DCIT CORPORATE CIRCLE 2, MADURAI vs. TAMILNADU FOOD GRAINS MARKETING YARD, MADURAI

The assessee carried the matter in appeal before the ld. CIT(A). After considering the facts of the case and by following the decision of the Tribunal in assessee’s own case for the assessment year 2011-12, the ld. CIT(A) deleted the disallowance of depreciation on subsidy.

Aggrieved, the Revenue is in appeal before the Tribunal for all the assessment years.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. At the outset, the ld. Counsel for the assessee has submitted the issue involved in this appeal is squarely covered in favour of the assessee by the decision of the jurisdictional Tribunal in assessee’s own case for the assessment year 2011- 12 vide order in dated 31.05.2016 and prayed for following the same. We have perused the order, wherein, the Coordinate Benches of the Tribunal has observed and held as under: “6. We have heard the rival submissions, perused the material on record and judicial decision cited. The ld.A.R has emphasized that the capital incentive grant-in-aid was for the purpose of establishing and maintaining quality infrastructure facility through PPP mode and not to offset any portion of the actual cost of any specific capital asset, directly or indirectly and thus it falls outside the ken of Explanation 10 to Section 43(1) of the Act. Further, ld.A.R submitted that the assessee was selected under the Industrial Infrastructure Upgradation Scheme to provide common facility centre for the functional Cereals, Pulses & Staples (CPS) industry cluster, to be availed by the members of the non-profit appellant organization, and drew our attention to page -17 of the paper book and prayed that the grant received from the Central Government should not be reduced from the cost of the asset and depreciation should be allowed. Ld. A.R also referred to the various clauses & terms conditions, monitoring, cost estimates, role of state Government, administrative expenses and assets acquired out of Government assistance and the assets/ properties of the Government issued by Department of Industrial Policy & Promotion vide approval order dated 20.10.2004 mentioned at pge-29 of the paper book and the Government shall appoint an independent auditor to monitor agency. The grant was released on 5th December, 2011 with certain requisite necessities to be complied by the assessee. Ld.A.R further explained the objects, aims and referred to the memorandum of articles of the organization and supported his arguments with various decisions of the Tribunal including the decision in the case of Saisri Extractions Ltd. Vs. ACIT reported in (2008) 119 TTJ (Visakha) 976 where the similar issue was adjudicated in contrast with the decision of Apex Court in the case of P.J.Chemicals Ltd.,(supra) and the Tribunal observed as follows:- 11. We have carefully considered the rival submissions and perused the record. In our considered opinion, even after insertion of Expln. 10 to s. 43(1) of the Act, the basic principle underlying in the decision of the apex Court in the case of P.J. Chemicals Ltd. (supra) still holds the field. Their Lordships analyzed the expression "met directly or indirectly" to come to the conclusion that only in a case where a subsidy or other grant was given to offset the cost of an asset, such payment/grant would fall within the expression 'met', whereas the subsidy received merely to accelerate the industrial development of the State cannot be considered as payments made specifically to meet a portion of the cost of the assets.

A careful perusal of 'Target 2000' scheme shows that the scheme was intended to accelerate industrial development of the State and the incentive was given for setting up of industries in Andhra Pradesh and for the purpose of determining the amount of subsidy to be given, cost of eligible investment was taken as the basis, though it was not specifically intended to subsidise the cost of the capital. Under the circumstances, we are of the view that the incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost and thus it falls outside the ken of Expln. 10 to s. 43(1) of the Act. In the light of the above discussion, we are of the view that for the purpose of computing depreciation allowable to the assessee, the subsidy amount cannot be reduced from the cost of the capital asset. The AO is directed accordingly. The present case of the assessee is similar to the above decision of the Tribunal cited supra where the provisions are discussed elaborately and the subsidiary amount shall not be deducted from the cost of the asset. Respectfully following the decision of the Tribunal, we set aside the order of the Ld. CIT(A) and allow the grounds of the assessee.

In the result, the appeal of the assessee is allowed.”

The ld. DR could not controvert the above decision of the Tribunal. Respectfully following the above decision of the Tribunal, we confirm the order passed by the ld. CIT(A) in deleting the disallowance of depreciation on subsidy claimed by the assessee. Thus, the ground raised by the Revenue stands dismissed for all the assessment years under appeal.