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TaxTMI 
TaxTMI 
TaxTMI 
2016 (2) TMI 117
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....of Capital Subsidy - Rs. 10,00,000/- 1) The learned Commissioner of Income Tax (Appeals) - 2, Mumbai [CIT(A)] erred on facts and in law in upholding the addition made by the Additional Commissioner of Income Tax - 1(3), Mumbai (AO) on account of capital subsidy of Rs. 10,00,000/- u/s. 41(1) of the Income Tax Act. 2) The learned CIT(A) erred on facts and in law in taxing the capital subsidy of Rs. 10,00,000/- u/s. 41(1) without giving an opportunity of being heard to the appellant while holding that the capital subsidy was taxable u/s. 4 1(1). 3) The appellant prays that your honour hold that that the capital subsidy received of Rs. 10,00,000/- was a capital receipt and was not liable to tax. B) General 4) The above grounds of appea....
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.... was nil, hence subsidy was to be taxed as short term capital gains under section 50 of the Act. 5. In appeal, the Ld. CIT(A) held that as 100% depreciation was allowed to the assessee on the asset itself, hence the receipt of subsidy was a benefit received and was hence taxable under section 41(1)of the Act. Being aggrieved by the order of the Ld. CIT(A), the assessee has come in appeal before us. 6. We have heard the rival contentions and have also gone through the records. At the outset, the Ld. A.R. of the assessee has brought our attention to the decision of the Hon'ble Bombay High Court in the case of "CIT vs. Reliance Industries Ltd." (2011) 339 ITR 632 (Bom.) wherein the Hon'ble Bombay High Court, while relying upon the decision o....
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.... in the financial year i.e. 2001-02. The assessee after successfully operating the plant with a minimum 12% plant load factor for one year had applied for capital subsidy vide letter dated 31.03.03, which subject to fulfillment of certain conditions were ultimately released to the applicant during the financial year i.e. 2007-08 at Rs. 20 lakhs. However, out of the said amount of Rs. 20 lakh, Rs. 10 lakh had to be returned back by the assessee to the government. So the mere acquisition of the asset was not sufficient to claim subsidy. The subsidy was not given for the purpose of acquisition of the asset but on the production of power generation as an incentive to promote through non conventional sources. Hence, the grant of subsidy in this ....
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....etting up of industrial project. It is also a fact that maximum limit of the subsidy was restricted with reference to the value of fixed capital investments in land, building, plant and machinery but no part of the subsidy was specifically intended to subsidize the cost of any fixed asset, therefore, it cannot he said that the subsidy was to meet a portion of cost of the asset. According to us, the assessee has rightly not reduced the amount of subsidy received from the actual cost/WDV of the fixed assets while claiming depreciation. It is also a fact that revenue during scrutiny assessments of the assessee for AY 2003-04 and 2004-05, the above stated subsidy was considered as capital receipt accepting the contention of the assessee. For th....
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....even though the amount of subsidy was quantified on the basis of the percentage of the total investment made by the assessee. 7. The law is already settled on the subject. Now, the only wavering is with reference to Explanation 10 provided under sec.43( 1). The said Explanation provides that where a portion of the cost of an asset acquired by the assessee has been 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 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 is....