2022 (7) TMI 1613

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....n 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2014-15. 2. As per its grounds of appeal, the assessee has challenged the disallowance of depreciation amounting to Rs.72,90,000/-. 3. When the matter was called for hearing, the ld. counsel submitted that the assessee is engaged in the business of manufacturing of mustard oil, cattle feed, etc. In the course of assessment proceedings, the Assessing Officer noticed that the assessee was granted subsidy of Rs.4,86,00,000/- claimed to be a capital subsidy and thus capitalized in the balance sheet by crediting the 'Capital Reserve' in the earlier financial year relevant to Assessment Years 2012-13 and 2013-14. The Assessing Officer took a view that such subsidy is required to b....

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....apital subsidy thereto was to encourage setting up of new SHP in various states under the scheme. The quantum of subsidy was determinable with reference to Mega Watt capacity of the project per se and not to compensate the cost in respect of any individual asset. It was contended that as per the settled law, where the government subsidy is not an incentive for a specific purpose for meeting the cost of the assets, it neither partake the character of payment on revenue account nor subsidy can be characterized to meet the cost of asset and is thus a capital receipt neither chargeable to tax nor deductible from the cost of acquisition of any particular asset acquired for project. It was pointed out that the amended provisions in Finance Act, 2....