2015 (10) TMI 1448

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....Income Tax (Appeals) ["(CIT) "for short hereafter] has erred in law and in fact in sustaining the reduction from the cost of fixed assets an amount of Rs. 60,63,67,626/-, which was provided by the Government of Assam, and thereby in sustaining the action of the learned Assessing Officer allowing reduced depreciation on such reduced cost of fixed assets." ITA 57/Gau/2011-AY.2007-08: 'l. For that, on the facts and in the circumstances, the learned Commissioner of Income Tax (Appeals) ["CIT(A) " "for short hereafter] has erred in law and in fact in sustaining the reduction from the cost of fixed assets the amount of Rs. 4,71,48,391/- (ADB grant against plant and machinery) and Rs. 48,53,00,000/- (Capital Grant under Accelerated Power....

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....e ground of appeal is about reduction from the cost of fixed assets an amount of Rs. 60,63,67,626/-, which was provided by the Government of Assam. During the assessment proceedings, the AO found that P & L account of the assessee showed revenue subsidies and grants as nil whereas Schedule 2 of the Balance Sheet revealed that it had received following grants towards cost of capital assets: a. APDRP-Rs. 59.47 Crores b. ADB-Rs. 1.16 Crores. The AO reduced the opening balance of the Plant and Machinery(P&M) with the capital grant of Rs. 60.63 Crores. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA). After considering the submissions of the assessee and the order of the AO,....

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....that the grants and subsidies were to be considered as promoter's contribution. Departmental Representative (DR) supported the order of the FAA. He relied upon the cases of CIT v. Shree Renuka Sugars Ltd. (IT APPEAL NOS. 5006 & 5007 OF 2011 Date 31-08-2012) (Kar.) and Steel Authority of India Ltd. v. CIT [2012] 348 ITR 150 (Delhi). 5. We have heard the rival submissions and perused the material before us. We find that the AO had not invoked the provisions of section 43(l) Expl.(10) while completing the assessment, although he had held that government grants on capital assets would affect depreciation allowable to the assessee and that the revenue grants and subsidies were taxable. Thus, it is clear that the issue of actual cost as pe....