Tribunal rules in favor of taxpayer on VAT subsidy & CSR expenditure claims, directs verification on windmill depreciation.

The Revenue's appeal was dismissed as it failed to provide any higher court decision reversing the Tribunal's earlier order. The Tribunal upheld that VAT subsidy is a capital receipt, directing the deletion of the subsidy addition. The claim for corporate social responsibility expenditure was allowed based on previous decisions. The Tribunal directed verification for depreciation eligibility on windmills. The disallowance of additional depreciation and license fee was confirmed by the Tribunal. The Revenue's appeal was dismissed, while the assessee's appeal was partly allowed.

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Issues Involved:
1. Deletion of addition towards subsidy received from the Andhra Pradesh Government.
2. Claim of corporate social responsibility expenditure.
3. Confirmation of disallowance of depreciation claimed under section 32 of the Act.
4. Confirmation of disallowance of additional depreciation claimed under section 32(1)(iia) of the Act.
5. Confirmation of addition on account of disallowance of license fee.

Detailed Analysis:

1. Deletion of Addition towards Subsidy Received from the Andhra Pradesh Government:
The first effective ground raised by the Revenue relates to the deletion of an addition of Rs. 10,85,54,000/- made towards subsidy received from the Andhra Pradesh Government. The Assessing Officer (AO) considered the subsidy as taxable income, while the assessee claimed it as a capital receipt. The CIT(A) directed the AO to delete the addition based on the Tribunal's decision in the assessee's own case for the assessment year 2011-12. The Tribunal, following the Supreme Court's decision in Shree Balaji Alloys vs. CIT, upheld that VAT subsidy is in the nature of a capital receipt. The Revenue's appeal was dismissed as it could not provide any higher court's decision reversing the Tribunal's earlier order.

2. Claim of Corporate Social Responsibility Expenditure:
The second ground involves the claim of Rs. 24,52,625/- as corporate social responsibility (CSR) expenses. The AO disallowed the expenses, stating they were not incurred wholly and exclusively for business purposes as per section 37(1) of the Act. The CIT(A) directed the AO to delete the addition, following the Tribunal's decision in the assessee's own case for the assessment year 2011-12. The Tribunal noted that the explanation 2 to section 37 of the Act, inserted by Finance Act, 2014, is not applicable for the assessment year 2014-15. Respectfully following the earlier decision, the Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's ground.

3. Confirmation of Disallowance of Depreciation Claimed under Section 32 of the Act:
The assessee claimed Rs. 42,73,79,644/- as depreciation, including 80% on certain plant and machinery. The AO restricted the depreciation to 15%, categorizing the assets under "Renewable Energy devices being windmills and any specially designed device which run on windmills." The CIT(A) confirmed the AO's decision. The Tribunal directed the AO to verify whether the windmills were installed on or before 31.03.2012 or on or after 01.04.2012. If installed on or before 31.03.2012, the assessee would be eligible for 80% depreciation; otherwise, only 15%.

4. Confirmation of Disallowance of Additional Depreciation Claimed under Section 32(1)(iia) of the Act:
The assessee claimed Rs. 3,01,17,327/- as additional depreciation. The AO disallowed the claim due to a mismatch in invoice dates and lack of credible evidence. The CIT(A) confirmed the disallowance. The Tribunal upheld the CIT(A)'s order as the assessee failed to provide any documentary evidence to justify the claim of additional depreciation.

5. Confirmation of Addition on Account of Disallowance of License Fee:
The assessee claimed Rs. 5,88,18,500/- as a license fee paid to Wind Direct GmbH. The AO disallowed the claim, considering it a capital expenditure due to the enduring benefit of the 20-year agreement. The CIT(A) confirmed the disallowance. The Tribunal, following its earlier decision in the assessee's own case for the assessment year 2012-13, held that the license fee is revenue in nature. The Tribunal directed the AO to allow the deduction of the license fee as claimed by the assessee.

Conclusion:
- The appeal filed by the Revenue was dismissed.
- The appeal filed by the assessee was partly allowed.

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