TaxTMI 
TaxTMI 
2008 (1) TMI 485
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....re the Tribunal. 2. The facts of the case, in brief, are as follows. The assessee is engaged in the business of manufacturing/processing of edible oils. During the previous year relevant to the assessment year under consideration the assessee received an amount of Rs. 20,00,000 as investment subsidy under a scheme floated by Andhra Pradesh State Government known as 'Target 2000'. The assessee has not declared the receipt as income of the year under consideration. During the course of assessment proceedings it was contended that the subsidy was given to the unit because of the fact that it has established an eligible industrial unit in the notified area and thus the receipt was capital in nature and not taxable. The AO called upon the ass....
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....uch assets. It may be noticed that the assessee relied upon the following decisions in support of his contention that the impugned subsidy is not directly or indirectly connected to the assets and in the absence of clear mention that the subsidy was given to meet a portion of the cost of the asset, the same need not be considered for inclusion of actual cost of the assets: (1) CIT vs. Godavari Plywoods Ltd. (1987) 62 CTR (AP) 179 : (1987) 168 ITR 632 (AP); (2) CIT vs. P.J. Chemicals Ltd. (1994) 121 CTR (SC) 201 : (1994) 210 ITR 830 (SC). 4. The learned AO was of the view that the case law cited by the assessee are distinguishable on facts inasmuch as the said decisions were rendered prior to insertion of Expln. 10 to s. 43(1) of th....
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....wever, of the opinion that Expln. 10 to s. 43(1) inserted w.e.f. 1st April, 1999, enlarges the scope of the expression 'actual cost'. Though in the present case the subsidy is not given directly to meet the cost of the asset, indirect motive of the State Government in giving subsidy was to bring down the cost of the investment of the assessee and therefore it can be said that the State Government has met the cost indirectly. He accordingly affirmed the action of the AO. Further aggrieved, the assessee is in appeal before us. 7. Learned counsel appearing on behalf of the assessee filed a paper book containing sixty pages and by adverting our attention to pp. 12, 18, 35, 46 and 47 of the paper book it was submitted that the scheme under wh....
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....reimbursement (by whatever name called) has to be reduced from the cost of the asset. Thus Expln. 10 to s. 43(1) as well as the main provision of s. 43(1) are couched in an identical manner stressing upon the fact that only the cost which is 'met directly or indirectly' has to be reduced from the cost of the asset. Sec. 43(1) of the Act was the subject-matter of consideration by the apex Court in the case of P.J. Chemicals Ltd., wherein their Lordships observed at p. 839 of the report as under: "The question in the present context is not whether if a portion of the cost is met directly or indirectly by any other person or authority, it should be deducted or not. Quite obviously, the plain meaning of the section is that it shall be. But t....
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....hat a specified percentage of the fixed capital cost was taken as the basis for determining the subsidy should not be mistaken as a payment intended to subsidise the cost of capital of the new industry. He thus strongly relied upon the aforecited decisions. 10. On the other hand, learned Departmental Representative relied upon the orders of the tax authorities and submitted that 'Target 2000' scheme is a different concept from the schemes considered by the apex Court in the case of P.J. Chemicals Ltd. and Andhra Pradesh High Court in the case of Godavari Plywoods Ltd. In the afore cited decisions, the intention of the Government was to induce the entrepreneurs to move to backward areas, whereas in the instant case, 'Target 2000' scheme i....