RECEIVED BY THE ASSESSEE UNDER PACKAGE SCHEME OF INCENTIVE, 1993 IN THE FORM OF SUBSIDY WAS NOT COVERED UNDER THE PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT. FOLLOWING ITA NO. 66 2 /PN/20 1 4 SURAJ COTEX 10 THE SAME PAR ITY OF REASONING, WE HOLD THAT THE PACKAGE SCHEME OF INCENTIVES 2001 IS SIMILAR TO THE PACKAGE SCHEME OF INCENTIVES, 1993 AND THE INCENTIVE RECEIVED BY THE ASSESSEE BEFORE US IS NOT COVERED UNDER THE PROVISIONS OF EXPLANATION 10 TO SECTION 43(1) OF THE ACT . CONSEQUENTLY, THE SUBSIDY AMOUNT RECEIVED BY THE ASSESSEE IS NOT TO BE REDUCED FROM THE COST OF ASSETS. THE ASSESSING OFFICER IS THUS, DIRECTED TO RE - WORK THE DEPRECIATION ALLOWABLE IN THE HANDS OF ASSESSEE ON THE AFORESAID ASSETS. THE GROUNDS OF APPE AL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 1 3 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 10 TH DAY OF FEBRU ARY , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (S USHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 10 TH FEBR UARY , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE AP PELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) , AURANGABAD ; 4. / THE CIT , AURANGABAD ; 5. , , / DR B , ITAT, PUNE; / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE