TaxTMI 
TaxTMI 
2020 (6) TMI 148
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....ed to as "the Act‟), dated 08.08.2013 was issued and duly served on the assessee. In scrutiny assessment proceedings, the Assessing Officer made additions / disallowances as under:- i) Disallowance u/s 14A of the Act, Rs. 2,33,50,690/- ii) Disallowance u/s 40A(3) of the Act, Rs. 64,300/- iii) Addition on account of sales tax benefit received under Package Scheme of Incentive, 2007 (hereinafter referred to as "PSI, 2007 Scheme), Rs. 13,34,90,536/-. Aggrieved against the assessment order dated 27.11.2015, the assessee filed appeal before the CIT(A). The First Appellate Authority after considering the documents on record and facts deleted the entire addition on account of sales tax subsidy received under the PSI, 2007 Scheme. As regards disallowance under section 14A of the Act, the CIT(A) restricted disallowance under Rule 8D(2)(iii) of the Income-tax Rules, 1962 (hereinafter referred to as "the Rules‟) to Rs. 8,88,221/-. Against these findings of First Appellate Authority, both the Revenue and assessee are in appeal before the Tribunal. 3. Shri Chetan Karia with Shri Suhas Bora appearing on behalf of the assessee submitted that the assess....
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....ion of cost of asset. 2.5 Therefore, it is submitted before Your Honour that assessee has rightly not reduced the amount of subsidy received from the actual cost/WDV of the fixed assets while claiming depreciation. Even Hon'ble Supreme Court in the case of CIT vs P.J. Chemicals Ltd. (210 ITR 830) has considered this issue and held that where Government subsidy is intended as an incentive to encourage entrepreneurs to move to backward areas and establish industries, the specified percentage of the fixed capital cost, which is the basis for determining the subsidy, being only a measure adopted under the scheme to quantify the financial aid, is not a payment, directly or indirectly, to meet any portion of the actual cost. Therefore, the said amount of subsidy cannot be deducted from the actual cost under sec. 43(1) for the purpose allowing depreciation. It is further held that if Government subsidy is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as a percentage of such cost, it does not partake the character of payment intended either directly or indirectly to meet the "actual cost". By implication, the above ....
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....in the law. They are not bringing any new law different from the law considered by the Hon'ble Supreme Court in the above cases. 2.9 In support of above contention, we have relied up on the decision of Hon'ble Bombay High Court in case of CIT vs. Reliance Industries Ltd, 339 ITR 632 (Bom HC) and the decision of Hon'ble ITAT Pune Bench in following cases: 1. Rohit Exhaust Systems Pvt. Ltd vs ACIT, ITAT Pune Bench, ITA No.1880/PN/2013, order dated 31.03.2015 2. Innovative Industries Ltd. vs DCIT, ITA No.601/PUN/2013 order dated 24.03.2017 3. Rasiklal M. Dhariwal HUF vs DCIT, ITA No.575/PUN/2007 4. M/s. Shriniwas Engineering Auto Components Pvt. Ltd. vs Pr. CIT, ITA No.777/PUN/2018 order dated 28.02.2019. 2.10 We are also relying upon following decisions of other Tribunals 1. Birla Corporation Ltd vs DCIT, ITAT Kolkata Bench, ITA No.683/Kol/2011, order dated 08.12.2014. 2. DCIT v. Rasoi Ltd. (2014) 46 taxmann.com 3. M/S Dayal Steel Ltd., vs Addl. CIT, ITA No.86/PAT/2014 order dated l3.04.2017 2.11 In view of the above facts and circumstances of the case and legal position explained by....
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....e not reproducing the findings of Co-ordinate Bench of Tribunal. Similar view has been taken by the Tribunal in the case of Rohit Exhaust Systems Pvt. Ltd. Vs. ACIT (supra). The First Appellate Authority has held sales tax subsidy received by assessee as capital receipt by placing reliance on the decisions of Tribunal. Thus, in view of the facts of the case and the decisions referred above, we find no reason to interfere with the findings of CIT(A) in holding sales tax subsidy received by assessee under PSI, 2007 Scheme as capital receipt. The findings of CIT(A) on this issue are upheld and appeal of Revenue is dismissed being devoid of merit. 6. In the result, the appeal of Revenue is dismissed. ITA No.945/PUN/2017 (Assessee's appeal) 7. The first ground raised in the appeal by assessee is against disallowance u/s 14A of the Act read with Rule 8D(2)(iii) of the Rules. The contention of assessee is that during the period relevant to assessment year under appeal the assessee has received exempt income of Rs. 2,000/- only. The Co-ordinate Bench of Tribunal in the case of Rajmal Lakhichand Jewellers Pvt. Ltd. Vs. DCIT (supra) has held that disallowance u/s 14A of the Act is t....
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....s as to how subsidy is reflected in the books of the assessee. 10. The Co-ordinate Bench of the Tribunal in the case of Innoventive Industries Ltd. Vs. DCIT (supra) has analyzed the purpose of PSI 2007 scheme. The observations of the Tribunal on the Preamble of the scheme are as under: "19. A bare perusal of the Preamble to PSI, 2007 shows that the incentives are offered by the State Government to the entrepreneurs for making investment and setting up of new industries in the lesser developed areas of the State of Maharashtra. The scheme envisages grant of fiscal incentives to achieve higher and sustainable economic growth with emphasis on balanced regional development and employment generation through greater private and public investment in industrial development. In other words, through this scheme the State Government intends to attract investments in those area which are less developed so as to create a balanced development in the State and generate even employment opportunities throughout the State. Thus the prime motive behind PSI, 2007 is setting up of new industries. 20. A perusal of the terms and conditions of the Memorandum of Understanding ....