TaxTMI 
TaxTMI 
2022 (4) TMI 1486
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....The CIT (A) erred in holding that there was no provision in package scheme of incentives, 2007 to show that the asseessee is granted subsidy towards meeting a cost of asset and CIT(A) has erred in not accepting the facts that there is a link between subsidy given and the cost of investment. 3. The CIT (A) erred in holding that there is no "direct" link to the investment in fixed assets by the eligible unit. As per explanation 10 to sec 43 (1) of the I.T. Act, 1961 when cost of asset has been met directly or indirectly by the Central Government, the State Government or any authority then such subsidy shall not be included in the actual cost of asset. 4. The CIT (A) ought to have considered that impugned incentives are taxable as per Sche....
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....er : The Government of Maharashtra in order to encourage the dispersal of industries to the less developed areas of the State announced the package to New/Expansion Units set up in the developing region of the State since 1964 under a scheme known as the Package Scheme of Incentive. This Package Scheme of Incentive was introduced in the year 1964 and was amended from time to time with latest amendment in the year 2001 and is operative from 01st April 2001 to 31st March, 2017. The incentive is calculated 75% of the cost of investments to be disbursed in the form of 40% eligible investments over a period of 8 years of refund of octroi, electricity duty exemption, entry tax refund, VAT etc. The preamble of the said Scheme reads as under :- ....
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.... is of opinion that the amount of the subsidy should be reduced from the cost of depreciable assets in terms of the provisions of Explanation 10 to section 43(1) of the Act and Proviso thereto placing reliance on the decision of the Hon'ble Karnataka High Court in the case of CIT vs. Shree Renuka Sugars Ltd., 28 taxmann.com 268 (Kar.) and the decision of the ITAT, Hyderabad Bench-A in the case of Exaband (India) (P) Ltd. vs. ACIT. 5. Being aggrieved by the order of assessment, an appeal was filed before the ld. CIT(A), who vide impugned order held that merely because the quantum of subsidy is granted in term of certain percentage of total investments made by the appellant in the fixed assets, it does not mean that the subsidy is granted to....
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....ge of the investments in fixed assets, it does not mean that the subsidy was granted to meet the cost of the fixed assets and, therefore, the provisions of Explanation 10 to section 43(1) have no application. 10. We heard the rival submissions and perused the material on record. We have carefully gone through the Package Scheme of Incentives, 2007, the preamble of the scheme, extracted above, clearly indicates the intention behind grant of subsidy was to encourage the setting up the new industries in under developed region in the State of Maharashtra. Indisputably, it is not the case of the Assessing Officer that the subsidy is revenue in nature, as the Assessing Officer himself had invoked the provisions of Explanation 10 to section 43(1)....
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....liberally. Such a subsidy does not partake of the incidents which attract the conditions for its deductibility from 'actual cost'. The amount of subsidy is not to be deducted from the 'actual cost' under section 43(1) for the purpose of calculation of depreciation etc." 11. The Hon'ble Gujarat High Court in the case of CIT vs. Swastik Sanitary Works Ltd., 286 ITR 544 (Guj.) following the principle laid down by the Hon'ble Supreme Court in the case of P.J. Chemicals Ltd. (supra) held that the subsidy is intended as an incentive to encourage entrepreneurs to move 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....
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.... cost u/s 43(1) for the purpose of calculation of depreciation and the provisions to Explanation 10 to section 43(1) have no application to the facts of the present case. We are forfeited in taking this view by the decision of the Hon'ble Bombay High Court in the case of Welspun Steel Ltd. cited supra. This decision being that of Jurisdictional High Court is binding on us. Therefore, it is not necessary for us to deal with the decision of the Hon'ble Delhi High Court in the case of Steel Authority of India Ltd. (supra) and the Hon'ble Karnataka High Court in the case of Shree Renuka Sugars Ltd. (supra) relied upon by the ld. CIT-DR. Therefore, we do not find any merit in the ground of appeal no.2 and 3 filed by the Revenue. Accordingly, gro....