TaxTMI 
TaxTMI 
2021 (4) TMI 1185
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.... Rs. 25 Lakhs received from the Ministry of Food Processing Industries [MFPI], Government of India, New Delhi under the scheme for Technology Upgradation/Expansion/Modernization/Establishment of Food Processing Industries was a capital receipt and there was no error of law in the assessment order of the Learned Assessing Officer. 3. On the facts and in the circumstances of the case and in contrary to law, the Learned Pr. CIT erred in giving a finding that the subsidy received from Ministry of Food Processing Industries, Government of India was intended to reduce the expenditure which the Appellant had incurred for acquiring Building and Plant and Machinery which would result in reduction of actual cost u/s. 43(1) read with explanation 10 of the Act. 4. On the facts and in the circumstances of the case and in contrary to law, the Learned Pr. CIT did not examine the subsidy scheme of Ministry of Food Processing Industries, Government of India Dt. 20-4-2007 fully and relied on the sanction letter Dt. 18-9-2013 which does not contain the entire subsidy scheme of the Government. 5. On the facts and in the circumstances of the case and in contrary to law, the L....
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....nt with separate utilization certificates in the prescribed proforma for (a) building or capital additions to the building etc., (b) equipment, furniture and books (c) revenue/recurring expenditure. 3.2. He further observed that the clause clearly indicates that the Govt. of India has granted subsidy for utilization of the amount for purchase of specified assets or for revenue expenditure. The subsidy amount utilized for revenue expenditure should be offered to tax as revenue income and the subsidy utilized for purchase of asset should be reduced from the WDV of the asset. Hence, the subsidy amount received by the assessee attracts the provisions of Explanation 10 to Section 43(1) of the IT Act. According to Pr. CIT, the Assessing Officer should have brought the subsidy amount to tax in the assessment order passed u/s. 143(3) of the Income Tax Act on 7-11-2016. Since he did not do so, the Pr. CIT issued a show cause notice dated 8/10/2018 u/s. 263 of the IT Act to the assessee-company proposing to revise the assessment order dated 7-11-2016, wherein, inter-alia, he stated that non-disallowance of the above mentioned claim of exemption of subsidy amount has resulted the assessmen....
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....granted for meeting cost of any specific asset either directly or indirectly. The scheme was intended to accelerate industrial development and incentive was given for setting up industry. For the purpose of determining the amount of subsidy, cost of eligible investment was taken as the basis. It was not specifically intended to subsidize the cost of the asset. Under such circumstance, the incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost. Thus, it falls outside the keen of Explanation 10 to section 43(1). c) During the course of assessment proceedings, the Assessing Officer had called for information and explanation relating to the subsidy received. Details thereof and explanations were furnished by the assessee and after proper inquiry and verification, the Assessing officer had completed the assessment. Hence, the order of the Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue. d) The stand adopted by the assessee-company is on a settled legal position and assessment is made for proper inquiry. Hence, it is requested that the proceedings under reference ....
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....st of any specific asset either directly or indirectly. The scheme was intended to accelerate industrial development and incentive was given for setting up industry. For the purpose of determining the amount of subsidy, cost of eligible investment was taken as the basis. It was not specifically intended to subsidize the cost of the asset. Under such circumstance, the incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost. Thus, it falls outside the keen of Explanation 10 to section 43(1). 5.2. He submitted that during the course of assessment proceedings, the Assessing Officer had called for information and explanation relating to the subsidy received. Details thereof and explanations were furnished by the assessee and after proper inquiry and verification, the Assessing officer had completed the assessment. Hence, the order of the Assessing Officer is neither erroneous nor prejudicial to the interests of Revenue and the same may be restored. 6. The ld. DR, on the other hand relied on the order of Pr. CIT and submitted that the grant is towards specific use and the beneficiary of such grant-in-aid shall....
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....ertificate by the unit in prescribed form. 6. The subsidy shall be kept as fixed deposit with the bank in the name of the borrower for the duration of the full term loan and it will not earn any interest. The fixed deposits created for the 1st and 2nd installments of subsidy should be for a minimum period of Three years from the date of commercial production. 7. The fixed deposits of installments of subsidy shall be adjusted against the last installments of full term loan plus a proper implementation/utilization by loanee as per schematic requirements. 8. Subsidy granted dates to the appellant First Installment 24th July, 2008 - AY - 2009-10 - Rs. 25,00,000/- Second Installment 18th September, 2013-AY- 2014-15 - Rs. 25,00,000/-" On going through the salient features of the subsidy scheme as above, at point No. 4, it is clear that the subsidy is for cost of plant & machinery and technical civil works. Therefore, we are not inclined to accept the submission of the ld. AR that the subsidy was not for the cost of the particular assets and as per the above scheme, there is a restrictive clause that the subsidy shall be kept by the beneficiary in th....