MAHAJAN CONVEYER INDUSTRIES,KANGRA V. ITO-WARD,PALAMPUR, PALAMPUR

ITA 1053/CHANDI/2024

AI Insights

The case involves M/s Mahajan Conveyer Industries, which appealed against the orders of the CIT(A) and the AO regarding the taxability of a capital subsidy and the subsequent depreciation claimed on it. The appeals for multiple assessment years were consolidated due to common issues arising from the same set of facts concerning the treatment of a capital subsidy received from the government. The primary legal contention revolved around whether the capital subsidy should be deducted from the cost of plant and machinery as per Section 43(1) of the Income Tax Act, which affects the depreciation claimed. The CIT(A) upheld the AO's decision, leading to the appeal before the Income Tax Appellate Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716690 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 14-10-2024
• Other Referred Cases: CIT vs. Mayor Hotels (1995) 215 ITR 788(H)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA DHAR LD.
• Assessee Lawyers: J.S.BHASIN LD
• Keywords: Set aside; Depreciation; Capital receipt; Revision of order
• Section: 147; 148; 143(3); 154; 263

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH HYBRID HEARING BEFORE HON’BLE SHRI LALIET KUMAR, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM 1. आयकर अपील सं. / ITA 1053/CHANDI/2024 (िनधाŊरण वषŊ / Assessment Year: 2013-14) & 2. आयकर अपील सं. / ITA 1054/CHANDI/2024 (िनधाŊरण वषŊ / Assessment Year: 2014-15) & 3. आयकर अपील सं. / ITA 1055/CHANDI/2024 (िनधाŊरण वषŊ / Assessment Year: 2015-16) & 4. आयकर अपील सं. / ITA 1056/CHANDI/2024 (िनधाŊरण वषŊ / Assessment Year: 2016-17) & 5. आयकर अपील सं. / ITA 1052/CHANDI/2024 (िनधाŊरण वषŊ / Assessment Year: 2017-18) M/s Mahajan Conveyer Industries Plot No 32 to 35, Industrial Area, Bai Attarian Tehsil Indora Kangra (HP) 176202 बनाम/ Vs. ACIT Circle-1 Palampur ̾थायीलेखासं./जीआइआरसं./PAN/GIR No. AANFM-3447-Q (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/ Appellant by : Shri J.S.Bhasin (Advocate) – Ld. AR ŮȑथŎकीओरसे/Respondent by : Smt. Priyanka Dhar (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 06-08-2025 घोषणाकीतारीख /Date of Pronouncement : 18-08-2025 Printed from counselvise.com 2 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by assessee have common issues. First, we take up appeal for Assessment Year (AY) 2013-14 which arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 29-08-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 147 r.w.s.144B of the Act on 24-03-2022. The grounds of appeal read as under: - 1. That the core issue of taxability of capital subsidy u/s 43(1), having arose in Assessment year 2012-13 with invocation of jurisdiction u/s 147/148 in that year to disallow depreciation on such cost, followed by its recurring effect in succeeding five years, the Ld. CIT(A) committee grave legal error in upholding the reopening of case u/s 147 in later years, without first adjudicating the issue in AY 2012-13, pending before him, with complete submissions already filed. 2. That without prejudice to above, the Ld. CIT(A) grossly erred in facts and in law in summarily upholding the reopening of case u/s 148, by way of a most cryptic finding, without appreciating the submissions and the binding judicial decisions, in correct perspective. 3. That the embargo put by first proviso to Section 147, as applicable to this case, when not complied with by Ld. A.O., the Ld. CIT(A) gravely erred to ignore this crucial aspect of the matter while upholding the reopening u/s 147/148. 5. That the subsidy received from State Government, being capital receipt in nature, was not covered by Section 43(1). The contrary findings of the Ld. A.O. and confirmation of the same by Ld. CIT(A), in total disregard of Hon'ble Jurisdictional High Court, is unsustainable being most arbitrary, unjust and illegal. 6. That even otherwise, the disallowance having increased the business profits of assessee, the same would have been allowed deduction u/s 801C. Printed from counselvise.com 3 7. That the impugned order is void in laws, when personal hearing through VC close of case, though requested for, was not allowed by Ld. CIT(A). 8. That the impugned order, being totally de hors the facts and the legal position, is liable to be set aside and quashed. 2. The Ld. AR advanced arguments on legal grounds as well as on merits and supported the case of the assessee. The Ld. Sr. DR, on the other hand, supported the assessment as framed by Ld. AO. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. Proceedings before lower authorities 3.1 The assessee’s return of income was scrutinized u/s 143(3) on 12-11-2015. The assessee-firm is stated to be engaged in manufacturing of conveyer belts. The assessee claimed deduction u/s 80-IC @25% of profits derived from that business. Pursuant to receipt of information that during FY 2011-12, the assessee had received capital subsidy of Rs.29.52 Lacs from the Government of Himachal Pradesh vide sanction order dated 18-10-2010 under 15% Central Investment Subsidy on Plant & Machinery in respect of its unit. However, the subsidy was not deducted from the cost of plant & machinery as required u/s 43(1) of the Act which led the assessee to claim excess depreciation of Rs.4.42 Lacs in FY 2011-12. Upon perusal of Fixed Assets Schedule for this year, it was similarly observed that the assessee had not reduced any capital subsidy / portion of capital subsidy from the cost of its plant and machinery and therefore, it had claimed excess depreciation of Rs.3.76 Lacs in this Printed from counselvise.com 4 year also. Accordingly, the case was reopened and notice u/s 148 was issued to the assessee on 30-03-2021. In response, the assessee declared same income. The reasons of reopening were supplied as per assessee’s request. Though the assessee opposed reopening of the case, Ld. AO rejected the objections by order dated 14-02-2022. The assessee again objected on 18-02-2022 which was also disposed-off vide order dated 23-02-2022. 3.2 On merits, Ld. AO, considering the expression ‘actual cost’ as defined u/s 43(1), held that the portion of the cost which was met directly or indirectly by any other person or authority was to be reduced from the actual cost. The cost of Rs.29.52 Lacs, in assessee’s case, was met by the authority on account of 15% Central Investment Subsidy on Plant & Machinery in respect of the unit set up by the assessee. The case law of CIT vs. Mayor Hotels (1995) 215 ITR 788(H) was distinguishable since in that case, the subsidy was granted to promote industries in backward areas whereas in the present case the subsidy was granted towards Plant & Machinery. Accordingly, the excess depreciation of Rs.3.76 Lacs was added back to the income of the assessee. 3.3 The Ld. CIT(A) upheld the reopening of the case. On merits, Ld. CIT(A) found Explanation-10 to Sec. 43(1) applicable to the case of the assessee which provide that where a portion of the cost of an asset acquired by the assessee was met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or Printed from counselvise.com 5 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 the actual cost of the asset to the assessee. It was accordingly concluded that the assessee claimed excess depreciation and the assessment was thus upheld. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 4. From the facts, it emerges that though the assessee’s return of income was scrutinized u/s 143(3) on 12-11-2015, upon formation of belief of escapement of income, the case was reopened and notice u/s 148 was issued on 30-03-2021. The same stem from assessment made in the hands of the assessee for AY 2012-13. From assessee’s submissions to Ld. CIT(A), it is quite clear that assessment of AY 2012- 13 was completed u/s 143(3) on 29-12-2014. However, the same was subjected to revision u/s 263 by revisionary authority on 26-02-2016. The consequential order was passed by Ld. AO on 05-09-2016 whereby the income was further enhanced. The order was proposed to be rectified u/s 154 on 03-11-2016 to assess capital subsidy of Rs.29.52 Lacs. After assessee’s objections on 11-11-2016 & 14-06- 2017, no rectification was carried out. However, order dated 05-09- 2016 was against rectified u/s 154 on 22-08-2017 to re-compute disallowance of interest. Since, no appeal was filed against the same, this order attained finality. However, case was reopened and notice u/s 148 was issued on 11-03-2019 for the reason that the capital subsidy of Rs.29.52 Lacs was required to be reduced from cost of asset which Printed from counselvise.com 6 was not done and the same led to claim of excess depreciation. The Ld. AO carried out said adjustment which is subject matter of assessee’s further challenge before Ld. first appellate authority and pending adjudication. Following the same findings of AY 2012-13, the case for this year has been reopened which is in further challenge before us. 5. Upon due consideration of factual matrix, the clinching position that emerges is that the whole case of Ld. AO is based on view taken in AY 2012-13 which is pending for adjudication before Ld. CIT(A). The assessee’s first appeal for AY 2012-13 would have direct bearing on computation of Written Down Value (WDV) of fixed asset for this year and consequential claim of depreciation in all the impugned years. It could also be seen that the assessee has been subjected to multiple proceedings in AY 2012-13 and the assessee has challenged the legality of the proceedings for AY 2012-13 also. Faced with this situation, we deem it fit to restore all these appeals back to the file of Ld. CIT(A) with a direction to first adjudicate lead AY 2012-13 which would have direct bearing on all the subsequent years. Accordingly, all the appeals stand restored back to Ld. CIT(A) for de novo adjudication with a direction to the assessee to plead and prove its case forthwith. All the issues are kept open. Printed from counselvise.com 7 6. All the appeals stand allowed for statistical purposes. Order Pronounced on18-08-2025. Sd/- Sd/- (LALIET KUMAR) (MANOJ KUMAR AGGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 18-08-2025. आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "