BRIDGESTONE INDIA P. LTD,MUMBAI vs. ASSL/JT/DY/CIT/ASSTT/ITO, NATIONAL E-ASSESSMENT CENTRE DELH, DELHI

This appeal is filed by assessee against the assessment order passed for assessment year 2016 – 17 under section 143 (3) read with section 144C (13) read with section 144B of the income tax act passed by National e-Assessment Centre, Delhi (the learned AO) on 23/4/2021 determining the total income of the assessee at ₹ 1,311,186,614 against the income returned by the assessee at ₹ 441,696,759/– as per return of income filed on 29/11/2016 as per normal computation of income wherein the only addition is on account of subsidies received from government of Maharashtra and government of Madhya Pradesh amounting to ₹ 470,341,836 and book profit under section 115JB of the act determined at ₹ 3,017,063,746 against book profit returned by the assessee at ₹

The only dispute in this appeal is addition of ₹ 332,287,820/– ( net of depreciation) in respect of subsidy received from government of Maharashtra under the packaged scheme of incentives, 2007 by treating the same as revenue receipt and further making an addition of ₹ 138,054,016/– ( net of depreciation) in respect of subsidy received from government of Madhya Pradesh under the industrial promotion policy 2004 by treating the same as revenue receipt to the normal computation of total income.

Assessee has raised following grounds of appeal:-

Brief facts show that assessee is engaged in the business of tyre and allied products manufacturing, trading in natural rubber and synthetic rubber. The assessee has taken a radial tyre manufacturing technology and use of Bridgestone brand of manufactured products in India. Assessee filed its return of income on 29/11/2016 declaring a total income of ₹ 441,696,759/– which has been further revised on account of signing of Advance Pricing Agreement on 26/2/2019 declaring an income of ₹ 840,844,813. This return of income was picked up for scrutiny. The assessment order was passed on 23/4/2021.

On perusal of the audited profit and loss account of the assessee, it was observed that assessee has credited industrial promotion subsidy under package scheme of incentives 2007 of government of Maharashtra under the head 'other operating revenue' however while filing the computation of total income assessee reduced the above from total income. The claim of the assessee is that as assessee has entered into memorandum of understanding with government of Maharashtra on 26/4/2010 to setup a manufacturing unit for manufacturing of steel belted radial, inner tubes and flaps. Industrial unit of the assessee was designated as

Further assessee has also been granted industrial investment promotion assistant by government of Madhya Pradesh for the expansion of production capacity of radial tyres at its plant. The assessee has deferred benefit recognized in the statement of profit and loss account over a period of 10 years on estimated basis and for this year has recognized ₹ 156,874,000 in the profit and loss account.

The assessee has contended that the subsidy received by the assessee is a capital receipt and hence not taxable. The assessee relied on decision of the honourable Supreme Court in case of CIT versus Ponny sugars and chemicals Ltd (2008) 174 taxman 87 (SC), and several other decisions of the coordinate benches. Assessee also submitted scheme of subsidy and the memorandum of understanding entered into with government of Maharashtra. Assessee referred to explanation 10 to section 43 (1) of the act in support of its arguments and submitted that assessee has already reduced the amount of subsidy from the cost of acquisition of the asset and claimed depreciation on the net cost of acquisition.

The learned assessing officer rejected the contention of the assessee that subsidy received is a capital receipt and further rejected the reliance on explanation 10 to section 43 (1) of the act. The learned AO was of the view that according to the scheme assessee is entitled to electricity duty payment

The learned authorised representative submitted a paper book containing 212 pages wherein the scheme of packaged incentive scheme 2007, memorandum of understanding entered into with the government of Maharashtra dated 26 double 2010, eligibility certificate of the assessee and copy of industrial promotion policy

The learned departmental representative vehemently supported the orders of the lower authorities.

We have carefully considered the rival contentions and perused the orders of the lower authorities. We find that the identical issue arose in the case of the assessee for assessment year 2015 – 16, which travelled before the coordinate bench in ITA number 45/IND/2021 in assessee's own case wherein by order dated 8/12/2022, the coordinate bench held as under:-

We find that coordinate bench in assessee's own case for assessment year 2015 – 16 after examining the scheme has held that the object of the scheme is for industrial development of the state, therefore, applying the decision of the honourable Supreme Court in case of Ponny sugar (supra) held that the subsidy received by the assessee is a capital receipt and should go to reduce the cost of acquisition of the asset. The learned departmental representative could not show us any reason to deviate from the above decision on identical facts and circumstances. Therefore respectfully following the decision of the coordinate bench in assessee's own case for assessment year 2015 – 16, which is the initial year in which the revenue raised this issue for the first time and the learned DRP also relied on direction for that year, we also hold that the subsidy received by the assessee is capital receipt. Further the assessee has applied explanation 10 to section 43 (1) of the act, considering subsidy as the cost of an asset met by the government and thus reduced from the total cost of the asset by the amount of subsidy for the purpose of claiming the depreciation by producing the chart where the above sum of subsidy was reduced from the actual cost

In the result, appeal filed by the assessee is allowed,