Tribunal rules in favor of assessee on grants and depreciation, dismisses disallowance under Section 80P(2)(d)

The Tribunal upheld the deletion of additions on account of grants received under SGSY and depreciation claimed on plant and machinery acquired through grants/subsidies. It also dismissed the disallowance under Section 80P(2)(d) of the Income Tax Act and ruled that interest earned on SGSY grants should not be taxed. The Tribunal favored the assessee in all contested issues, dismissing the Revenue's appeal and allowing the assessee's cross-objection.

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Issues Involved:
1. Deletion of addition on account of grant received under Sampoorna Gramin Swarojgar Yogna (SGSY).
2. Deletion of addition on account of depreciation claimed on plant and machinery acquired through grant/subsidy.
3. Disallowance under Section 80P(2)(d) of the Income Tax Act.
4. Taxation of interest earned on SGSY grant.

Summary:

1. Deletion of Addition on Account of Grant Received under SGSY:
The Revenue challenged the deletion of Rs. 1,85,04,494/- received under the Sampoorna Gramin Swarojgar Yogna (SGSY) by the Commissioner of Income Tax (Appeals). The Tribunal found that the issue was already decided in favor of the assessee in their own case for the Assessment Year 2006-07. The grant was received for specific objectives under a Memorandum of Understanding and was not to be treated as a revenue receipt. Therefore, the Tribunal upheld the deletion of the addition and dismissed the Revenue's grounds on this issue.

2. Deletion of Addition on Account of Depreciation Claimed on Plant and Machinery Acquired through Grant/Subsidy:
The Revenue contested the deletion of depreciation on plant and machinery acquired through a 70% loan and 30% grant scheme from NDDB. The Tribunal noted that this issue had been resolved in favor of the assessee in previous years (Assessment Years 2002-03 to 2007-08 and 2010-11). Following these precedents, the Tribunal upheld the deletion of the addition and dismissed the Revenue's grounds on this issue.

3. Disallowance under Section 80P(2)(d) of the Income Tax Act:
The Revenue appealed against the deletion of Rs. 1,88,18,927/- disallowed under Section 80P(2)(d). The Tribunal observed that the assessee had sufficient own funds to cover the investments made in fixed deposits with Cooperative Banks and Societies. Therefore, the disallowance under Section 80P(2)(d) was unwarranted. The Tribunal dismissed the Revenue's grounds on this issue, following the decisions in the assessee's own case for previous years.

4. Taxation of Interest Earned on SGSY Grant:
The assessee's cross-objection concerned the interest of Rs. 2,40,043/- earned on the SGSY grant, which was taxed as revenue receipt. The Tribunal held that the interest earned on the SGSY grant, kept in a separate bank account for specific purposes, should be treated as part of the grant. Since the grant itself was not considered income, the interest earned thereon was also not liable to be taxed. The Tribunal allowed the assessee's cross-objection on this issue.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, upholding the decisions made in favor of the assessee on all contested issues.

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