TaxTMI 
TaxTMI 
2022 (1) TMI 147
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....ances of the case and in law, the Ld. CIT(A) has erred in holding that excise refund being revenue receipt cannot be reduced from the cost of plant & machinery. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in relying upon the Hon'ble Supreme Court decision in the case of CIT vs. Meghalaya Steel Ltd. wherein it was held that excise duty refund is a revenue receipt forming part of profits and gains, arising from business while dealing with deduction claimed u/s. 80IB/IC of the Act whereas the issue under consideration is claim of depreciation in a situation in which the deferred government grants have been utilized by the demerged company in a direct manner in pursuance of notification issued under Central Excise Act, 1944. 4. That the grounds of appeal are without prejudice to each other. 5. The appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time hearing of the appeal." 3. Facts of the case, in brief, are that the assessee company came into existence as a result of de-merger of the rubber thread unit of M/s. Dharampal Satyapal Ltd. in a scheme of de-merg....
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....-merged company. The deferred government grants have been obtained by the de-merged company M/s. Dharampal Satyapal Ltd. in pursuance of notification no. 69/2003 dated 25-08-2003 and notification no. 8/2004 dated 21-01-2004 issued under Central Excise Act, 1944. Since, the entire cost of the asset have been directly met by the Central government grant, the actual cost of the asset in accordance with the provisions of section 43(1) of the Income tax Act shall be nil. There is no disputing the fact that the assets were acquired by the de-merged company out of amount of excise duty exemption which has been classified by the de-merged company in its Books of account as deferred government grants. In the circumstances, the actual cost of the assets to the assessee company shall be reduced by the amount of deferred government grants utilized for acquisition of such assets whether by the de-merged company or the resulting company. 8.2 As per the accounting policies followed by the demerged companies, the depreciation claimed on similar assets remaining with the demerged company is first charged to the P&L account and simultaneous credit is also made to the P&L account thus nullif....
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....t of deferred government grants stands at Rs. 55,72,52,172/-. Thus, the cost of the assets met out of the deferred government grants comes to Rs. 55,72,52,172/-. Therefore, in accordance with the provision of section 43(1) of the Income Tax Act read with explanation 7 and explanation 10 of the said section, the actual cost of the assets is reduced by a sum of Rs. 55,72,52,172/-. The claim of depreciation u/s. 32(1) of the Income Tax Act is therefore recomputed by reducing the actual cost of the assets by a sum of Rs. 55,72,52,172/-. The total claim of depreciation made by the assessee company is at Rs. 4,98,61,124/-.The assessee submitted that additions in plant & machinery and computers during the years were made from own funds and no subsidy was utilized in the purchase of same. In view of submission of assessee, the depreciation on plant & machinery purchased during the year amounting to Rs. 2,15,81,391/- is allowed and the balance depreciation amounting to Rs. 2,82,79,733/- which was on the assets purchased out of subsidy is disallowed and added back to the total income of the assessee. (Addition Rs. 2,82,79,733/-")" 5. In appeal, the CIT(A), following the orders of....
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....le working out the depreciation allowance. From the above, following facts emerged: * The excise duty refund is given to the appellant on account of the manufacturing activities carried out in the notified area, upon fulfillment of certain conditions; and * The Excise duty refund, is derived from the manufacturing activities and purchasing the assets from this excise duty refund on fulfillment of certain conditions, is nothing, but application of profits, * The excise duty refund is of the nature of revenue receipt, forming part of Profits and Gains, arising from business. The same is a revenue receipt, as has been held by Hon'ble Supreme Court, in the case of Commissioner of Income Tax Vs. Meghalaya Steels Ltd. [2016] 383 ITR 217 (SC) and therefore, this excise refund, being a revenue receipt, cannot be reduced from the cost of Plant & Machinery. From the above, it is clear that the Excise duty refund, is a revenue receipt, forming part of total taxable income and therefore, same cannot be reduced from the block of assets, in order to determine the actual cost of assets. In view of the above facts and circumstances, I am of....
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....he record. We find, the AO, disallowed an amount of Rs. 2,82,79,733/- being depreciation on plant & machinery which was purchased out of subsidy disregarding the order of CIT(A) on the ground that the department has not accepted the same and has filed appeal before the Tribunal. We find, the ld. CIT(A), deleted the addition by following the order of his predecessor, the reasons of which have already been reproduced in the preceding paragraphs. We find, against the order of the CIT(A) for AYs 2012-13 and 2013-14, the Revenue filed an appeal before the Tribunal and the Tribunal, vide ITA Nos. 5131 & 5132/Del/2016, order dated 08.08.2019, has restored the issue to the file of the AO with certain directions. The relevant observation of the Tribunal from para 4 onwards read as under:- "4. We have heard the rival submission and perused the relevant material on record. The Tribunal while deciding the appeal of the Revenue as well as assessee in ITA No. 4876/Del/2014 and ITA No. 824/Del/2015 respectively for assessment year 2011-12 observed as under: "6. After considering the facts of the case and submissions of both the sides, we deem it appropriate to set aside the orde....
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....ribunal (supra). 6. It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. The grounds of the appeal of the Revenue are accordingly allowed for statistical purposes. 7. In the result, both the appeals of the Revenue are accordingly allowed for statistical purposes." 8. Since the ld. CIT(A) while allowing the claim of depreciation has followed the order of his predecessor for AYs 2012-13 and 2013-14 and since the order of the CIT(A) for AYs 2012-13 and 2013-14 has been restored to the file of the AO by the Tribunal, therefore, respectfully following the decision of the Tribunal in assessee's own case for AYs 2012-13 and 2013-14, we restore the issue to the file of the AO for fresh adjudication in accordance with the directions of the Tribunal for AY 2012-13 and 2013-14. Needless to say, the AO shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We hold and direct accordingly. The grounds raised by the Revenue are accordingly allowed for statistical purposes. ITA No. 2475/Del/2018 (A.Y. 2015-16) 9. The grounds raised by the Revenue reads as under:- "1. T....
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....ly vide Ho'nable Delhi High Court Order dated 11.09.2007. These units of the company were at construction/erection stage at the time of demerger. As per the scheme of demerger all the assets and liabilities of the Rubber Thread Business has now been vested with Abhisar Buildwell Pvt. Ltd and Flexible Packaging unit with Avichal Buildcon Pvt. Ltd. In consideration to the net asset value of the respective business, the demerged companies allotted Equity shares of face value of Rs. 10 each at a premium of Rs. 30/- each respectively, to transferor company namely Dharampal Satyapal Limited. As on the date of demerger on 1 April, 2006, the assets of demerged unit included assets acquired out of amount of Excise Duty Exemption( accounted as Deferred Government Grant in the books of the assessee) as per scheme of Investment listed above. The year-wise details of amount spent till the date of demerger against excise exemption amount as per investment returns duly certified by a firm of Chartered Accountants is as under: (a) Abhisar Buildwell Pvt. Ltd. (erstwhile Rubber Thread Unit) Particulars Upto 31-03-2010 (Rs) 2010-11 (Rs.) Pla....