TaxTMI 
TaxTMI 
2017 (7) TMI 952
X X X X Extracts X X X X
X X X X Extracts X X X X
....on behalf of assessee and Shri S.K. Paul, Ld. Departmental Representative represented on behalf of Revenue. 2. Only effective issue raised by assessee in this appeal is that Ld. CIT(A) erred in applying the provision of Explanation10 of Section 43(1) on account of subsidy received. 3. Briefly stated facts are that assessee is a private limited company and engaged in manufacturing & sale of M.S. Ingot, Silico Manganese. The assessee in the year under consideration has received subsidy from Government of Jharkhand for Rs. 25 lakh, which was reduced by the Assessing Officer from the amount of fixed asset in terms of provision of Explanation 10 to Section 43(1) of the Act. 4. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hall not be included in the actual cost of the asset to the assessee.' 2.4 Therefore, from assessment year 1999-00 onwards, the law laid down by the Apex Court in the above mentioned decision no longer remains a good law. In the decisions cited as above by the appellant, even though some of these decisions have been rendered after insertion of Explanation 10 in Section 43(1) of the Income Tax Act, 1961, assessment years n question are prior to assessment year 1999-10 and the applicability of Explanation10 as above has not been discussed. From the above, Explanation and the proviso thereto, it is seen that the AO has taken a correct view in line with the provisions of the statute and no intervention is called for." Being aggrieved by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nation 10 to Section 43(1) of the Act and has erroneously held that the insertion of the Explanation 10 in Section 43(1) of the Act was to overcome the judgment of Hon'ble Supreme Court in the case of CIT vs. P.J. Chemical (1994) 210 ITR 830 (SC). The admitted fact on record is that the subsidy was not granted to the assessee to meet out cost of a particular asset or assets. The same was granted vide letter dated 28.02.2006 (copy enclosed at pages 4 to 6 of the paper book) under the Jharkhand Industrial Incentive Rules, 2003 (copy enclosed at pages 7 to 14 of the paper book. The very purpose for bringing these Rules were to give incentive for setting up of new industrial unit and/or expansion//modernization of the existing unit. The ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l fours to the facts of the present case of assessee so also the judgment of Hon'ble Supreme Court in the case of P.J. Chemical (supra) is clearly applicable and the order of Ld. CIT(A) may be quashed. On the other hand, Ld. DR vehemently relied on the order of Authorities Below. 6. We have heard the rival contentions and perused the materials available on record and the case laws cited by the Ld. AR for the assessee. From the above facts and circumstances, the admitted facts are that during the year under consideration assessee-company received incentive subsidy from Govt. of Jharkhand as encouragement for setting up of new industrial project and/or expansion/modernization of the existing unit. It is also a fact that maximum limit of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sidy is intended for meeting a portion of the cost of the assets, then such subsidy should be deducted from the actual cost, for the purpose of computing depreciation. As per Hon'ble Supreme Court, the law is that if the subsidy is asset-specific, such subsidy goes to reduce the actual cost. If the subsidy is to encourage setting up of the industry, it does not go to reduce the actual cost, even though the amount of subsidy was quantified on the basis of the percentage of the total investment made by the assessee. 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 assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ectly or indirectly using the subsidy. The above Explanation and the proviso thereto do not dilute the finding of the Hon'ble Supreme Court in the case of P. J. Chemicals Ltd. (supra) that asset-wise subsidy alone can be reduced from the actual cost. The above Explanation and the proviso therein attempt to explain the law. They are not bringing any new law different from the law considered by the Hon'ble Supreme Court in the above cases. We also find that the AO has reduced the value of the fixed assets by the amount of subsidy proportionately which also proves that AO has failed to establish the direct connection with the specific assets. In view of the above facts and circumstances of the case and legal position explained by Hon&....